India is a fast-growing economy, with a burgeoning middle-aged population. Studies expect the country to have about 755 million individuals over 25 years of age by 2020. The changing social structure spells great opportunities for life insurance. However, controlling misrepresentation and fraud mitigation are unfortunate realities of this sector. Both have contributed in different ways towards dwindling customer confidence in insurance as a tool for protection and long-term savings.
Mis-selling is primarily an outcome of poor assessment on individual capabilities and intent. In the context of insurance and mis-selling, it is pertinent to draw parallels to the medical profession. Medical practitioners undergo rigorous training and mandatory internships to be identified as specialists in their field. Medical practitioners offer solutions based on diagnosis of the symptoms of patients' illnesses. They are equipped with the requisite tools and medical equipment to aid their practice. Further, they are bound by certain ethical codes of conduct as they deal with precious human lives.
Similarly, in the insurance sector, it is important to lay focus on the process of selection, hiring and training. The sales force must undergo rigorous training in a manner that ensures the individual is not only 'market-ready' but also 'customer-ready'. Just as medical practitioners, insurance agents must offer solutions through diagnosis of customers' needs. The sector is moving from a product push strategy to customer outcome pull. Individual financial goals differ across segments and evolve in line with changing aspirations. It is important that insurance practitioners be trained to meet individual requirements across customer segments. Adequate need analysis ensures solutions being proposed to prospective customers to meet their needs. Insurers have started mandating segmentation of customers on the basis important parameters, including financial goals, age, income and risk appetite. Such advisory-based selling will limit dissatisfactions and improve persistency.
Life insurance is the only financial instrument with a moment of truth when dealing with individual death and life's uncertainties. It involves hard-earned income and, therefore, needs specialist skills and understanding on insurance solutions, their composition and the final benefits. In view of this, insurers are investing in the acquisition and retention of right talent with customer-centric beliefs. Intermediaries, too, play a very important role in the business. They form crucial touch-points with existing and potential customers, and are determinants of the overall customer experience. Investing in building long-term relationships with distribution partners and meeting their training and technology needs will enable process efficiency.
Mis-selling and fraud significantly cause trust deficit in the sector. Controls must be enforced across levels by the regulator, insurance sector and individual companies. There is a need for enforcement in sales practices and disclosure norms. The revised product guidelines have been a positive move in this direction. The insurance sector as a whole must move to re-look licensing norms and companies must enforce internal checks on process efficiency. We foresee the industry will come together towards mitigating mis-selling by sharing best practices for our collective growth.
The future of life insurance in India is in creating everlasting customer relationships by aiming to be the customer's preferred investment instrument. Enforcing internal controls along the value-chain to control frauds and mis-selling will rebuild customer confidence, creating customer delight along the way.
MD & CEO, Birla Sun Life Insurance and Dy CEO- Financial Services, Aditya Birla Group