Insurance sector is a part of banking and financial services industry in India. The insurance penetration in India as of 2020 is merely 3.7% of the gross domestic product (GDP) where the world average stand at around 6.31 percent. By the penetration figure it can easily be understood that there is a huge scope for growing the numbers but there are definitely a few challenges the insurance industry in India is facing which is impeding the increase in these numbers.
Although in India the life insurance industry is growing at 11-12%, general insurance is growing at around 17-18% and health insurance is growing at 35% per annum, there are certain perennial set of issues that need to be addressed by the industry regulator, leaders and think-tanks to increase the insurance density and penetration numbers.
In the current situation of pandemic, we see and talk about a lot of negative news and gossips some of these are that the greatest recession ever is to come, businesses are stopping and sales figures are slumping, the season for salary cuts and job cuts is here etc.
The overall sentiment in these tough times are not that great and this is a truth but the problem of low insurance penetration in India is older and can be attributed to some of the reasons like less awareness in the common and rural public, less disposable income in the hands of a large masses, lesser incentives for people to buy insurance in some lines of businesses, inefficient distribution and bad sales and marketing etc.
The last point mentioned is an important one and there is a lot of adverse impact by bad word of mouth and adverse effects on the overall consumer sentiment if sales and marketing function does not work well in Insurance sector. Why? Is there anything special? What are the factors which makes sales and marketing in insurance different than any other product? Well this relates to the topic of this article and we are going to discuss three points that makes service products like insurance different from others.
Intangibility: When a person buys an insurance product, he buys nothing but an assurance and promise on a piece of paper that the insurance company will come forward at the bad times and make good his accidental loss and damage as per the terms of the policy. You see that the concept of insurance product is very peculiar which is different from any other product. Thus, it requires a higher attitude of customer centricity and knowledge to solicit and sell insurance products.
The problem of mis-selling is also a very old problem of this industry which happens even today. Sales managers and their sub ordinates must understand that in order to complete their targets they should not cheat consumers by telling the coverages in an exaggerated manner nor should make false promises. Any such kind of unethical practises on the part of agent or his superior results in bad word of mouth promotion and affects adversely insurance industry and sales of insurance products more than others.
To sell insurance products and designing insurance programs for large corporate companies the salesman requires a higher degree of knowledge and understanding of the insurance business as a whole.
Insurance is a push product: It is true that insurance is not bought it is sold. In fact, if someone is desperate to buy insurance, companies tend to be suspicious. Many consider in India insurance products are still a push one. In lines of businesses like health and motor third party this many not be true completely but for some lines of business this saying may be true as evident from low insurance penetration numbers compared to other developed markets. Sales and marketing of such push products need to be slightly different from normal ones.
Agents and sales professional should be more knowledgeable and clearer with the purpose of the products. The products may be in push category due to multiple reasons like lesser disposable income, lesser incentives to buy, every company selling more or less products with same coverages i.e. less product variation and others but there is no denial of the fact that everyone needs insurance. The salesman should be smart enough to recognize this fact and pitch products accordingly.
Give it when people will buy it: Distribution is the key to sales in almost every industry, better the reach more is the sales numbers but this statement cannot be of more importance than in the insurance industry compared to others. As the line of businesses vary widely from health, to home insurance, to motor, life and others the distribution strategy needs to be changed.
Also, the segment of customers can run from a large corporate MNC to a middle-income household to a small farmer. The product mix and distribution strategy both becomes of prime importance. People can be inclined to buy motor insurance near traffic police check points and health insurance can be solicitated at hospitals. It works this way! The distribution system and point of sales should be efficient and omnipresent.
One of the reasons for growth of motor insurance is that the insurers have correctly implemented the distribution system and engage motor dealers to sell insurance. Going through the similar strategy, builder offices and jewellery shops can be a good point for home insurance sales, mobile shops can be used as a distributor of mobile insurance and so on and so forth.