Arun Agarwal 14 October 2003

Chennai: The insurance industry today is undergoing dramatic changes due to the development of new innovations that are strengthening existing customer relationships as well as seeking new relationships.

Privatisation has opened the barriers that once segmented the industry and prevented new companies from entering the market — offering new products or opening new lines of business. Such movements have increasingly demanded better technology tools to acquire new customers, retain existing customers, improve customer services, reduce operating expenses and manage information… particularly at the point of sale.

With the liberalisation of the Indian insurance sector that threw open doors to many insurance companies to set up their bases in India, the imminent challenge is the management of a huge number of insurance agents and policyholders.

Stringent processes such as interviews, selection criteria, recruitment of insurance agents, training and certification processes are posing new challenges, especially considering the complexity of Indian topography and population density.

Recruitment process Under the regulation of Insurance Agents Regulatory Act 2000, any person desirous of obtaining an agent''s licence shall have to pass the pre-recruitment examination in life or general insurance business conducted by an examination body duly recognised by the Insurance Regulatory and Development Authority (IRDA).

Qualification of the applicant The applicant must possess the minimum qualification of pre-university or equivalent examination conducted by any recognised board or institute, where the applicant resides in a place with a population of 5,000 or more as per the last census, and pass in tenth standard or equivalent examination from any recognised board or institution if the applicant resides in any other place.

An applicant applying for a licence to act as an insurance agent will have to complete training from an IRDA-approved institution with at least 100 hours of practical training in life or general insurance business, as the case may be, which may be spread over three to five weeks. For renewal of his licence, the agent will have to undergo training for just 25 hours.

Composite agents'' training Applicants seeking licence to act as a composite agent shall have to undergo training in an approved institution, with at least 150 hours'' practical training in life and general insurance business, which may be spread over seven to eight weeks.

Training of professionals Professionals like associate or fellows of Insurance Institute of India (III) or Institute of Chartered Accountants of India (ICAI) or Institute of Costs and Works Accountants (ICWA) or Institute of Company Secretaries of India (ICSI), MBA from a recognised university or the candidates possessing professional qualification in marketing from a government-recognised university or institute shall have to complete just 50 hours of training.

Every person aspiring to take up agency as a career will have to undergo on-the-job practical training with the designated company where s/he will work under the supervision of a sales functionary.

The trainees will be taught the subtle art of creating the need, awareness and importance of insurance in the mind of the customer, understanding the requirements of the clients, and proposing a couple of alternative solution for satisfying the wants of the clients.

Most people have their first contact with an insurance company through an insurance sales agent or broker. These professionals help individuals, families, and businesses select insurance policies that provide the best protection for their lives, health, and property.

Insurance agents have to work exclusively for one insurance company while the brokers can place insurance policies for their clients with an insurance company that offers the best rate and coverage.

In either case, agents and brokers prepare reports, maintain records, seek out new clients, and, in the event of a loss, help policyholders settle insurance claims. Increasingly, some may also offer their clients, financial analysis or advice on the ways they can minimise risk.

Technology has greatly impacted the insurance agency, making it much more efficient and giving the agent the ability to take on more clients. Through computers agents are now linked directly to the insurance companies, making the task of obtaining price quotes and processing applications and service requests, much easier and faster. IT also enables an agent to be better informed about new products that the insurance carriers may be offering.

The four major issues for insurers in managing the agency network revolve around the strategies for fixing the distribution network:

• Align channel strategies around customer demand and channel usage
• Manage channels against business profitability requirements and profitable revenue growth
• Integrate channels with back-office staff and processes to ensure that everything works smoothly
• Deliver consistent value to customers via well-supported, trained and motivated people in the channels

Adding value From a product manufacturer''s viewpoint, there continues to be a growing need to provide value-added services to agents. Insurance agents expect product suppliers to assist them in building their practice beyond product promotions.

Numerous studies have shown that product suppliers and dealers who provide true value-added services to advisors will substantially benefit from stronger relationships and increased sales. One such strategy is to enabling cross-selling of financial products like:

• Cross-selling mutual funds to insurance clients, and
• Cross-selling insurance products to investment clients.

These programmes independently train insurance agents to sell other financial products to overcome the obstacles associated with transitioning their practice to cross-sell other products and services to existing clients. The programmes help advisors apply a process-driven approach to client mining that will lead to a greater success in insurance or investment product sales.

Channel productivity The reason channel productivity is the No 1 problem most companies are worried about is that the cost is skyrocketing and not generating increased revenue. Channel decisions are now elevated to a strategic level. The overriding concept is to become customer-centric and to focus channels on improving the customer experience.

But it is not advisable to use all channels to serve all customers. Some customer segments may prefer certain channels, but if these segments are not profitable, it may be prohibitively expensive to serve them using their preferred channels. Consequently, insurance companies need to tailor their channels to appeal to the largest number of profitable customers to maximise earnings.

Improving agency effectiveness Insurers must begin to focus on the quality of their customer relationship management (CRM) and sales activities, with "improving sales effectiveness" as the top priority — allowing the agents to spend more time with their clients and prospects (what they do best) and less time in performing administrative duties.

The industry has focused on product creation and largely ignored distribution and sales strategies. Only by shifting their focus to having more interaction with policyholders can insurance carriers expect to strengthen brand loyalty, re-establish value pricing and sell high-margin products. This will require mobile support systems that facilitate increased face-time with customers.

The ultimate mission is to deliver on a customer-centric corporate strategy with channels that provide consistent quality and satisfaction to customers and a profitable return to the company. Here, then, lies the potential for creating customer value so that it defines our brand versus competitors.