Insurance companies have for long been wedded to the concept of agents. But their performance has been an expensive proposition for insurers and caused dissatisfaction among customers and immense reputation risks to companies.
Many agents, especially in the private sector, have left the profession after the regulator came out with a series of new norms and trimmed the commission paid to them. Actually, each applicant of an agency should be exposed to a familiarisation period of six months where he will be required to sell only risk-based term insurance policies. This would give him the much-needed skills to deal with a customer, do the need-based analysis of the prospect and test the agent's patience for facing rejection. However, the large sum assured and volumes in term plans should take care of his earning.
The agent should be nurtured by his mentor, a permanent employee of the company, who should give him training and provide support in field calls. In the period of authorised probation, the agent would be able to decide whether he is suitable to take the plunge. If he finds the profession remunerative and to his liking, then he should be given a licence as per the existing norms.
This will save insurance companies a lot of paperwork and cost of training and compel company officials to work along with trainees in the field to ensure success and need-based selling. For too long, the sales job, which requires networking and relationship skills, has been converted into a desk-oriented activity.
Life insurance companies should keep in mind that the trust of the customer in a transaction of sale is as important as the companies' need for trust in disclosure of all facts in the policy document. The emphasis on premium as against cover of risk is the root cause of the recent woes of the industry.
Role of the regulator
Some of the decisions taken by the regulator has cost implications. For instance, the recently mandated standardised 10-page application form has to be provided in all languages, which adds to the financial burden of companies. Alternatively, for initial data, a single-page analysis sheet with basic parameters of health and income could have saved a lot of resources. If these were found satisfactory, then the proposal form could be filled for the policy. This will help eliminate wasteful expenses for companies.
Moreover, the regulator needs to go easy on licence fee for insurance agents and other authorised representatives like Rural Authorised Person (RAP) under the Centralised Service Centre (CSC). A licence fee of R5,000 for RAP and a similar fee charged by insurance companies, along with the kit, becomes too expensive for a beginner, who is in the dark about the future outcome of selling insurance and his profession.
In fact, banks have provided an easy way by authorising business correspondents to work for bank without charging any fee. The regulator could propose India Post to become a broker and this will provide unparalleled reach. Similarly, a common set-up should be explored to train rural agents, RPAs & business correspondents for maximum result.
The havoc caused by mis-selling has been so huge that there are no takers for insurance as career or a subject of pursuit in academics. Therefore, insurance companies need to join universities and educational institutions to partner with them in research projects, surveys, seminars and workshops to create interest and awareness among all stakeholders.
The writer is advisor in Amity University, Noida