The Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines on appointment of life insurance agents on March 16 following the promulgation of the Insurance Laws (Amendment) Ordinance 2014. Under the guidelines, all insurance companies were instructed to draw up a policy on appointment of agents and get it approved by their boards by March end.
The guidelines have dealt in detail with all aspects concerning the appointment, skill development and role of agents and also the responsibilities of the companies in developing an effective and productive sales force. The guidelines under Section 42 of the Insurance Act, 1938, vindicate the importance of the agency channel in the Indian market at least for the next few decades.
The business of insurance is essentially a distribution-led business. The success achieved so far by the life insurers in India can be attributed to the efficiency and commitment of the distribution channels. LIC’s exceptional hold on the market has been due to its very strong network of agents across the country. But, unfortunately, since the opening up of the sector, there has been tremendous confusion at all levels among private players regarding the usefulness of this channel.
Even at the regulator’s office, undue haste in framing rules derailed many of the time-tested processes, which led to excessive bleeding of new companies. Over a period of time, they started looking for more cost-effective and manageable channels. This led to experiments, which, sometimes, proved counter-productive.
Some business leaders tried to leverage IT to market life insurance products. Online life insurance sales portals were launched with great expectations, induced by the success and growth in the number of mobile and internet users. Such confidence in the potential buyers very often
Online marketing lacked the essentials of the process of selling insurance, such as creating need in the mind of the prospective buyer through discussion and persuasion .The truth about this business is that conversion of the prospect to a policyholder cannot be achieved through robotics or sensors or even a smart website. In fact, IT can provide an effective tool to agents to perform with speed, efficiency and accuracy, but it cannot be a substitute to the man who slogs and delivers on his promises.
Rapid innovations in the communication system and access to information often tempt sellers to tap the virtual market. Transactions have become time and place independent. Mobile applications have empowered the common man to avail himself of the boons of technology. But in the distribution of life insurance, these advances of technology have limited applications. They can make interfacing of the customer with the distributor convenient and frequent. Technology can bring all relevant data to the table in a reliable form. But I believe that no major disruption in the sales process is likely to happen in near future. The man initiating the sales process would remain the most important factor; therefore, he needs to be coached, mentored and supported. Only then he will remain motivated and consistent in output.
I believe that growth in this business is possible only through feet on street and not through adoption of best of applications and deployment of hordes of developers and also by attracting customers to a very easily navigable website.
Companies must learn to leverage the basics of this business for competitive advantage. Let technology serve as a tool and drive growth through well trained and motivated people. Companies must think big, but they must start doing small things first. Handholding of the agents is foremost among all the measures to be taken for building an effective and productive organisation.
The process of selling is today shifting from product-centric to consumer-centric. Transparency may lead to better sales as well as greater reliability on the part of the company. Instead of seeking customer loyalty, insurers have to offer a loyal company to customers.