Role of an Insurance Agent: Licensing, Responsibilities, and Success Factors

1. Chapter 14 ROLE OF AN INSURANCE AGENT

2. INTRODCUTION • An agent is the first link between the insurer and the insured. • Only companies that have obtained License from the Insurance Regulatory Development Authority (IRDA) can function as insurers. • Prior to enactment of IRDA Regulations, LIC was the only insurer insuring human lives. • After opening of the insurance sector to other players, a number of insurance companies grant life insurance policies. • As such it is necessary for the LIC agent to be well informed about the benefits of life insurance and different policies available to suit the needs of the policy holders. • A person having completed 18 years of age and having passed the 12th std. (in rural areas – 10th Std.) is eligible to become an insurance agent.

3. INTRODCUTION Grant of licence • A person requires a license to function as an agent. • A person desiring to obtain or renew a license to act as an agent has to make an application to a designated person as per the IRDA regulations. • The designated person may on receipt of the application alongwith proof of the payment and on being satisfied that the applicant: • Possesses the qualifications and has the practical training, has passed the examination

4. Grant of licence • submitted application duly completed, d) has requisite knowledge to solicit and procure insurance business, • is capable of providing the necessary service to policyholders. Grant or renew a licence along with identity card to him.Alicence issued as above entitles the applicant to act as an insurance agent for the life insurer.

5. INTRODCUTION • Every person receives income for services rendered. An employee in a bank receives salary at the end of the month. • Likewise an agent receives commission on the premiums paid by the insured. (First premium & renewal) • Agent is the main component and link of the distribution channel for the life insurance business. • Agent has to solicit and procure new life insurance business in amanner that is consistent with the interests of policyholders and the insurance company in the following manner:

6. INTRODCUTION • Contact prospects for life insurance, study their needs and persuade them to buy. • Complete all related formalities - filling up proposal form, collecting premium, arranging medical examination, age proof, reports and other information required by the underwriter. • After the sale is completed, ensure that the policy continues, without a lapse, till it matures/ results in a claim.

7. INTRODCUTION • Continuation of the policy till maturity is in interest of all 3 persons – insurer, policyholder & agent . • Once a policy is sold, the agent becomes part of the family. • He should keep in touch with the policyholder and see to it that all the renewal premiums are paid on the due date. • For this the agent should keep a record of all the policies sold by him and approach the policyholder before the due date to make sure that he has sufficient funds to pay the premium. • The premium should be paid within the days of grace to keep the policy in force.

8. INTRODCUTION • When the agent is in touch with the policyholder it is likely that he may be invited for family functions. • If the policyholder purchases a new house and the agent is aware of it, or if he is invited for the house warming ceremony, he should advise the life assured to inform LIC about the change of address. This will ensure that the policyholder receives all communications at his new residence. • So also, if the policyholder gets married and wants to change the name or nomination, the agent should help him in the same.

9. INTRODCUTION • If it is a money back policy, the agent should help the policyholder in completing the discharge form and getting the claim from LIC office. • If the policyholder requires a loan, the agent should inform him about the amount of loan available under his policy and the rate of interest. This will enable the policy holder to decide whether he wants to avail of the loan or not. • In the event of the unfortunate death of the life assured, the agent should assist the nominee in informing the LIC office and provide all help in obtaining the claim amount.

10. PRE-REQUISITES FOR SUCCESS To perform the above tasks well, the agent has to be familiar with: • Benefits under different plans. • LIC offers various plans suited to the needs of different individuals like Whole Life, Endowment, Money Back, Plans for children, Term Assurance, Special plans - Jeevan Adhar, Asha Deep, Bima Plus, Pension Plans. • Large sum assured rebate and rebate on mode of payment should also be explained to the prospect.

11. PRE-REQUISITES FOR SUCCESS • Office procedures for various matters including forms and documents. • The proposal form has to be filled in by the prospect. The agent should explain to him the importance of each question. • The agent also has to complete the Agents Confidential Report (ACR) on the basis of which the underwriter assesses the risk. All the facts should be correctly mentioned in this form. • If the proposer is a lady, some additional forms may be required. Likewise, if the proposer is working in a hazardous occupation, Occupation Questionnaire may be required.

12. PRE-REQUISITES FOR SUCCESS • Legal provisions & tax implications. • Agent should explain the basis of the contract – premiums will have to be paid by the prospect for the full term so that he can receive the sum assured along with the bonus on maturity. • The importance of nomination, signing the declaration on the proposal form should be explained to the prospect. • Benefits & advantages of other financial instruments, suitable for savings and investments. • Laws on taxation matters relevant to these instruments.

13. PRE-REQUISITES FOR SUCCESS • The tax benefits available should be explained Sec. 88 - 20% tax rebate on payment of premiums, Sec 80CCC – 100% tax exemption up to SA of Rs. 10,000/- under Jeevan Suraksha, Section 10D - Policy proceeds on maturity are not subject to tax. • The agent should be aware of the benefits available under other financial instruments – PPF, NSC, Infrastructure bonds, savings accounts, fixed deposits. • He should be aware of the tax relief available under these instruments

14. PRE-REQUISITES FOR SUCCESS • He should emphasize that no other instrument provides for life cover. • In the event of unfortunate death, only the amount paid will be returned under these instruments, whereas in LIC, the premiums paid wont be returned, but the full SA becomes payable in the event of death.

15. SELLING INSURANCE Have a continually expanding list of prospects (persons who can be approached for insurance) • People within reach- obtained from friends, relatives, functions, news paper reports, directories, contacts at parties, meetings, seminars. • The agent should have a database of clients, classified on the basis of age groups, income, gender, occupation and update this data continuously.

16. SELLING INSURANCE • Prospects have to be qualified – health risk, moral hazard. • Prospects who are having health problems – high BP, asthma, adverse family history may require additional medical reports or special reports. • Prospects working in dangerous occupations or staying in unsafe localities, or going for insurance disproportionate to their income may pose moral hazard. • Those in the qualified prospect list have to be met. • Those whom the agent thinks will finally be fit to be insured have to be short listed. The agent should make efforts to meet these people.

17. SELLING INSURANCE • Sale results only when the following steps are met with: • Pre-approach, • Approach, • Interview, • Objections, • Close.

18. PRE-APPROACH • Means preparing to approach the prospect • Agent must be well equipped with all the information before approaching the prospect. He must prepare a detailed questionnaire so that he can get information from the client. • Basic information is required - income, habits, concerns, interests, saving capacity, family position of the prospect. • Variety of sources- personal call on the prospect. • This information can be obtained from a variety of sources – meeting the client personally, talking over the phone and arranging for a personal meet at the convenience of the prospect, enquiries from the clients friends, neighbours family , doctor, office.

19. PRE-APPROACH • Information received in pre-approach stage will provide reasonable idea of prospect’s financial position & his needs & concerns. • What is his income, which plan and for what sum assured and period he can go in for, as premiums are different under different plans for the same age. • Tentative recommendation of a plan. • This information will enable the agent to suggest a plan suited to the needs of the prospect and his family.

20. PRE-APPROACH • Picturise the sale in the mind – actual sale will be easy. • Create a strong and clear image in the mind of the entire sale going smoothly. This will in fact make the actual sale very easy.

21. PRE-APPROACH • As far as possible, the proposal should be in writing. The advantages of a written proposal are: • Details are not missed by agent & prospect, • Impression is more lasting, • Prospect can go back to earlier data on his own, • Prospect can understand at his own pace and need not hurry up, • Easy to stop at any point, clarify questions and continue without losing the trend. • If any data is not understood or any question is left, the agent can always clarify the same and complete the proposal.

22. APPROACH • Be very clear and straight forward in your approach. • When you are face to face with the prospect, make it clear to him that you are meeting him to render the valuable service of ensuring financial security for him & his family through life insurance. • Explain to him the importance of human life, how it cannot be replaced. Insurance can fill the void created on the death of the bread winner and enable his family to maintain the same standard of living.

23. APPROACH • The agent should arouse enough interest in the prospect so that the interview results into a successful close. • Otherwise the prospect may not pay enough attention to the proposal. • Establish eye contact with the prospect, clear all doubts in his mind to see that the interview results in a success.

24. INTERVIEW • The agent should make the prospect listen to the proposal for insurance. • This can happen if the agent talks about things which interest him, his needs, his family’s needs, or things that really matter to him. • However it should not appear that the agent is flattering the prospect. • Proposal should be beneficial and complementary to the existing arrangements. • Take into consideration the income, family size, age, gender, current requirements, need for insurance of the prospect.

25. INTERVIEW • Simple rules to be followed: • Talk only about the necessary facts. • Do not let the conversation drift to unnecessary topics. Value the prospect’s time. • Let it be an interactive discussion. • Don’t do all the talking. Let the prospect also be made an equal partner in the discussion • Create doubts in the prospect’s mind so that he asks questions. • Provide facts on the basis of which the prospect starts thinking and asks questions.

26. INTERVIEW • Listen properly to the prospect’s view point. • Do not try to force your views on the prospect. • Pay attention to his views and guide him properly. • Do not argue, interrupt or contradict his statements. • People generally feel good when they are listened to and then they listen better.

27. INTERVIEW • Make the talk interesting by giving true stories how insurance has helped families. • Quote examples how the insurance sum assured received on maturity was useful for the education of the children or performing their marriage. • How the policyholder could use the money obtained from insurance for his family needs without having to borrow loans from others.

28. INTERVIEW • How on the death of a breadwinner the family could lead a decent life from the money received out of the life insurance policy. Use names of his children or relatives. This will make the story more touching. • Use additional aids like pictures, graphics and presentations – power point if you have a lap top. • Colorful pamphlets of different plans can also be left with the client, so that he can go through them at his own pace.

29. INTERVIEW • Make the prospect write down figures of his needs, liabilities, benefits of the insurance plan and of the premium. • Work out the insurance in terms of numbers. Make the prospect write down his age, his likely retirement age, current income, expenses, liabilities, benefits of the insurance plan and the premium to be paid. • This ensures that the prospect is paying attention to the proposal for insurance.

30. INTERVIEW • Advice to be in the best interest of the prospect, and not the agent’s own interest. • While giving all this information, the agent has to keep the interest of the prospect in mind and not his own interests. • He should avoid suggesting plans which have a high premium and which he knows the prospect will not be able to pay for the entire term. Even though higher premium would mean more commission for the agent.

31. INTERVIEW • Prepare the flow of the sales talk in advance. • How will the sales talk proceed, what would be the opening remarks? • Try to be polite and enquire after his well being, health, occupation, family members and suggest him the appropriate plan as the talk proceeds.

32. OBJECTIONS • Prospects are likely to raise objections, one after the other. • Objections are a part of every sale. • If the prospect remains silent, the agent will not know how his mind is working. • The objection is the prospect’s way of referring to further information that he needs. • Every objection raised by the prospect should be dealt with carefully by the agent. • The agent should not get angry if the prospect raises any objection. He should listen patiently to the same and assure the prospect of the benefits of life insurance.

33. OBJECTIONS • Try to remove all doubts and fears in the prospect’s mind regarding insurance. • Objections give an opportunity to understand the prospect’s thinking and remove his mental blocks. • These objections show how the prospect’s mind works and enable the agent to guide him . • At the Approach stage itself the prospect may object by saying- “I do not believe in life insurance” or “I do not need life insurance”.

34. OBJECTIONS • The agent needs to understand that such objections are not against life insurance but rather against the agent whom he wants to put off gracefully, or signs of indecision or of a fear of being forced into buying. • Objections raised during the interview- “I pay more than what I get back”, “It is advantageous only if I die”, “Meet me after six months”, are real objections. • The prospect wants the agent to convince him and give detailed information that will remove his fears and doubts and enable him to make up his mind to go in for insurance.

35. OBJECTIONS • A true agent should welcome objections as the prospect is actually asking the agent to give him one more reason to buy. • Objections raised at the closing stage – “I will think it over”, “I will consult my father”, “See me next month after I get my confirmation/increment/ promotion” reveal an inability to take a major decision.

36. OBJECTIONS • The prospect wants the agent to convince him and give detailed information that will remove his fears and doubts and enable him to make up his mind to go in for insurance. • A true agent should welcome objections as the prospect is actually asking the agent to give him one more reason to buy. • Objections should be treated in an effective manner, convincing the prospect of the need for insurance.

37. OBJECTIONS • The answers to the prospect must be complete and convince him to make the decision to buy. • His doubts, fears, difficulties need to be removed or clarified. • The agent should never get into an argument while answering the objections. • The yes…. but method is very effective . You agree in principle with what the prospect says under circumstances assumed by him; but you say, “the actual circumstances are different” and then convey your point.

38. OBJECTIONS • The prospect is bound to be receptive to an open ‘give and take’ in discussion. • You can say “ Mr. A, I agree that conditions are hard and people have difficulty in saving; but just imagine how much more difficult it will be if your family has to carry on without you.” • The secret of successful selling is to make the prospect feel that he has taken the decision – you only help him in the process by answering his objections and clearing his doubts. • Make the prospect feel that he has taken the decision to go in for insurance.

39. CLOSE • The close has to be sensed and timed, as few prospects of their own accord are ready for insurance. • The agent sensing the close, takes the prospect’s positive decision for granted by asking for his implied (not direct) consent - “Will you pay the premium by cash or cheque”?, “Can you give the age proof now or tomorrow”? • A positive answer to any of these questions is an indication to go ahead. • If the interview does not end with a close and is put off to another time, the interview will have to be gone through all over again.

40. CLOSE • In selling life insurance, an appeal to the heart of the prospect is more useful than an appeal to the head. • Life insurance is brought for the basic reason of protecting loved ones, affording a good start in life to children, caring for old parents or providing for old age. • So a sale can be accomplished only when an appeal is made to one of these motives. • A sale can be made when an appeal is made to the sentiments of love, affection , concern for the family members of the prospect.

41. SERVICE TO THE POLICYHOLDER • The prospect becomes a policy holder with the sale of a life insurance policy. • Acontract of life insurance is a long term commitment. • As people are too involved in their day to day activities, it is necessary for the agent to provide service which includes monitoring premium payments, nominations, revivals, help in settling claims. • The agent should maintain his own record so that he can keep track of the renewal premium dates, help the policyholder in getting the address changed in the records, nomination changed, securing loan, reviving the policy if it gets lapsed.

42. SERVICE TO THE POLICYHOLDER • These services ensure that the policy remains in force for the full term. • Servicing benefits the agent as he can review the policyholder’s need for insurance and advise him accordingly. • The existing insurance may be inadequate because of changes in the policyholder’s financial position or family.

43. SERVICE TO THE POLICYHOLDER • If new members are added to the policyholder’s family, if there is a birth of a child in the family, the agent can suggest the policyholder to insure the child under policies meant for children. • If insurance on a minor is taken, the agent should see to it that when he completes 18 years of age the policy vests in him and a nomination is done, check out whether there is further need for insurance on his life. • By providing good service, the agent’s reliability and trustworthiness are spread to other people and the agent can get more prospects. It is necessary for him to build a good reputation in the eyes of the client so that the latter refers other family members or friends to him. The agent can thus expand his data base of clients.

44. ETHICAL BEHAVIOUR Ethics – moral values, principles, beliefs • Of late, reports of improper behaviour are on the rise. • Funds of banks have been misused by their managements to fulfill the greed of their friends. • Officials have used their authority to promote personal benefits courts have failed to render justice. • People who are trusted by the community to perform their tasks have betrayed the trust put in them. • This happens when personal greed prevails over the sense of duty. • The insurance agent is placed in a position of trust by the policyholders and he should not resort to any behaviour which betrays this trust.

45. ETHICAL BEHAVIOUR • On his trust, the policy holders part with their small savings to an insurer. As such issues of propriety (politeness/respectability) and ethics are extremely important. • Unethical behaviours happen when the benefits of self are considered more important than of the other. • Every clause in the code of conduct spelt out by IRDA in the Agents Regulation should be complied with. • This compliance will be easier if the agent always keeps the interest of the prospect in mind.

46. ETHICAL BEHAVIOUR • Things go wrong when the agent is more concerned about the commission that he will earn from the policy, rather then the benefits to the prospect. • Unethical behaviours happen when the benefits of self are considered more important than of the other. • LIMRA, (Life Insurance Marketing Research Association - USA) which is the premier international organization of matters concerning life insurance marketing, has found that the ethics in life insurance consists of mainly putting the interests of the prospect/policyholder first.

47. ETHICAL BEHAVIOUR • Such an ethical approach helps the agent through: • Improved business and earnings, by gaining a good reputation in the market; • Business remaining in the books for a longer period without lapsation, as the policyholders trust in him is not lost; • Stronger relationship with clients, by being honest in all the dealings; • More referrals and word of mouth recommendations – which will increase the agent’s business.

48. ETHICAL BEHAVIOUR • Some agents feel that they are doing a good turn to the prospect when they do not reveal certain important information in the proposal form. • They may feel that this information may result in the underwriter asking for more details and the proposal may not result into a policy. • However as the agent is the link between the insurer and the prospect, he should disclose all the relevant facts. • Hiding information may be harmful, in the long run if the policy results into an early claim and is repudiated by the insurer. • ….. At that time, the prospect’s family will be the loser.

49. ETHICAL BEHAVIOUR • Credibility of the entire life insurance industry would then be at stake- of the agents and the insurers. • Rumours may spread that the insurers are not settling claims after collecting premium. • The actual truth may never be known.

50. ETHICAL BEHAVIOUR Some characteristics of good ethical behaviour are: • Placing the interests of the client above one’s own direct or indirect benefits, • Holding in the strictest confidence and considering as privileged, all business and personal information pertaining to the client’s affairs, • Making full and adequate disclosure of all facts to enable clients make informed decisions.