Know your sector - insurance - written on 19 July

Know your Sector:-

In the last article, we looked at cost benefit / profitability for life insurance companies, it is an established fact that Productivity and Activity are important parameters to reduce operational cost as it increases  new business premium thus giving better ROI. In this article we will explore productivity of Tied agency and Corporate Agents in detail.

Share of individual policies of different channels

	Private			LIC			Total
	Individual Agents	Corporate Agents	Others	Individual Agents	Corporate Agents	Others	Individual Agents	Corporate Agents	Others
2007-08	59.73	26.97	13.31	97.99	1.91	0.1	88.01	8.44	3.54
2008-09	56.16	25.73	18.11	97.66	2.31	0.08	85.38	9.22	5.4
2009-10	48.42	35.95	15.62	98.06	1.91	0.03	84.66	11.1	4.24
2010-11	47.65	38.2	14.15	98.06	1.86	0.08	86.44	10.24	3.33
2011-12	48.12	37.72	14.16	98.1	1.64	0.26	88.55	8.53	2.92

Traditionally, the individual tied agent were the dominant players in the market. Gradually corporate agents have also occupied significant space in the arena (as seen above). Insurance industry employs around 23 lakh individual advisors, bulk of them working for LIC. Though we have seen a drop in No of Individual agents (20% from 2009), still the channel contributes around 88% of overall business for industry.

	No of individual Agents (in lakhs)
	2007	2008	2009	2010	2011	2012
Private	8.9	13.27	15.93	15.75	13.02	10.81
LIC	11.03	11.94	13.45	14.03	13.37	12.78
Industry	19.93	25.21	29.38	29.78	26.39	23.59

Source :- IRDA

The next data points are more shocking, the average productivity of LIC agent is 9 times the average productivity of private insurance industry. Is this clear that average no of individual policies sold by private insurers have been consistently lower to LIC and have also seen a downward trend. Private insurers have dipped from 7 policies to merely 3 policies in 2011-12. Even employee channels are not able to maintain the same ratio of Agency for LIC. This is a serious concern and need to be addressed immediately.

Productivity:-

Average No of individual policies sold by individual Agent
	2007	2008	2009	2010	2011
Private	7	6	4	4	3
LIC	32	28	28	26	27
Industry	20	16	15	15	16

Source :- IRDA

Similar numbers can be seen on CA front also, where a huge decline was seen in CA partners. (70% drop compared to 2007). The no of CA for Private industry has been reduced to one third of 2007 level.

	No of corporate Agents
	2007	2008	2009	2010	2011	2012
Private	1906	2070	2091	2420	1870	642
LIC	409	345	415	510	295	240
Industry	2315	2415	2506	2930	2165	882

Source :- IRDA

LIC has put lot of efforts on corporate agent front also, there CA productivity is increasing for last two years.

Average No of individual policies sold by CA
	2007	2008	2009	2010	2011
Private	1798	1857	2289	1976	2533
LIC	1905	2190	1606	1708	2194
Industry	1815	1908	2172	1933	2474

The objective of this article is to create some awareness about the scope in improvement for private players. In coming articles I will share some of the best practices across globe in increasing productivity.

Do share your feedback on this

Customer proposition - written on 12 July

Building Proposition keeping customer experience at the core

Insurance needs are evolving but have not changed fundamentally, customer want to protect what they value. This they want to do through simple product that they can understand or complex product which some one can explain to them, with sufficient transparency to compare different offerings. Understanding buying behaviors and emotional triggers are key to tying these concepts together into building proposition based on 360 degree view of customer.  In this article we will look at some of tools used by companies globally

·         Progressive insurance company  uses telematics to empower their customers to select options to custom fit  their needs and budget through program called “Name your price tool”

·         Achmea in Netherlands and Pru health in UK are helping customer live healthy life style with advice, guidance and benefits in form of lower premium. Discovery (SA) has a program specifically to cover HIV Positive customers.

·         Even our own “AEGON” has established new direct insurer based on facebook called Kroodle, initially offering mass market P&C products.

A close look at these propositions shows that these companies have driven proposition based on customers ‘moment of truth’. Many customer across globe find insurance products difficult to understand, such proposition give a genuine differentiation to these products.

Actions points for creating such propositions:-

1)      Move from product development based on competitive positions or distribution demands to customer needs basis

2)      Apply customer insight to rationalize your existing product portfolio and match product segment to identify gaps in product matrix

3)      Give customer greater control of pricing and other parameters( if a customer promises to be healthy and his medical record shows so can his/her premium be reduced from next policy anniversary)

4)      Stay agile and re-asses customer needs frequently – including need and behavior questions in selling and servicing. (give customer chance to change his/her  policy anniversary or SA in case he becomes a father or buys a house )

Know your Customer:-

As the Great Management Guru Peter Drucker said “The purpose of a business is to create a customer.” So it 
becomes more important to understand what does a customer wants?

Insurance has for long lived with myths like:-

•          Customer have low confidence in life industry
•          Life insurance is sold, not bought
•          Personal interaction is essential
•          Providers can influence persistency

As per insurance survey report by a E&Y, 93% of customer surveyed across all channels, age and income group are very or fairly confident that they have the right product to meet their needs. The overall customer satisfaction index rating for insurance industry in India is much higher than china and UK. Though 52% of customer still feel insurance industry lags behind other in quality of customer service. Service element that they would like to see improved are