Having put in a service of more than 4 decades in the insurance industry, I had been seeing that among the insurance agents some procuring business were illiterate, some did not know what is insurance, while a good number of people who had business were earning commission in the guise of benami agents. The then Controller of Insurance used to grant licence to whosoever applied for licence and the application for agents licenses were submitted through the respective insurers.
1. Pre-Nationalization Scenario
The scenario prior to Nationalization was that the rate of commission was more plus an equal amount paid was towards business procuration expenses totally amounting to about 50 to 60%. Everybody who commanded the business was interested in the commission, if he had agency, whether in his name, or in the name of his wife, child, servant or neighbour and the insurers were also happy to pay the so-called commission because they were getting the business in their books. Surprisingly, the business was also indirectly sold to those whose targets were less. Long ago I knew of one Satyamurthi, who was residing at Gudiwada and worked as agent at Vijayawada a distance of about 60 kms. He knew lot of rice and oil mill owners. He was illiterate. He did not know English but practiced some sentences in English to write the fire cover-note and practiced signing his name. Daily he used to go to Vijayawada on his old bicycle and on the way covers the risks and hands over the cover-notes and, in return, takes the policies to be handed over to the parties.
His hard work made him to earn the commission in lakhs of rupees. Let us imagine how many of such Satyamurthi did exist in the insurance industry. Some of the employed persons also worked as agents in the name of wife, child or relative. They did little of the job for which they were employed but concentrated in doing insurance in the name of these agents and earned lucrative commission for themselves. Even if you have good quantum of business, the insurance offices will induce you to take agency no matter what your avocation is. They would help in getting the agency license etc. The insurers heartily welcomed such business either quality or otherwise. If the anomalies in the proposals were detected, the same were set right otherwise at the time of claim, the innocent parties would suffer. I remember of a cable manufacturing unit was insured for ten years.
The problem was that the insured gave the valuation of the building including compound wall was given in one lot although at that time it was required to give the value of the compound wall separately as the rate for flood risk was higher than the building. The insurer issued the policy without bothering to enquire for the details from their valued client and issued the policy. When the compound wall was washed away in floods, nobody noticed this flaw. The surveyor was appointed and the loss was surveyed. After 10 months, the head office of the insurer came out and said that the compound wall is not covered and hence theÂ claim is not payable. Just imagine the plight of the insured as the loss assessed to Rs.14 lakhs and finally it was compromised for Rs.6 lakhs. Whose was the negligence and who was put to loss. This is the case of lack of insurance knowledge either the staff member or the agent but the customer suffered. I will cite one more case where the agent brought the proposal of plate glass insurance covering the front glass door of particular dimensions and came with the premium after having a nice sip.
The office issued the policy quickly. When the claim arose the claim settler pointed that the door had beautiful art work was engraved and this was not disclosed apart from the fact that there were number of glasses fitted and these were also to be insured. Hence under insurance. The insured cried for this was not told. This is the work of an ignorant and untrained agent. Such many cases can be cited but the innocent insured remained silent and compromised as he knew litigation hampers his business.
2. Period of Nationalisation
The agents during the nationalization period did scarcely visit the office and their work was done through the Inspectors or Development Officers. The Development Officer used to bring the Agent’s proposals and take the commission cheques and hands over to the agent. He used to have number of benami agents, out of whom his share was more. In so far as the commission is concerned, even some of the top executives were interested and for this some benami agencies were existing.
The staff membersÂ were happy to lend their name to help his boss for this purpose. On the whole obtaining the agent’s licence was a very simple job – pay the fees and get the licence. No qualifications, no examination, no proof of existence and the licenses were issued by the PSUs. This continued even during the period of Nationalization for abut 30 years, when the government realized that the “customer service” is lacking and, therefore, Privatization of insurance industry took place in 1999. Mr. N. Rangachary, the then Chairman IRDA realized that unless agents are properly trained no effective customer service would be expected.Â
3. Privatisation RegimeÂ
In order to remove the anomalies of working of Agents, who were the main link between the insurer and the customer, the IRDA Act of 1999 felt the compulsory training to the Agents for 100 hours. Thanks to the notion and it was honestly implemented for sometime. Within a period of 7 years, good lot of trained agents came in the field.
But the trend among the insurers and persons holding the business is that the giver (agent) gives and the receiver (insurer) receives the business, no matter how it is obtained. Same type of persons step in the present days also. Many of those who wished to become agent, wanted a license and not training. Initially Chartered Accountants, Top Executives, Engineers, Company Secretaries and various other professionals joined the program.
They joined the training classes and counted minutes for completion of class, as they were interested in the some other avocation. Other amateurs too followed the same foot steps and the interest in training was getting lost. The insurers too feeling this problem started losing interest in training programme for Agents rather than in getting business through qualified or non-qualified agents. Leave apart private insurers, PSU*s too were not far behind.
As an incharge of the Regional Training Centre of a PSU for 10 years and also a faculty, I had been observing that the insurance offices are least interested in the training of their staff or agents, as they are worried of their targets and training has become a secondary aspect or is considered to be an unnecessary expenditure as such it was considered to be unnecessary. However, my study has been that the employees and agents are interested in training but there should be a recognition and patronage from the top management level.
The insurance office who sponsors the candidate should not only emphasise 100 percent attendance, but also give importance to trained agents so as to have better customer service. On the other hand request from various corners to eliminate Agents Training program or reduce the number of hours is giving an impression that insurance offices are finding it a hurdle in the fulfillment of their targets and also to appease those who are holding business to have an agency some how. No one can make an unwilling horse to drink water. If the insurers understand importance of training in the interest of quality business and good customer service, much can be done.
4. No Interest in Training
Number of times I had a chat with some of the licensed agents, who did not know the basics of insurance, nor the product knowledge, while many have expressed ignorance – some have stated that “What all they studied was for passing in the examination”. This indicates that the prospective agents are taking training lightly and they are sure that they will have licence on e they appear in the examination. If this is the trend and object, it is better the training program be eliminated.
5. Training in Global Market
But in order to face the global market, where all the agents in other countries are undergoing detailed training, not 100 hours but for six months or one year. In USA there is a mandatory pre-licence study in some of the states but the requirements vary dramatically. In Brazil there is a nine months training program. In Switzerland a broker has to have a licence based on curse requirements which include two years experience. In Singapore 30-40 hours training is followed by an examination. When in India we have 100 hours training, but a lot of hue and cry is made in the name of expenditure. As a matter of fact ours being a country of high illiteracy, the training program should be more rigorous.Â
6. Insurance, as an academic course
Thanks to Indian academicians, the subject of insurance is taught in schools and colleges as optional subject and even at post-graduate level. The students are manifesting a better knowledge compared to those who are working day in and day out in the corridors of insurance offices. In a dinner party a young boy asked me: “Uncle, how is that you collect Rs.10 as premium and Pay Rs.10,000 as a claim?” Since it was not a proper time to explain, I simply ended saying “It’s magic!” This is the interest of youngsters and it must be more in the agents who are aspiring to become professionals.
If the insurance officers or the IRDA pick up such students and if they are given practical insurance training, they can turn to be potential agents.
7. Agency as a career
Unfortunately, who wants to become an agent with bleak career and low remuneration, the insurance offices also do not want qualified persons in insurance but they want such persons who have business in their pockets and they pick up only such persons, groom and train them. If this preposition is correct, they are right and such persons should be picked up for licence and the training for 100 hours should be made compulsory. In order to get such persons qualified to be agents, the insurance offices see that they regularly attend the programs and must be given exclusive practical training.Â
8. Peculiarity of Insurance Contract
To such persons training also becomes necessary because the insurance contracts are peculiar in nature compared to other contracts and transactions. Insurance contracts have distinctly peculiar terms and conditions devoid of the principle of caveat emptor. So the necessity of creating awareness in the customer about such peculiarities. It is difficult for insurers to create awareness of insurance to each member of public or customer, as they are scattered in every nook and corner of the country. This also cannot be done by mass-communications or big advertisements or seminars, as the customer is not interested in the subject of insurance except in so far as the protection of his person or property is concerned. He is more interested when he is in danger or running a risk.
9. Necessity of Insurance KnowledgeÂ
Therefore, an agent becomes a teacher, philosopher and guide to the customer to create awareness of the risk he faces and the solution presented in the shape of an insurance contract, i.e., an insurance policy, which contains the scope of cover, exceptions, terms and conditions – whether conditions precedent, subsequent or conditions precedent to liability, that are applicable to qualify for a claim, if any.
If the agent does not have the knowledge of these aspects and the customer takes the policy in quick return of service by the Agent, and keeps it in his drawer or locker as a document of security without looking into it or reading it, it means that the agent has not told the importance of a piece of paper which is received after payment of huge premium. Such an agent is not fit to represent the company for which he is working and he will be in hot water in the event of a claim. Hence training becomes necessary as he would be a spokesman of the company he represents.
Unfortunately a prospective agent does not know what is insurance, how does the insurance customer know the basics of insurance who has the least knowledge of the product, or the application of the principle of indemnity. When the agent has not received the training intended for, what does anybody expect his capacity to give service to the client. On the other hand some of the so-called agents are the clerks or servants of those who are having the insurance business in their pockets.Â
The rates of commission as stated earlier are very less compared to life insurance agents. There is a good encouragement to life insurance agents with social status as member of DM’s club, Chairman’s club etc., with other perks like housing facility and conveyance etc. Hence in order to have agents on permanent rolls of the company, the commission rates should be made on par with life insurance agents, when young and energetic blood will step in to enter into the general insurance profession wholeheartedly.Â
In order to get quality agents, the application for agency licence should be forwarded to the IRDA before the candidate receives the training and the candidate has to face an interview to note his mind and determination if he wants to make insurance as his career or just a commission earner.
The faculties should also be asked to emphasise the glamour of insurance profession, as a good agent has the prospects of going up the ladder if he is capable of accepting responsibilities, and the insurance offices should also make a program to enlist such agents on the rolls of the company.
In view of the above I feel that the training of agents, which was taken as an eyewash, should not only aim to give product knowledge and customer service, but also effort should be made to create a confidence in the trainees that they are entering in a lucrative profession, which has higher prospects.
10. An Agent, a well equipped soldier
Honestly speaking the agents training should also include computer knowledge like, use of e-mail, studying websites in the organizational setting, use of laptops and power point presentation and improving the art of public speaking, participation in seminars, so as to prepare a prospective agent to face a bigger battle of business of the future.
A well trained agent with commanding insurance knowledge and modern update of computer, is a modern well-equipped soldier who can go in any battle field with the knowledge of use of all types of weapons, but I wonder if the Indian insurance industry needs such agents. However, such agents can be attracted on payment of adequate commission and perks in the era of competition in employment. For the sake of quality business and service to the client in the event of claims at least to convince him why his claim is delayed, scissored or repudiated. Otherwise a dead fish spoils the entire water.Â
11. Black spots in Insurance Industry
The insurance industry is already crowned with blots of bad remarks. Insurance people have no lobby to explain of the problems and principles involved in settlement of claims and motivated clients to make bogus claims. An agent is not capable to explain his client as to why his claim is scissored. Despite the efforts of those who spent their lives in creating a good image about insurance activity, I hear the echo of an IAS officer who at one time said. “Insurance people are bad but they are good in receiving premiums and not in settling claims.”
12. Pretext of Training Expenditure
It is all the more surprising for the sake of saving training expenditure insurance offices are weighing education to money. Just imagine how a man spends his blood and money in getting his child to become a doctor or an engineer.Â He spends lakhs for each child, what if an expenditure of Rs.5,000 for an agent. If it is too much for gigantic insurance offices, should not a common man bow down his head in shame for such a cowardly thought of petty amount of expenditure and in this context the training program for Agents should be totally eliminated? Whatever it may be, we are going to the same pre-nationalisation era back to 1970s, as the anamolies of the past are repeating one after the other.
Since now it is understood that the IRDA has reduced the 100 hours training coursed to 50 hours, it is wondered that the newly licensed agents could stand the test of the earlier licensed agents who had already received 100 hours training. It is well know that even 100 hours training was taken as boring for the busy would be prospective agent – neither they attended the program regularly, nor have they acquired the knowledge what is expected of the agent.
On the other hand it is observed that some of the clients have better knowledge compared to such agents. If savings of hundred crores of rupees for reducing 50% time at the alter of knowledge is a better step, then why not we should save another amount of hundreds of crores by eliminating this course itself. We cannot forget the aspect that wishes for saving of money cannot supercede the quest for learning.
However, the advantages of training the agents are many. Agents should be adequately trained to face global market. The then IRDA would have thought of the pros and cons of training and 100 hours training should have been adequate. As a matter of fact the duration of training should have been increased to give more training in computer programs, use of laptops, E-mails and websites etc.
An agent is a great asset to the insurer. A stitch if it is negligently overlooked, how can it save nine The expenditure of training the agents is just Rs.4000 and odd per head compared to lakhs of rupees expenditure of the parents who spend for the education of one child to procure for him the degree of medicine, engineering or any professional course. There must be a revision in the payment of commission to agents with other perks. They must be brought on par with Life Insurance agents. Good candidates will be attracted; otherwise the Agents profession will become a “Part-time”, like the brokers in transport business, who expect about Rs.10/- to book a truck. For this no one will be blamed except the insurance industry itself.
By Mr.Vazir Ahmed Khan, Published in The Insurance Times, December, 2007