Chapter 17 – Life Insurance Agency as Career
An agent is one who works on behalf of a principal. An Insurance Agent is a person engaged by the insurer to procure new business. He gets his remuneration by way of commission.
An Insurance Agent is a person who:
- Is engaged by the insurer to procure new business
- Is representing the insurance company and works on its behalf
- Is paid commission as remuneration for the duties done by him
Corporate Agents: IRDA (Licensing of Corporate Agents) Regulations, 2002 provides for appointment of corporate agents such as companies, firms and co-operative societies.
Brokers: An insurance broker represents the insured and generally does not have any contractual agreement to exclusively serve any one insurance company.
Bancassurance: The term ‘Bancassurance’ refers to the collaboration between banks and insurers to distribute insurance products to the same customers or customer base.
Direct Marketing: This is where the company directly markets to customers through its own sales force which is made up of employees of the company. They may get a regular salary and incentives, based on their sales performance.
Direct marketing may involve various approaches such as:
- Telemarketing (through call centres for instance), Mail marketing, Internet and web-based marketing and Work site marketing.
Persistency of Individual Agents: Persistency during a period has been defined as “proportion of policies remaining in force at the end of the period out of the total policies in force at the beginning of the period.” Persistency refers to the amount of business that insurance companies are successful in retaining without lapse or surrender of the policy. It can be calculated as follows:
Persistency = Number of policies remaining in force at the end of the year / Total number of policies in force at the beginning of the year
Methods to Maintain High Persistency: High persistency ratio can be maintained by:
- Flexibility in premium payment by clients
- Constant reminder of due premium dates
- Continuous contact with clients
- Effective policy servicing
Through an agency career, apart from the scope to earn high incomes, an insurance agent can also attain a tremendous job satisfaction and social respect if one’s job is done in an ethical and professional manner
- Qualities that would contribute to success in the career as an insurance agent or advisor include:
- Fire in the belly
- Positive self-image
- Being a self-starter
- Ability to relate and communicate with people
A good salesman should have two basic qualities: empathy and ego drive
Four major areas of unethical behaviour have been identified in the insurance sector:
The IRDA has prescribed a code of ethics and market conduct for agents
IRDA has laid down the regulations for recruitment, training and licensing of insurance agents
Effective from September 2012, a standard proposal form has been adopted by all life insurers for all individual policies. This is based on the draft exposure guidelines issued by IRDA in June 2012
The agency function consists of two distinctive tasks:
- Building a relation with the customer – which inspires trust and confidence
- Providing expert financial advice to the customer – which enables the latter to meet his or her needs for insurance in the most appropriate manner
- IRDA has decided to implement guidelines strictly from 1st July 2014.