Chapter Introduction
In the previous chapters we studied various concepts and practices in the general (non-life) insurance business, including the processes of selling and customer service. This final chapter is to introduce to you to the career of an agent in the non–life insurance industry and also offer a brief perspective about what you could look forward to in this industry.
Learning Outcomes
A. Insurance agency as a career
B. Different careers in insurance
After studying this chapter, you should be able to:
1. Assess insurance agency as a career.
2. Discuss different careers in insurance.
A. Insurance agency as a career
The first question that one might have while starting a career in sales is whether or not she is really suited for the job, and whether she would be successful. This raises the question of what makes a good sales person.
1. What makes a good sales person?
In 1964, an interesting study on “What makes a good salesman?” was published in the Harvard Business Review. The authors, David Mayer and Herbert M. Greenberg, after seven years of intensive field research, came up with an interesting insight.
They found that a good salesman should have two basic qualities – empathy and ego drives.
Empathy is the ability to feel as the other person does in order to be able to sell him a product or service. A sales person needs to be sensitive to what goes on in the customer‟s mind and adopt an appropriate approach and communicate accordingly.
Ego drive refers to the sales person‟s intense drive and effort to make the sale, not merely for the money to be gained, but because it gives a feeling of self- achievement.
In other words great sales people typically have a massive hunger to excel and to improve their financial standing in the process. They also have an entrepreneurial spirit – the ability to see their work as an exciting adventure and look forward to a job environment where security comes from the ability to achieve results. They also have the ability to relate and connect with people. They are comfortable in networking with others, making friends and influencing them.
2. Rewards of a career in non-life insurance sales
By now you would also be aware that the nature of the selling business in insurance is quite different from others. Unlike other products, insurance is intangible. One has to often create a need in the prospect‟s mind and motivate the latter to buy insurance.
This involves a very high level of concept selling and thus insurance sales persons are generally among the most accomplished of sales professionals. They are remunerated through commissions so that there is no limit to what an agent can earn. The limit is set by whatever premium revenues the agent generates.
Apart from the scope to earn high incomes, an insurance agent can also attract tremendous amount of job satisfaction and social respect if one‟s job is done in an ethical and professional manner. The rewards and recognitions can be listed as:
vi. Being recognised by the society as a knowledgeable professional
vii. Being able to provide insurance solutions to problems of people is a matter of immense social value that non-life insurance agents enjoy
viii. Social prestige that comes from being instrumental in financially helping out people who are affected by a misfortune
ix. Being able to help people by advising them to take the right policy to cover an accident, an illness, an earthquake, flood or fire loss, is a matter of immense personal satisfaction for non-life insurance agents
x. Agents deal with multiple clients and keep learning during their interactions. Over a period of time, insurance agents become fairly knowledgeable in many areas simply through dealing with multiple experts
xi. Successful insurance agents are able to build a brand around them and are recognised as single window for acquiring insurance knowledge and claims advice
Insurance agents are present in practically every nook and corner of the world. They are called insurance advisors in some markets. They are regarded as people with good product knowledge in the realm of insurance, who can advise people regarding the right kind of insurance cover required to cover personal or industrial risks.
Important
Unique advantages of insurance agents
Insurance agents have unique advantages of working as per their own career ambitions.
a) If an agent wishes to have a regular commission income, she will meet a fixed number of prospects or a fixed number of existing customers for renewal.
b) If she wants to earn more commission, she will step up her efforts depending on her appetite for growth. She may even decide to be more active in some months and less active in other months based on her other priorities.
c) If she has appetite for sales, she may be able to synergise with fields of life insurance, banking etc.
The work – life balance that one can achieve when one is working as per her own career and ambitions is a plus point for insurance agents.
3. The emerging environment
An agent should be aware of the external environment in which she is working.
a) The insurance industry in India has seen a high growth in the last decade, both in the life and non-life segments.
b) In the year 2012-13, the non-life [general] insurance sector underwrote a total premium of almost Rs 69,000 crores, offering insurance cover for more than 100 million policies during the year.
c) As on 31st March, 2012, the non-life insurance companies were operating from 7,050 offices all over the country, of which 5,354 were in the public sector and 1,696 were in the private sector.
Today general insurance products are sold through a range of distribution channels like brokers, bancassurance and direct marketing.
Indian non-life insurance market is still at a stage of growth. The penetration [given by premiums as a percentage of GDP] of the non-life sector in India, as per 2012 data is still around 0.7 % and the density [premiums per capita] is still around Rs. 550/-. This shows that the market is virtually still untapped and there is tremendous scope for growth in the sector.
At the end of the financial year 2012-13, there are 27 companies in the general insurance industry and many more companies may be formed as there is huge untapped potential. This potential can be realised through agency channel of selling. Along with the growth of the sector, there would also be openings for new jobs, particularly in insurance selling.
Test Yourself 1
Which among the following are the two basic qualities that make a good sales person?
I. Empathy and ego drive
II. Prejudice and loathing
III. Pride and honesty
IV. Scepticism and perseverance
B. Different careers in insurance
A career as an insurance agent is for many, a starting point for an opening in other areas in the non–life insurance segment. There are jobs available, both at the field level and also the office level of insurance companies. An insurance agent who seeks to move into these careers would of course need to equip herself with the required knowledge and skills that are needed for respective roles.
Some of these careers are discussed below:
1. Corporate agents
This is a channel that has emerged only in recent years as a part of the liberalisation process. It is similar to the “Individual Agency” model. Here a corporate body, which has its own set of customers, tries to reach out and sell insurance products.
Example
A large co-operative society, which is engaged in distributing various products to its members, may decide to become a corporate agent of an insurance company.
The corporate agent could be:
a) A firm
b) A company formed under Companies‟ Act, 1956
c) A Banking Company
d) A Regional Rural Bank
e) A Co-op. Society/Co-op. Bank f) A Panchayat/Local Authority
IRDA„s regulations require that the corporate agent needs to set up a separate unit with a Principal Officer and trained manpower which has undergone compulsory training from an institute recognised by the regulator.
One can have a career as an insurance executive in a corporate agency. One would need to be properly trained, skilled and knowledgeable in insurance products.
2. Insurance brokers
IRDA (Insurance Brokers) Regulations, 2002 gives details of the broking profession. Brokers are insurance intermediaries representing the customer. A broking firm requires a minimum amount of capital and its officers are required to undergo 100 hours training and pass an examination.
A career with a broking firm would be an attractive option for those opting for anybody interested in insurance marketing.
Both agents and brokers are intermediaries who interact with the insurance company and the customer.
There are however differences between the two as given in the box below.
Agent |
Broker |
Is a representative of the insurance company and is governed by the principal - agent relationship. |
An insurance broker represents the insured. His principal is the client/insured. |
The agent's primary relationship and responsibility is to the insurance company and not the insurance buyer. |
Does not have any contractual agreements to exclusively serve any one insurance company and is expected to represent the customer‟s interest in choosing the right product and company that would best fit the customer‟s particular needs. |
The agent is expected to faithfully represent his or her company and offer whatever is available in the company‟s product line to the customer. |
Brokers assist their customers and prospective customers in developing risk management strategies appropriate to their risk profiles. They also work with their customers to find out what kinds of risks they regularly encounter, and educate them about what policies are available in the market for each type of risk. Brokers also advise and assist their customers in carefully selecting their insurance policies and reducing their premiums through the use of deductibles or self-insured retentions. |
3. Bancassurance
The term „Bancassurance‟ broadly refers to the tie up between banks and insurers to distribute insurance products to their customer base. It has emerged as an important distribution channel globally and has risen in a relatively short time due to the benefits it offered in terms of operational cost and efficiencies. This was due to the wide consumer network that banks had access to.
In India, bancassurance is still quite new. However it has immense potential which is seen from the rapid strides it has already made. India has two broad bancassurance models:
a) One, where a bank becomes a corporate agent of an insurer and taps its customer base to sell insurance products. In this case the employees of the bank take up the task of selling the products of the insurance company.
b) A referral model, where the bank supports the insurance company with the data base while the sale of insurance products is done by the insurance company.
The first one, where banks become corporate agents of an insurance company, is gaining momentum. The potential is immense for this channel, as banks have a huge reach, across the entire geographical spread and are a strong brand supported by their customers.
Bancassurance is growing rapidly and needs a large number of insurance sales personnel. This offers attractive prospects for the insurance agent. Already this channel has taken a position of having almost a “monopoly” when it comes to distributing the insurance products of some of the companies.
4. Other career opportunities
In the previous paragraphs we considered various types of distribution channels in addition to the individual agency channel that provides selling / marketing career opportunities in the insurance industry. Let us now examine some other areas of opportunity for growth in an insurance company.
a) Marketing professionals
The insurance agent‟s work and career is likely to be connected with the branch to which they are attached or the professional executives who are responsible for guiding and supporting the agent to achieve success in the business. These include the following persons:
i. The Branch Manager: is the key person for promoting a congenial atmosphere for work and productivity in the branch. She represents the company in the branch area and is Head of the branch family. She has ultimate responsibility for growth and profitability of the branch. Branch manager also plays the role of an administrator, responsible for managing the day to day service and administration functions of the branch.
ii. The Development Officer / Unit Manager / Sales Manager: The immediate person to whom every agent reports and looks up to, for guidance and support, is the Development Officer or Sales / Unit Manager. She may also be known as an Agency Manager. The Agency Manager is responsible for recruitment, development, supervision and providing leadership to help the agent in building a successful agency career.
Sales managers may also be managing other kinds of sales forces. For instance, a company may have a direct sales force and appoint sales managers to look after these units.
The manager has also to take up certain administrative functions and spend time on:
• Follow ups on business logins / proposal introductions and conversions
• Follow-ups on claims and renewals etc.
iii. Sales trainer
Many insurance companies have established training departments to train the sales-force.
Trainers are engaged in varied types of training interventions:
• Pre-recruitment training: meant for prospective agent advisors, it consists of the IRDA stipulated 50 hours training to help prospects clear the IRDA examination.
• Product training: for introducing the advisor to the products and services offered by the principal. This training is meant for both new and existing advisors, normally after they clear licensing exams. Only then the advisor is considered ready to approach prospects in the market place. Training is also provided when a new product is launched in the market by the principal.
• Sales training: most of the agents need to get equipped with proper sales training to be effective in the field.
• Process training: every organisation (principal) has its own defined systems and processes. Agents are trained so that they can adhere to the same. It is also the responsibility of the principal to ensure that agents undergo trainings on AML (Anti-Money-Laundering) guidelines, under-writing guidelines etc.
• Soft skills training: another area of training where sessions are conducted on a continuous basis for behavioural and other topics like:
Goal setting
Time management
Business planning
Work habits
Leadership and personal effectiveness
iv. Counsellor
Trainers also play the role of counsellors for the agents and agency or sales managers, especially when they are de-motivated and need a fresh dose of motivation to get up and start meeting customers all over again. Insurance agents who have got experience of the above and seek to enter a career in teaching and mentoring others can consider the option of a trainer.
b) Other roles beyond marketing
The marketing department is responsible for a range of activities related to understanding and satisfying the needs of customers in the marketplace.
Many aspirants to a marketing career are engaged in these and an agent can consider some of them in future.
i. Marketing research: to determine who the customers are and build a profile of their needs and wants.
ii. Brand management: Marketing determines how to position the company and its products in the minds of customers. This is done through branding. Marketing executives who are responsible for brand management may also have to work with media, ad agencies and other bodies for marketing communication campaigns and promotion activities.
iii. Product development: The marketing department also initiates and is responsible for new product development on the basis of analysis of market studies and competitor activities. For this purpose marketing department executives may team up with officials from other departments like actuarial and legal.
iv. Promotion: Marketing department is also responsible for promotion of the products and the company. Their executives develop marketing plans, design promotional material for the different products, market the products to the customers and provide them services. The marketing department‟s role starts even before the inception of a product and carries on well after the product has been sold to the customer.
v. Underwriters: Every proposal [or application] for insurance has to enter through a gate where a gatekeeper determines whether the proposal should be admitted, whether the risk can be accepted, and if so, on what terms. This gatekeeper is known as the underwriter.
Underwriting essentially serves two purposes. Firstly the screening of applications and selection of risks for insuring is done to prevent anti- selection. Secondly underwriting helps in properly classifying and pricing the risk so that equity is maintained among policyholders.
An insurance agency career is just the beginning of a career in an industry that plays a critical role in advancing human and social welfare. It can not only be a gateway to financial success but also confers much satisfaction to those who embark upon it.
Test Yourself 2
Which among the following is the most likely to contain the IRDA stipulated 50 hours training to help prospects clear the IRDA examination?
I. Process training
II. Product training
III. Pre-recruitment training
IV. Sales training
Summary
a) A good salesman should have two basic qualities: empathy and ego drive.
b) The rewards of being an insurance agent include being recognised by the society as knowledgeable professional, ability to recommend insurance solutions to people in need etc.
c) Other career options in the field of insurance include corporate agents, insurance brokers and bancassurance etc.
Key terms
a) Empathy
b) Ego drive
c) Broker
d) Bancassurance
Answers to Test Yourself
Answer 1
The correct option is I.
Empathy and ego drive are the two basic qualities that make a good sales person.
Answer 2
The correct option is III.
Pre-recruitment training is the most likely to contain the IRDA stipulated 50 hours training to help prospects clear the IRDA examination.
Self-Examination Questions
Question 1
_______________
is a representative of the insurance company and is governed by the principal agent relationship.
I. Insurance agent
II. Broker
III. Banks
IV. Underwriter
Question 2
_______________ is collaboration between banks and insurers to distribute insurance products.
I. Bancassurance
II. Agent
III. Broker
IV. Insurance company
Question 3
_______________ determines whether the proposal should be admitted, whether risk can be accepted.
I. Agent
II. Insurer
III. Underwriter
IV. Insured
Question 4
Broker represents:
I. One insurance company
II. Multiple insurance companies
III. Insurance Regulatory and Development Authority
IV. Customer
Question 5
_______________cannot become corporate agent.
I. A co-operative society
II. An individual
III. A bank
IV. A broker
Question 6
Insurance brokers are licensed by:
I. Insurance Regulatory & Development Authority
II. Reserve Bank of India
III. Security Exchange Board of India
IV. Government of India
Question 7
The following is not a benefit of insurance agency.
I. No limit on income from commission
II. Fixed salary income
III. Freedom to decide working hours
IV. Social prestige
Question 8
Following is required in insurance agency career for achieving success:
I. Will to excel
II. Empathy towards customer
III. Truthfulness
IV. Will to excel, empathy towards customer and truthfulness
Question 9
Following is not an insurance intermediary:
I. Corporate agent
II. Share broker
III. Insurance broker
IV. Insurance agent
Question 10
An agent can earn upto:
I. 20,000 per month
II. Rs. 10,00,000 per month
III. Rs.1 Crore per year
IV. Unlimited amount based on her efforts
Answers to Self-Examination Questions
Answer 1
The correct option is I.
Insurance agent is a representative of the insurance company and is governed by the principal agent relationship.
Answer 2
The correct option is I.
Bancassurance is collaboration between banks and insurers to distribute insurance products.
Answer 3
The correct option is III.
Underwriter determines whether the proposal should be admitted, whether risk can be accepted.
Answer 4
The correct option is II.
An insurance broker can represent multiple insurance companies.
Answer 5
The correct option is II.
An individual cannot become a corporate agent.
Answer 6
The correct option is I.
Insurance Brokers are licensed by the Insurance Regulatory & Development
Authority.
Answer 7
The correct option is II.
Fixed salary income is not a benefit of insurance agency.
Answer 8
The correct option is IV.
Will to excel, empathy towards customer and truthfulness is required for a successful insurance agency career.
Answer 9
The correct option is II.
Share broker is not an insurance intermediary.
Answer 10
The correct option is IV.
An agent can earn unlimited amounts of money based on her efforts.