INSURANCE – BACK TO BASICS
The business of the insurance industry is simply to provide security and peace of mind to the insuring public by paying claims.
We hear more often of disgruntlement, unhappiness, and lack of trust from the insuring public due to unorthodox means used to sign up clients, poor policy administration and notifications during policy currency and repudiation of claims on technical grounds.
To restore the general public’s confidence in the insurance industry, the Regulator and insurance companies must go back to the basics of the Insurance industry viz employment of qualified and experienced personnel, proper prospect profiling, proper needs analysis, proper product recommendation and good underwriting philosophies.
The insuring public must also remember that insurance is never meant to enrich or gainfully benefit the recipients. Its purpose is only to restore back one’s position to a pre-loss position and anything more than this position is not insurance.
To achieve the stated position, insurance sales must be relationship based. It must also be borne in mind that people are more willing to do business with people they know and trust especially where sensitive details such as personal health and earnings are involved. Relationship-based selling will eliminate misrepresentation by financial advisors as people are more inclined to offer professional advice if there is a relationship in existence. Established relationships will ensure frequent interactions between the policyholder and financial advisor/insurance company and will enhance excellent communication resulting in good policy management and avoiding policy lapses. For the financial advisor, relationship-based selling will also ensure unending referral business and good commission earnings.
Because insurance is never bought but sold. The industry employs sales agents to market and sell insurance products. Commotion in the insurance industry is mostly created by financial advisors who employ unorthodox tactics to close business. This is so mostly a result of the way advisors are compensated. Because they are remunerated by the commission, advisors will always be desperate for a sale and will misrepresent thereby bringing the name of the industry into disrepute. From time immemorial, insurance selling was for mature and retired professionals such as doctors, lawyers, and accountants. These retirees would be having a very huge database of their own clientele and will not be under any pressure to obtain a sale. By virtue of being professionals, they are bound by ethics to do the right thing when dealing with insurance clients. So, the industry must consider the age and financial standings of an individual before engaging them as sales advisors or at least come up with another acceptable way of remuneration that may not exert pressure on the sales force.
Banks have evolved in a very marvellous way as far as technology is involved. Bank customers can access, transact, and view the status of their accounts from everywhere. The same cannot be said of the insurance industry. It is lagging in terms of policyholders accessing policy information conveniently. This then makes people lose interest in their policies. Back then, though it was done via post offices, at least notices on policy status were dispatched to policyholders religiously and as a cost containment measure, the industry stopped transmitting notices to policyholders a situation which leads to policy owners losing interest in their insurance portfolios. The industry must evolve itself by finding ways of keeping in touch with policyholders as was the norm back then. This will generate increased interest and trust from the insuring public.
Underwriters should also have realistic retention limits which will not strain financially in the event of a claim. To go back to basics, underwriters should reinsure risks with huge sums insureds as opposed to retaining huge risks due to the selfish need of not wanting to share the premium with reinsurers. Once underwriters start to share risk with reinsurers, claims management and payment will also improve, not only will it enhance claims management, it will also increase the underwriting capacity of first-line insurers and will aid in quality risk assessments as both underwriter and reinsurer will assess the risk.
The insurance industry should employ people with relevant qualifications, especially sales staff. All sales advisors should have the mandatory Certificate of Proficiency which will then enable the regulator to license the sales agents. Currently, the industry is flooded with unlicensed sales agent who lacks the basic understanding of insurance. This then leads to misrepresentations when advising clients.
Premium/ price undercutting is a major problem in the industry, especially on the short-term side of things. In a bid to offer cheaper premiums and attract more clients, underwriters find themselves offering uncompetitive quotes which will later come back to haunt them at the claims stage as they would not be able to honour claims. To curb this disease, regulators should insist on solid actuarial valuations and audits by reputable auditing firms who would be able to express an honest opinion about the state of affairs.
The above is not exhaustive. There is still a lot of basics that the industry needs to observe in order to offer world-class service and products so as to impact positively on humanity.
About the writer: Paradzai Masvingise is an Insurance practitioner with vast experience in the insurance industry. He can be contacted on email: firstname.lastname@example.org or whatsapp +263772955507