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Financial Intermediaries in Non-Life Insurance
FICCI October 16, 2001
Current Industry Scenario
Low business and territorial penetration levels - need for new
distribution channels
Poor marketing strategies, lack of innovation in designing & pricing
the product - New products and better packaging
Low service standards - Need for improved customer service
Poor Risk Management Practices - Prudent underwriting practices in
line with international standards.
Intermediaries to play a key role in fulfilling the above
needs.
HR Seminar
WHY AM I HERE ? The success of the Insurance business depends on the role
played by the intermediaries. In the Indian context -role of intermediaries in :
Life insurance business for procurement and servicing.General Insurance business - presently for servicing
e.g. settlement of claims New Insurance Companies are getting organised -
ability of the company to develop a complete network of robust intermediaries is key to success.
Relevance and challenges in intermediation of the insurance business cannot be underestimated.
Specialists to speak on various topics related to intermediaries training & HR interface
Definition
What is Insurance ???
Insurance is all about a promise of a payment / service.
Emerging Customer centric Business Model in India
The Changing Context In India
Personal Lines -Car repair syndrome
Commercial LinesFire claims syndrome
Challenges Ahead : Global context
The emerging expectations of the promise of the intermediaries
Managing these expectations Long haul process of change management
Presentation Flow
No of Slides Intermediaries 3 Current Scenario 4 Intermediaries - a schematic 1 Personal Lines Business 4 Motor product Intermediaries 2 Commercial lines 1 Other Issues 1 Summing up 2
Intermediaries Definition
The link between insurer and insured (Customer) for insurance sales and service.
Key/Formal Insurance intermediaries include Insurance Agents Brokers Insurance Consultants Surveyors and Loss Assessors Third Party Administrator Reinsurance Broker
Intermediaries (contd.)
Other Intermediaries : Co-operativesActuaries IT Systems provider Rating agencies Any other person assisting and representing an Insurer
in any of the following:Soliciting, negotiating, procuring or effectuating an
insurance contract or its renewal;Disseminating information relating to coverage or
rates;Forwarding an insurance application;Servicing and delivering an insurance policy or
contract
Intermediaries (contd.)
Inspecting a risk; Setting a premium rate;Investigating or assessing a claim or loss;Transacting a matter after effectuation of a contract;Representing a matter after effectuation of a contract; Representing or assisting an insurer or other person in
any other manner in the transaction of an insurance contract;
Servicing a policy or contract.
The total intermediation equation has to be right to be a successful insurance company in the new environment.
Current ScenarioKey Intermediaries Agents
Primacy to insurer’s interest (FACE OF INSURANCE COMPANY) Cannot represent multiple insurers hence are “tied” to an
insurer Practical training and passing of examination is
mandatory and sponsored by one insurer Discourages switching of Insurers
Broker Primacy to insured’s interest Can represent multiple insurers to provide suitable
products to the insured IRDA has formulated regulations governing insurance
brokers (to be passed)
Key Intermediaries Surveyor / Loss Assessor
To examine the claim and assess the actual loss suffered
To submit a report for the consideration of the insurance company
Third Party Administer (TPA) Arises mainly out of Managed Health Care
business. Only “companies” registered under The
Companies Act, 1956 are allowed to act as TPA IRDA is finalising regulations governing TPAs.
Reinsurance Brokers Link between insurer and reinsurance
organisationsIncentivised by the reinsurer for annual
treaties and facultative deals
Current Scenario (contd)
Current Scenario (contd)
Appointed Actuary Provides actuarial advice to the management. Assurance to IRDA
Co-operatives Reach in rural areas rural populace more comfortable while
dealing with cooperatives.
IT Systems provider Essential support for all new Insurance
companies IT systems backbone of the operations
Rating Agencies - AM BEST, Standard & Poor, Moody’s
Current Scenario (contd)
Skill set of an agent and broker Customer orientation Advice customer according to needs Ability to sell multiple products Provide market intelligence Good working knowledge of IRDA
regulations and willingness to adhere to it
Surveyor/Loss Assessor
Third PartyAdministrator
Intermediaries - a schematic
Reinsurance Broker
Broker
Insurance Company
IT Systems ProviderBancassurance
Actuary Other
Intermediaries
AgentRisk
Advisory
Corporate
IndividualsCo-
operatives
Personal Lines Business - Backdrop Untapped potential largely due to
Lack of product knowledge and brand recall
Absence of a customer centric approach
Products not addressing the changing trends in customer needs
Low penetration due to inadequate marketing / delivery system
Absence of risk-cum-investment tools resulting in low involvement buying behavior
Unattractive commission structure
Personal Lines - Opportunity Ahead Increased consumerism
Increased social instability
Higher disposable incomes
Operation of law
Changing attitudes
Easier availability
Increased medical cost
Some Challenges Ahead Need to develop state of the art training institutes
focussing on sales & management Put in place scientific selection / recruitment of
Intermediaries Promote, encourage professional association of
intermediaries and self-regulation concepts Marketing support to distribution channels Link business strategy more effective with
technological reality
THERE IS URGENT NEED TO CREATE AN ENVIRONMENT/STRUCTURE, INCLUDING TRAINING CENTRES/EDUCATION TO ENHANCE CAPACITY BUILDING OF INTERMEDIARIES.
Suite of Personal Line Products
Motor Home & Home content Health Overseas Travel Education ...
Each line of business requires its own selling and processing intermediaries and dependency vary across the products
MULTI DIMENSIONAL MANAGEMENT MATRIX
Motor Product Intermediaries
Sales Agents for vehicle insurance
Manufacturers wanting to become agents / brokers to provide one stop services to their customers
Auto Dealers: point of sale influencers in the value chain
Direct Marketing Agents:decision influencers at the point of provision of finance
Services Surveyors
Assessing vehicle damageExamining, Inquiring and Investigating the
causes and circumstances of lossEstimating measuring and determining the
quantum of loss
Motor Product Intermediaries (contd.)
Garages and Workshops to carry out actual repairs
Other Service Intermediaries Towing service providers On the spot repairs Trauma services
Ambulance providersBlood banks
Commercial Lines- Intermediary Challenges Key Issues
Business to Business vis-à-vis Business to Customer in PL
Key differentiationSales Process
Different skill sets and role of Agents / Brokers
More personalised approachRisk Assessment Intermediary
Claims ServicingRole of surveyor critical
Other Issues
Bancassurance
Direct Channels
Summing Up - Emerging Scenario
Emerging trend Channels to evolve according to market
opportunities /economics Agents/Brokers will align to market and
customer profile Implies
Undertake agent profiling by doing intermediary mining
Align agents to products being sold and customers being targeted over time
Learning from banking industry?
Local flavour to play important role
Rules of the game will be written by Indian Companies
Key to success is keep ear to the ground and keep modifying as per changing requirements
Fit ground realities to your organisation’s business strategy
Summing Up - Looking ahead
Thank You
Backdrop - Motor Insurance claims
Insurance Company
Garage owner
Surveyor
Car Dealer
Agent or
Broker
Towing & other
Services
Financier
Backdrop - Fire Insurance claims
Insurance Company
Surveyor Salvage Buyer
RepairerAgent/Broker
Insurance Education
Insurance Education
Management cadre Operational level
Domestic Training Overseas training
Intermediaries
Direct Channels
Minimum physical contact Call Centres
Ideal for renewal businessEconomic dispensing of insurance related
informationService related guidance and support
E-IntermediariesInternet based information dispensing
Other remote terminalsATMsKiosks
Banks as an Agent - Bancassurance (?) Provides readymade customerbase Approx. 70,000 bank branches Insurance products can be linked with banking products Comfort for customers since he is accustomed to doing
regular monetary transactions with the bank. Reach potential middle / lower class population Ease in sale of standard products Sales experience in other products
Mutual fundsCredit cardsPersonal loans
Essential to keep the products simple Pre-underwritten product guidelines
