While the insurance industry has grown rapidly after nationalisation ? and even more so after it was opened up to the private sector ? it is now in turmoil. Stakeholders need to come forward to address the issues faced by the industry before it?s too late.
The first task is to restore the faith of the public. Insurance products are distributed through agents, corporate entities, bancassurance, etc. However, a spate of complaints about mis-selling has proved that insurers have not been able to manage the distribution channel to work for public good. It?s not surprising then that the number of agents recruited by the industry in a year is almost equal to the number of agents terminated from the existing pool.
The long-term focus of the insurers must be on a well-motivated sales force. There is a need to shift the responsibility of identifying and training agents to a separate entity, which would allot the same to companies according to their geographical requirements. This will bring about some sense of accountability.
The insurance industry has a separate channel of agents, who, along with business correspondents identified by banks as a common entity, could look after the insurance needs of people in the rural areas, both for life and general insurance, and banking. This will give the authorised individuals sufficient income to take up the same as a career option.
Banks have moved into insurance through bancassurance or separate distribution channels in a big way. However, the rush to entice customer may boomerang, with banks losing even existing accounts. Therefore, innovative steps are needed to devise products that are affordable and can easily reach the common man.
Banks are introducing technology at a furious pace. Paradoxically, this will contribute to the loss of personal touch, which requires a lot of inter-personal skills.
Studies indicate that social networks will play a big role in pricing and underwriting. Therefore, companies need to evolve strategies to understand the emerging demand and requirement expressed through Facebook, Linkedin, etc. More and more people are likely to prefer a direct interface with the company. Direct selling through internet is going to be a big source of business. Companies need to evolve simple products that can be sold online and the benefits passed on to the customers in reduced premium.
Ulips, the biggest cause of downturn in the insurance industry, should be sold to only those have experience in equity investment. These policies should be sold by authorised financial advisors or others trained by Sebi or Amfi, irrespective of the jurisdictional constraints of the regulator.
Every accountholder in a bank or a post office should be covered by insurance, graded upon the balance of the average in the last one year. As the pool will be extremely large, the premium will be equally low and easily affordable.
All social security schemes providing for subsidies should have an element of insurance built into them. The concept could be adopted initially for those who are covered under Aadhar, so that there is no scope of manipulation.
Salary saving schemes or payment through ECS should be popularised. Single premium should be offered to those with seasonal or small incomes. Companies need to take greater responsibility for need-based sales. Sales should be graded according to the amount of premium subscribed. Every prospect, above a particular level, should be contacted over phone for confirmation of terms and conditions, including the free-look period. The inputs must be preserved for at least three years.
All pension schemes and group gratuity schemes should have compulsory provision of insurance built into them.
Today, the focus is only on premium. Naturally, companies tend to target metros and semi-urban areas. For a change, they should think of people to be insured annually and make their budget plans. The regulator has failed in this basic objective. Insurers should enhance theur credibility through an open-door policy and encourage people to come forward for interaction. The industry has taken such a beating that there are no takers for insurance education programmes in management schools. The growth of any industry is bound to be hampered if the young generation does not adopt it. Let the industry come out of the cocoon that it has built for itself.
The author is director, Amity School of Insurance, Banking & Actuarial Science and former chief of marketing, LIC
