Allowing agents to sell insurance plans of multiple players will only
result in increased mis-selling and greater pain for the consumer
Having been in the insurance business for several years now, I get intrigued every
time I hear someone smart mention: Insurance is sold and never bought. The legal nature of the insurance business is such that insurance is solicited, which means that the insurer approaches the prospect to buy insurance.
However, over the years, this has resulted in several unsolicited practices by the agents’ sales force, which have earned them the sobriquet of being rogue agents. (That’s how an article in a recent issue of The Economist described them, discrediting the entire industry and its functioning.) In a bizarre move, the Insurance Regulatory and Development Authority (IRDA) chairman has gone on record to suggest the possibility of agents hawking policies of more than gone company in the life insurance business, which has all the makings of further tarnishing the image of agents.
The current dubious ways of agents are well-documented and any effort to curtail this menace has not been sincerely undertaken by either the insurers or the regulator. In the past 10 years since the sector opened up, the quality of the agent force has not seen any improvement, which is desired of a developing market. Take, for instance, the case of the West, where alternate channels have almost wiped out direct agents, empowering buyers to decide than being cornered into making a decision.
By allowing agents to sell policies of more than one insurer, the regulator will be letting accountability take a backseat. Agents represent an insurer and have their interests linked to products that have incentives embedded in them, making them
sell policies that may not be best suited for the client. The role of training the agent will further get diluted because each insurer will pass the buck on to the other for not adequately training agents. The buyer’s experience will only worsen.
The role of insurance brokers will also get unclear because, unlike agents, they represent the policyholder and act in his interests by advising him on the policy that best suits his requirements.
Brokers are accountable as they need to maintain capital requirements to get licences and it is in their interest to sell policies that address the policyholder’s interest to grow their business. The regulator should bring in accountability among agents and encourage other forms of sales channels, so that buying insurance is a pleasant respect for buyers and not an arduous task. For this, it can take cues from several other industries that were agent-dominated.
For instance, the retail industry has managed to make shopping pleasurable by offering plenty of choices to consumers. Or, for that matter, the airline ticketing business has almost completely ended its dependence on middlemen, thereby ending variable pricing of tickets and bringing in greater transparency. By bringing multi-brand products under one roof, large-format grocery stores have enabled consumers to choose the products
they want instead of buying what is available at the local kirana.
It is time insurance companies helped agents transform from being a ‘product pusher’ to a solutions provider, which is possibly the only natural way to address mis-selling and inculcate the right selling approach. Research shows that a satisfied customer spreads the good word to seven more people. That’s barely anything when you compare it to what an unhappy customer does: he talks about his experiences, with exaggerations, to four times that number. The wisdom is in focusing on quality.