Topic of Discussion: Breaking from the Past (Mr. Appa Rao Machiraju, College of Insurance & Financial Planning (CIFP) Co. Ltd.)
Source:
Mr.Appa Rao Machiraju, College of Insurance & Financial Planning (CIFP)
Abstract:
Opening up of the insurance sector to private companies and also predictably convergence of insurance and financial services paving the way to competitive environment, the insurance companies need to formulate new marketing strategies in the real sense.
Strategies for the future:
1. Recognize the changes that have taken place in the industry and the market place
2. Understand the implications of these changes for the company
3. Examine their specific markets and their needs
4. Assess the strengths and capabilities of the company
5. Analyze the distribution options that are available
6. Select a distribution strategy (or non-distribution strategy) that will work in the marketplace
Emphasis should be on coupling marketing with distribution efficiency; products based on customer needs including new needs such as asset protection and effective marketing to create customer interest in the products, must go hand in hand with cost-effective distribution.
Focusing on selling in isolation of "marketology," we tend to miss the need to promote market-orientedness and professional service concepts with a holistic approach. This viewpoint is not to under-play the role of intermediaries, which is indeed the soul of the entire company operations.
It is an undisputed fact that about 75 to 80% of the insurance population is yet to be covered in India. It is estimated that in terms of lives, the figure could be around 20 Crores. Those who are insured also are not adequately insured. We are "selling insurance policies" but not insuring the people based on 11 needs".
We are in a transition stage. We need to adapt to the new emerging scenario: The convergence of Insurance/ Banking/ and other financial services and the emerging financial services in the market place. The scenario is expected to give birth to a new vocation in our country: Financial Planners and Counselors. The intermediaries, whatever titles they may have, i.e., Corporate agents, Brokers, Institutional Agents or Banks should equip themselves with required levels of knowledge and skills of salesmanship to be able to advise and counsel individuals and businesses as to application of insurance principles in their situations. The service they offer should be prescriptive through recommending suitable "plans": Every company needs an "Insurance University" concept today because commitment to Education and training must be continuous.
In the period of transition we need to focus on "transition facilitation" - and we need to address the issues truthfully, based on unfiltered feedback as to what is going on at all levels in order to develop appropriate strategies.
The intermediary channels we are now familiar with i.e., in our country are predominantly transient type and sales focused. For over four decades we are aware that the focus has been on selling high premium and high commission earning policies: Marketing aspects have not received the attention deserved. Agent recruitment continues to be haphazard. "MARKETING" has been simply selling without any relevance to "customer needs". The attitude of the general public may have been induced to some extent by the character of the selling force itself. Also there is another and possibly even greater loss which is not seen or can be measured in the loss of potential clients not reached or who are alienated by the ineptness or lack of skills of unqualified agency force. This alienation may extend beyond a particular company to the whole institution of life insurance.
We have now Insurance Regulatory Development Authority. We have already in place 12 or 13 new companies licensed to function. In this context, we have important issues to be addressed simultaneously with particular relevance to Marketing & Selling and positioning Intermediary channels by identifying the "Target Markets" to be tapped.
The title "Intermediaries" has entered into our lexicon in the new context of emerging different channels of marketing: Agents (some new companies preferring to call them financial advisors etc.), Institutional agents, Corporate Agents, Brokers etc. Whatever title they carry, the common thread that brings together is the services offered and the public is the "human factor". Even in the U.S.A. 75% of the sales made is person-to-person selling at the contact level.
The important issue that is to be addressed on priority basis is: What kind of intermediaries/ their selection process, licensing, education and continuous training.
We have a recent history of marketing lessons to learn from - the U.S.A. and the U.K in particular, problems the insurance companies faced in the matter of sales practices and heavy fines the companies had to pay. As a remedial measure they have now Insurance Marketplace Standards Association (IMSA), which has formulated procedures to be complied with by the insurance companies. Insurance companies are to certify compliance of these requirements from time to time. There is also an independent organization called Life and Health Insurance Foundation for Education (LIFE), founded by the insurance companies in USA to propagate through non-partisan education and media publications and to educate the public.
We in India need to give a fresh approach to different practices vis-a-vis the current ones.
Issued that need to be addressed:
i. Need to ally with academic institutions for introducing collegiate/university level education.
ii. Need to develop state of the art training Institutes focusing on Sales and Marketing management.
iii. Put in place scientific selection/ recruitment of Intermediaries.
iv. Market conducts regulation relating to policy replacement as a preventive measure.
v. Promote, encourage professional association of intermediaries and self-regulation concepts.
vi. Marketing support to Distribution channels.
vii. Advertisement and sales materials that are clear as to purpose and honest and fair in content.
viii. Applied as well as basic research in all aspects of marketing i.e. Selection/ Retention of Agents, Consumer Attitudes; Lapsation etc
All the issues cited are as challenging as the marketing of life insurance and revitalization of product-driven life insurance sales with customer-centered approaches. Most importantly we need to address once again in view of the new contextual situation - what is the nature of the business in which we are engaged and what should be our goals and objectives? The Insurance Companies are to meet just the life insurance needs or should be engaged in the broad business of meeting Personal Economic Security needs. Even more, corporate financial services should be included with the marketing portfolio of life insurance companies including equity products such as variable annuities, and mutual funds.
The future however, depends on, institution building process and activities supporting the industry with a united approach.
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