Traditionally, the business of life insurance has been highly sales-oriented. The emphasis is always on new customers and, normally, their acquisition tends to offer higher recognition to employees in any life insurance company. The cost and complexities of the marketing activities normally take up most of the time and energy of the people at all levels of the organisational structure. As a result, the team is not left with enough time for the existing customers. It is understood that the terms of forfeiture in the fine prints would prevent the customers from going away anyway. Discontinuing a life insurance policy is highly loss-making. A lapsed policy, without acquiring the surrender value, leads to total forfeiture of the premium paid. The normal surrender of a policy returns a sum far lower than the premium paid up to 3-4 years.

Some people in the companies would also believe that bringing back a lost customer through a fresh sale might be a more profitable proposition. All these and the inherent durability of the products made post-sales service, beyond the renewal premium collection, less significant. Very often, it has been observed that the volume of sales remains independent of the quality of post-sales service. This may defy normal business logic, but this is how life insurance companies in India have been performing. This attitude does seriously hamper profitability and this is proved by the missing profitability in the Indian market of 2001?2010. In their craze to chase the top line, almost all companies ignore the creation of a stable agency force and they do not pay enough attention to persistency of business. When the sector was being opened 12 years back, consultants and industry experts expressed a view that it would see a wide range of products and a very high standard of customer service. It was also observed that the quality of customer service would be the most significant differentiator. But the ground reality is that in any conference of insurance executives, customer service would always find a place in the agenda for the post-lunch sessions only.

On the other hand, the outsourcing model adopted by many companies did not prove very successful as crucial customer issues where often mishandled. There is another paradox in the life insurance business that pushes the customer service issues to lower priority. Very often, the person who interacts with the company and demands service is not the same person who buys the product and pays for it. Life insurance is an intermediary-based business. Hence, the policy holders do not directly deal with the insurers. Therefore, the agent who deals with the company, day in and day out, is the customer of the company and he demands respectful attention and reasonably satisfactory service.

For receiving service and delivering it to the end-customer, he acts as the agent of the policyholder. Millions of LIC?s customers in India have successfully got their maturity claims over a period of 20?30 years without ever visiting an LIC office. This phenomenon has been more pronounced in other markets also where intermediaries like brokers and independent financial advisors have been key players in the distribution of life insurance products.

For a long time, they have been treated as customers by the companies; and the quality of service received by them determined the standard of service to the policy-holders. In fact, this model often proves to be the strength of the insurers. But this is fraught with serious dangers. A dropout agent may trigger defection of a large number of customers. Policies which continue in the books face the predicament of becoming orphans. Such policyholders find it very difficult to draw the attention of employees for any service. Even if the company people are sensitive to such issues, the policyholders also feel reluctant to contact the office and expect somebody to visit them, know their problem and solve them. The recent developments, however, have substantially removed the dichotomy between the ?customer? who visits the office demanding service and the customer who received the service through him. Technology has made it possible. SMSes, emails, websites and call centres have aggressively put the policyholders directly in front of the insurer and this phenomenon is gradually redefining the issue of customer service.

Claim settlement is the most critical customer-service activity for a life insurer. This is the moment of truth that vindicates the ultimate reliability and trustworthiness of the insurer. But the irony in claim settlement is that while maturity is settled in favour of the policyholder, the death claim is settled in favour of a nominee who may not have the experience of being a customer. But this last process in the chain of services impacts the market most. Honouring the promises made to the customer in his absence is the unique privilege of life insurers; hence, this must be executed with speed, accuracy and courtesy. The claim-settlement ratio has the highest impact on the image and rating of the insurance company.

To remain competitive and derive maximum value from customer-relations management, every insurer must discard the old assumptions regarding the profile of the customer and learn to give the king his rightful place in all its structure and strategies. Beyond the ?loyalty addition?, the product structure and the privileges under policies must be designed to encourage long and uninterrupted relationships. Trust should be a bilateral proposition. The end customer or the ultimate beneficiary, all should contribute to the making of the ?king?.

The writer is former MD & CEO, Star Union Dai-ichi Life Insurance