Accountability in New Insurance Companies.

Marketing operations of private insurance companies is facing major problem in India. After the opening of insurance sector to private companies – man power requirement by these companies is posing a great challenge. The low level of insurance penetration and rising incomes has opened huge opportunity to the newly started insurance companies.

Insurance companies need agents to deliver their products to customers. The agents require training and license from IRDA. No body is paying any attention to the basics of selection of agents, training on insurance concepts, products and sales skills. The agents are attached to Unit Managers ( or business development managers or sales managers or team managers) and it is the duty of Unit Managers to bring business through the agents.

The insurance companies today face severe shortage of manpower. Attrition rates are very high in this very young industry which is only 5 years old. The Unit Managers are given primary target of appointing a minimum number of agents and are expected to nurture them. The problem is the attrition of Unit Managers and the agents appointed by them are left high and dry.

Number game is not going to last. Targets and incentives should not be based on the number of agents appointed. It should be based on the number of successful agents. The Unit Managers should ensure that the newly recruited agents are properly guided through sales process including prospecting techniques, requirement analysis and product positioning. Newly appointed agents soon exhaust their list of prospects from among their friends and relatives and they come to a stand still as they are not trained to locate new prospects.

Unit managers are busy talking to each other and they talk to the agents only in the last week of the month. Three weeks of the month they are busy boasting last month’s achievements (despite no contribution from them), tracking colleagues’ move to or in other companies, and visiting tea and pan shops on hourly basis (to ease pressure!), and somehow manage to act busy. Given an option majority of agents will opt for working independently without any Unit Manager for two reasons. One why should Unit Manager earn commission and promotion without any significant contribution towards business growth and secondly the fact the Unit Manager will not last in the company for more than a year exposes the agent’s customer database to competition.

One wonders why the new companies are blind to non-performance, wrong incentives. Ask any common man with little business acumen he will point out the glaring mistakes.

1. Unit managers should manage their units towards set targets of business. Appointing number of agents should not be the target.

2. Why do agents come to these companies? ( now they have been dragged by the Unit Managers) – To earn. After the exhaustion of known circle of prospects, the business stops. The Unit Managers have no time or business plans to ensure that these agents continue toearn in the long run.

3. It is the agents and the companies which are going to stay together in the long run. Unit Managers are joining and leaving so fast the agents are left high and dry as the new Unit Managers have the target of appointing new agents and nobody cares for the existing agents. More than 95% of agents recruited, trained and licensed are not properly utilized.

4. Who will hold these Unit Managers accountable? The Managers of managers are also joining and leaving all the time, which makes it easy for all to escape accountability.

5. Any pay structure should be so tailored to address these concerns. Total pay should be split into 3 components. One third basic pay, two thirds on achieving minimum targets every month (like bringing business from the all agents attached to that particular Unit Manager) and incentives should be based on the breadth of the business and volumes.

6. Working for competition: The newly appointed agents rush in with prospects, create awareness about insurance in persons with no insurance or less insurance but are unable to clear the doubts due to lack for training and non-availability of his Unit Manager due to his busy(sic) schedule. These leads generated and not handled properly automatically go to LIC as the Development Managers of LIC are quick to move in and close the sale. Reality- In a rural area an LIC agent whose annual premium collection has never crossed Rs 2 lakhs per annum till last year, now notched up a premium collection of Rs 15 lakhs per annum thanks to leads generated by all the private company agents who are ill-trained and badly supported. 90% of these leads were walk-ins for this LIC agent. Main objection which could not be addressed by private company agents was “private vs. government owned”

7. Number games in agent recruitment is a failure: To reach the number target set by companies Unit Managers fill the IRDA classes with dummies or friends or contacts assuring them that they need not attend 100 hours, 2-3 days will do and attendance will be cooked up to show 100%, and they need not prepare for the exams and it will also be taken care of. Now look at the results it is very poor at less than 5-10% passes percentage in recent IRDA’s agent examinations.

Solution: The managers should be sufficiently remunerated to reduce attrition. Focus should be laid out on quality in agent recruitment and training instead of mere numbers. Companies should also formulate and review their methods of incentive calculations to ensure it results in greater accountability.

The above example though pertains specifically to insurance industry the underlying problem is being or will be faced by all companies in the emerging India