Sunday, March 30, 2014
‘Make insurance as simple as Maggi’
If insurance products were as simple as instant noodles, how can agents mis-sell them, asks Aegon Religare Life Insurance’s Chief Agency Officer
I went into the meeting with Amit Kumar Roy, Chief Agency Officer of Aegon Religare Life Insurance, prepared to grill him about the mis-selling of insurance, complex products and agent attrition. But Roy, who has worked across 11 Indian states in his two-decade-long insurance career, turned it into a rollicking conversation, with a humorous and honest take on the profession.
Why do insurance products have to be so complicated?
As my doctor once joked, if a patient comes to you with headache, you (insurance guys) don’t give him Saridon, but the chemical formula to make it. That is how mis-selling happens. You try to confuse the customer and sell him a plan that he can’t afford. I think life insurance is required for two simple things. One, it is a provision for contingency. If you live very long, you get assured income; if you live too short, your nominees get the benefit. I really believe that insurance should not be sold for returns at all. Though life insurance companies manage the most assets across the world, returns tend to be very low. Two, I think the best feature of insurance is that it creates compulsory savings. It is like a Chakravyuh. Once you commit, you have to pay the premium every year; there is no escape.
I remember how an agent sold me a policy with a ₹6,700 premium way back in 1991. In those days, the premium was massive and I couldn’t even afford it. But my father said that I have to take a policy and I did. I felt like Abhimanyu; I got in, but couldn’t come out. Over the years, it has become much easier to pay the premium. I would not have saved that money without the policy.
Life insurance is a crowded market. What can a new entrant do that is different?
We plan to do two things that are different. For one, Aegon Religare would like to sell insurance as a simple protection product. Today, more and more insurance is sold to people who don’t need it. The truth is that life insurance is a middle-class and lower middle-class product. Rich people don’t really need protection. Life insurance is not a ₹50,000 premium game; it should be a ₹10,000-15,000 commitment. Aegon Religare was the first to offer online term plans in the industry at a really low premium.
I would like to have products which are as simple as Maggi noodles. Maggi was a hit because it sold at ₹2 and was so easy to make.
And two, we are really choosy about our agents. Generally, they join, don’t really understand products, and sell to their uncle, aunts and neighbours. Once they meet a target, they leave. The customer tries to contact the agent, but can’t reach him. That is why so many policies lapse. Policies don’t lapse due to mis-selling. They lapse because the seller also did not understand the product. I have therefore made it mandatory that Religare agents need to meet their customers four times a year. I tell them, “Don’t try to find 100 customers. Find 10 and service them well. They will continue to buy from you.”
Eight lakh agents left insurance last fiscal, but LIC fared better. How are you tackling agent attrition?
That is also why LIC has the highest persistency ratio (the number of customers who renew their policy). It has an 85 per cent persistency, while our number is about 58-59 per cent. There is no rocket science to this – if my agent stays, my customer will stay. That is why we are trying to build agent incentives based on persistency. We don’t pay the entire commission upfront, we pay part of it if the client renews. We also have very strong post-sales verification. If I have sold you a policy, someone from our Mumbai office will call you and verify whether you have understood the product. Even if they have a hint that you haven’t, they will stop the sale.
If you look at our online sales, the persistency is 95 per cent. That tells you that if a customer needs a policy and buys it, he will not let it lapse.
Insurance selling is not a Page 3 job. None of us will ever tell our children to go and become an insurance agent. Therefore, there is nothing wrong with the job being part-time. I hire agents only if they are graduates and commit to coming in for training every Saturday for three hours. Agents get trained not just on selling, but on providing other services − how to calculate taxes, how to plan the EMI and how to calculate the present value of future liabilities.
And I do think agents make enough money. The regulator has done right by reducing the plan charges. Today, the product is attractive by itself and insurance selling is much more viable.
(This article was published on March 30, 2014)