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Getting insured - just about anywhere

Freny Patel | July 22, 2003

Sam Mehta, a customer of Union Bank of India, bought a HDFC Standard Life's child plan by simply picking up a leaflet at the bank counter.

His brother Daraius Mehta, shopping at a leading retail chain Westside with his family, purchased a similar plan for his two-year-old son from ICICI Prudential Life. Both brothers faced no hassles in buying the plans.

In fact, Daraius by virtue of being a gold cardholder of Westside stores -- having an affiliation with ICICI Prudential -- was already pre-approved to avail of the plan.

The purpose of the alliance, as in the case of any corporate agent, is to reach out to the member base of card customers with a customised offer that appeals and meets their needs. It also builds a database of people who might be interested in life insurance products.

Anil Kumar, an insurance agent, for the last 10 years has seen a phenomenal change in customer awareness and the way in which they demand service.

Customers today know what they want. At the same time, changing lifestyles means greater demand by customers in terms of how he wants to interact with insurance companies.

The Mehta brothers were well aware of the insurance products they purchased, thanks to the awareness created by the industry. They did not need the help of an agent to explain the benefits.

Entry of private insurance players has brought about alternate distribution channels to suit customers' needs.

Today, interface between the customer and the company is no longer characterised by long-drawn meetings with the insurance agent. It is a question of speed, convenience and ease of transaction that new companies are emphasising.

The distribution revolution has created a new dimension of opportunities for traditional providers, in terms of different modes of distribution (the telephone, the Internet and related technologies) and new partner organisations including employers, unions, retailers, charities or professional services bodies.

Come 2005, it is expected that insurance will be sold just about anywhere. Medical stores have already started selling medical and personal accident covers.

ATMs are selling over the counter. Departmental stores are also offering similar products today. Insurance has become the highest selling financial product in a non-financial environment.

Trade unions have also become an important channel for propagating the need for risk cover among the unorganised sector, as they are seen as respected bodies among employees.

The Life Insurance Corporation of India has invested huge amounts in recruiting and training its almost 10-lakh (1-million) agency force.

ICICI Prudential Life Insurance has already recruited 22,000 financial advisors. Other private insurers are equally in the race to enhance the number of "feet on the street".

But at the same time, a major paradigm shift is taking place in the way insurance is sold in the country.

Essentially this paradigm change has evolved on account of changing lifestyles and the social trends of the population.

In Europe, the direct sales force is slowly giving way to sales by brokers, bancassurance, direct marketing, and Internet.

In the Netherlands, about 16 per cent of sales are through direct marketing. Bancassurance accounts for as much as 63 per cent of insurance sales in Spain. The Internet is catching on in Poland and Sweden, accounting for 1.2 per cent of sales.

Research further indicates that by the end of the decade, these ratios will undergo a dramatic change. Greater percentage of sales will be through the bancassurance route, the Internet and direct marketing, and to a lesser degree even through digital TV.

India is also catching on. Many new players have capitalised on alternate distribution channels.

ICICI Prudential Life, the second largest life player in the country today, states that alternate distribution contributed 28 per cent of its new business premium in fiscal 2003.

"Maximum contribution was from the bancassurance channel, followed by corporate agents and then direct marketing," says the company's CEO and managing director Shikha Sharma.

LIC is equally gearing up as it channelises sales through bancassurance partners such as Corporation Bank, Central Bank, Oriental Bank of Commerce, among a host of others.

Birla SunLife Insurance, HDFC Standard Life, ING Vysya Life, Aviva and Metlife Insurance have all seen increasing sales through their banking partners. In many cases, about 50 per cent of the premium earned come from the banking channel.

Banks, among other channels, have much lower distribution costs than insurance companies and thus have emerged as the fastest growing distribution channel.

The importance of alternate distribution channels stems from the databases they capture, and how well these are data-mined to give customer information in terms of consumer behaviour and attitude. This differentiates a direct agent from the alternate distribution approach.

Moreover, alternate distribution channels are also about reach and lowering costs. In a country the size of India, banks offer networks that extend across the geographical spread, reaching the remotest of corners, communicating with diverse cultures and all social classes.

They have the financial expertise and understand the saving patterns and lifestyle of the customers they serve.

ICICI Prudential for instance has seven bancassurance relationships, giving it a presence across a number of states such as Maharashtra, Bengal, Karnataka, AP, Gujarat, MP, Kerala, Tamil Nadu, Punjab, Haryana, UP, Rajasthan, among others.

"This has given us a reach across 642 bank branches, which will double in the coming months," says Sharma.

Banking channels have demonstrated success in leveraging their relationship with customers, controlling costs and launching innovative products.

In contrast, direct sales force proves to be expensive. However, this does not mean the end of Anil's career as an insurance agent.

Complex products will continue to see individual preference for face-to-face interaction, while telemarketing and Internet along with corporate agents will sell simpler products.


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