Sell insurance as service, not as a mere product

Written by YRK Reddy | Updated: Jun 24 2006, 05:30am hrs
In a recent address, the Insurance Regulatory and Development Auth-ority (Irda) chairman reportedly expre-ssed some concerns about marketing of insurance in our countryof it being sold more as a product and not enough as a service. It is probable that he was concerned about the approach being adopted while selling insurance cover. The notion of banking or insurance having a slew of products has arisen post-liberalisation in the context of emerging competition on the one hand and the growth in market opportunities on the other. Commens-urate with the developments, and as in the case of developed markets, insurance is being packaged to address differentiated markets based on demographics, risk perceptions, psychographics, etc., thus increasing the range of plans and services.

For long, a product meant a physical object which, when sold, completes the transaction. However, during the explosive growth of products, particularly consumer durables, a shortcoming noticed was that of after-sales service. The challenge was appropriate behaviour to please customers with quality attention during and after sales. The aim was to exceed customer expectations.

Competitive advantage swiftly chan-ged from product features and pricing to customer service. Empowerment and intense training of managers and frontline executives was expected to enhance customer satisfaction and their loyalty. Custo-mer acquisition, retention and satisfaction got mainstreamed into performance criteria. The advice has been to treat customers as sustainable resource and co-create value. Products have seen sudden improv-ement in their functionality, price, warranties, guarantees and freebiesthey are indeed bestowed with service values bringing about what I call servicisation of products.

Productisation of services began with liberalisation. Driven by growing market opportunity, banking, insurance and other service industries have started concentrating on generating new services and fresh menus to be offered as products on a competitive basis, while sales channels increased without commensurate service skills. A product perspective may be important for those researching and designing a new scheme, plan or service. However, such a perspective for those in sales might have induced the short-term goal of selling the product any which way.

Irda chairman notes how insurance is sold more as a product, less as a service
Notion of banking, insurance having products came up post-liberalisation
User experience cant be separated from relationship with insurance providers
The danger of such a happening is very high in the case of the financial sector for the simple reason that the market in this case is mainly one of exchanges of prom-ise. In the case of insurance, it is an excha-nge of promise that activates only on a contingency. The customer cannot see any features of the product and cannot point out its defects easily, or exchange it. He has to pay for a promise and service which he will discover when a contingency arises. This is more so in the case of farmers, informal businesses and micro-enterprises.

In a country where awareness of contracts and promises are weak and the processes of grievance redressal tortuous, people selling such promises might actually leverage on the ignorance and lack of understanding of their clientele. With a high turnover of selling personnel and absence of long-term relationships, information asymmetry can be aggressively exploited. This prospect increases where there is indirect selling and channelling.

The suppliers of services must distinguish themselves not only by the technical product/service knowledge of the person selling, but also through skills of building sustainable relationships with custom-erswhich means helping them decide rationally. The seller must not treat the customer as an object to be manipulated or used. Sellers of service as products must remember that eventually the customer experience cannot be separated from the relationship with the insurance service providers. It is not like vending soap.

Exceptions apart, several players are apparently in a baiting rather than servicing mode. In an environment of early competition in a growing economy, there is little hope that sellers will adopt a fully customer-oriented service approach. They will be tempted to push products than service customers till the industry matures. This will be a challenge for the government and the regulators, as they search for mechanisms that will foster servicing values, especially for the sake of the underprivileged. To start with, Irda may like to review the training infrastructure for the industry, which is disjointed and disparate, and the quality of training and retraining of direct and indirect sellers.