INSURANCE

Semester I Project Synopsis

By
Reema Shah
Roll No. 148

Under the guidance of

Prof. Priti Oza

NAGINDAS KHANDWALA COLLEGE OF

COMMERCE & MANAGEMENT STUDIES

September, 2007
WHAT IS INSURANCE?

The business of insurance is related to the protection of the economic

values of assets. Every asset has a value. The asset would have been
created through the efforts of the owner. The asset is valuable to the
owner, because he expects some benefits from it. The benefit may be
an income or something else. It is a benefit because it meets some of
his needs.

Every asset is expected to last for a certain period of time during which
it will perform. After that, the benefit may not be available. There is a
life time for a machine in a factory or a cow or a motor car. None of
them will last forever. The owner is aware of this and he can so
manage his affairs that by the end of that period or life time, a
substitute is made available. Thus, he makes sure that the value or
income is not lost. However, the asset may get lost earlier. An accident
or some other unfortunate event may destroy it or make it non-
functional. In that case, the owner and those deriving benefits
therefrom, would be deprived of the benefit and the planned substitute
would not have been ready. There is an adverse or unpleasant
situation. INSURANCE is a mechanism that helps to reduce the effect of
such adverse situations.
PURPOSE & NEED OF INSURANCE

Assets are insured, because they are likely to be destroyed through

accidental occurrences. Such possible occurrences are called perils.
Fire, floods, breakdown, lighting, earthquakes etc. are perils, if such
perils can cause damage to asset, we say then asset is exposed to that
risk. Perils are the events. Risks are the consequential losses &
damages. The risk to a owner of a building because of the peril of an
earthquake, may be a few lakhs or a few crores of rupees, depending
on the cost of the building and the contents in it.

The risk only means that there is a possibility of loss or damage. The
damage may or may not happen. Insurance is done against the
contingency that it may happen. There has to be an uncertainty about
the risk. Insurance is relevant only if there are uncertainties. If there is
no uncertainty about the occurrence of an event, it cannot be insured
against. In the case of human being, death is certain, but the time of
death is uncertain. In the case of a person who is terminally ill, the
time of death is not uncertain, though not exactly known. He cannot be
insured.
Insurance does not protect the asset. It does not prevent its loss due to
the peril. The peril cannot be avoided through insurance. Insurance
only tries to reduce the impact of the risk on the owner of the asset
and those who depend on that asset. It only compensates the losses-
and that too, not fully.

Only economic consequences can be insured. If the loss is not

financial, insurance may not be possible. EXAMPLES of non-economic
losses are love and affection of parents, leadership of managers,
sentimental attachments to family heirlooms, innovative and creative
abilities, etc.

COMMUNICATION WITH RESPECT TO

INSURANCE

Communication is normally understood to refer to the information that

one has to send to another, through words or symbols or pictures, in
writing or verbally. Because of its importance in commercial or private
life, the process of communication has been studied and written about
extensively.

Communication happens when meanings are made. When the

meaning intended by the sender is same as the meaning made by the
receiver, there is perfect and complete communication. If the two
meanings are not identical, there is said to be a communication gap or
misunderstanding. Meanings are made even when nothing is said. A
friend remaining silent can mean that he is worried about something.

An agent’s main tool at work is his communication skills. He has to

explain and to persuade. Any misunderstanding might become evident
only much later. It will then be attributed to the failure of the agent to
inform, alleging even deliberate cheating or suppression of material
facts. Good effective agents make written presentations about their
recommendations for insurance, pointing out both benefits and pitfalls.
SEVEN C’s OF GOOD WRITTEN
COMMUNICATION

• COMPLETENESS : Stating all essential facts, anticipating and

answering
all possible doubts.
• COURTESY : Pleasantly worded, meant to gain goodwill,
requesting instead of commanding.
• CONSIDERATION : Keeping in mind the reader’s interest and
level of
understanding.
• CLARITY : Using simple familiar words, short sentences
and
avoiding jargons.
• CONCISENESS : Avoiding superfluous and redundant
expressions.
• CONCRETENESS : Avoiding complicated imagery and saying
directly,
leaving no room for imagination.
• CORRECTNESS : particularly with numbers, dates and
references.
OBJECTIVES

MOTIVATION:-

An agent is an independent professional. He cannot wait for someone

else to come along and persuade him to action. Others will demand
that he perform. He has to feel the urge and drive to perform.
Otherwise, he will not do. When a person feels the urge and drives to
do, he is said to be motivated.

All action is goal-oriented. This means that whatever anyone does is

for a purpose, to attain something that will satisfy his needs and give
him satisfaction. Thus, motivation to do is related to the doer’s needs
and satisfactions. Motivation to do includes motivation not to do. The
need to relax, makes one become inactive at work.
Motivations can be varied. The effort to learn and do well may come
also from a motivation to avoid being among the non-performers.
Some agents are driven by the need to be of help to the community,
on matters not directly connected to insurance. That motivation may
lead to a lot of insurance business coming his way because of the high
esteem in which he is held by the community in which he operates.

RAISING MORALE :-

A customer buys because he trusts the agent and his promises. It

implies that the behavior of the agent has to be one that exudes
confidence and positive thoughts about the insurance company and its
offerings. This is possible only if the agent feels good about his
profession and his business.

If he does not feel good, his disappointments and frustrations will be

sensed in his voice and manners and that will harm the process of
sales. Feeling good or not good about one’s work is a question of
morale or enthusiasm about work. To keep up his morale, he has only
to say to himself that his is a job that brings cheer to others at a time,
when a whole lot of circumstances have conspired to take away that
cheer.

Apart from the nature of the business of insurance, the agent must
also feel confident that he is in a position to render effective service to
his policy holders. It is possible that sometimes something may go
wrong in the insurance office. The agent is in a position to make sure
that the effects of that error do not reach the policy holder. Good
agents with adequate records can insulate their policy holders from the
office, so that they experience only the positive aspects about the
service and claim settlement procedures. Customer satisfaction and
agent’s morale will both be high as a consequence.

PERSONAL GROWTH :-

Agents may have personal goals, like wanting to rise in the hierarchy
of the company. Some companies do provide opportunities for agents
to accept higher responsibilities. One might like to become a senior
agent, helping newcomers in the field. Some senior agents make it o
point to attend seminars, workshops and conferences. They meet
others in the profession. The benefit is mutual. They receive as well as
give, as experiences differ and are unique. Professional agents set
aside both funds as well as time for such purposes. The pay-off is high ,
although not immediately visible

PERSUASIVE SKILLS :-
Persuasion is important in all selling. It is more difficult in insurance
selling. What is being sold is a concept, an idea. There is nothing
tangible which could be shown as a sample. The idea has to be
examined by the prospect in his mind, on the basis of words, figures,
stories and mental pictures created by the insurance agent. He has to
be convinced on the basis of his own logic and beliefs. It cannot be
forced. The insurance agent has to influence the thinking process of
the prospect, without being to see it or share it.

BEHAVIOUR WITH OTHERS :-

Behavior with fellow-agents is also very important to avoid

misunderstanding and also interference in business dealings.
Professionals do not interfere with the clients of the other
professionals. This is professional etiquette. Agents are professionals.
They are also expected to maintain such proprieties. For example, if
agent ‘A’ knows that a particular client is good enough for some big
business and is being contacted by another agent ‘B’ , he should not
try to contact that client and try to procure the business. Some agents
do so by telling the client that the advice being given by B is not in the
interests of the client and so on. There are instances of one agent
persuading the client to discontinue the policy taken by him through
another and taking out a new policy. Temptations may be offered by
way of sharing of the agent’s commission. These are unprofessional
behaviours. A doctor does not tempt patients by offering them
concessions. Lawyers who stand outside courts, soliciting business are
not looked upon as professionals.

Interfering with another’s business and offering rebates to prospects,

are referred to in the Regulations and the Insurance Act as punishable
offences. The agent’s action should be guided, not by the threat of
punishment under the law, but by his value system, that distinguishes
between what is wrong and what is right.

TIME MANAGEMENT :-

One of the resources of any professional is ‘TIME’ .Time is an input in

work. The time taken to do anything is an indicator of the skill of the
doer. Novices take more time than an expert to do the same work. One
of the indicators of the professional development of an agent would be
the time he takes to do various activities as an agent, to get an
appointment, to explain a point, to conclude a sale. Time is necessary
also for personal development, to read books and journals, to do
physical exercises, to unwind and relax, to attend spiritual discourses,
to reflect on one’s behaviour, to introspect.
METHODS OR CHANNELS

A channel is a route by which the product (or offer) prepared by the

producer reaches the ultimate consumer (or buyer). The channel
bridges the distance between the producer(point of manufacture) and
the consumer (point of sale).In the case of goods, the product
manufactured in the factory passes through wholesalers, stockists and
retailers, before it reaches the consumer. In the case of life insurance,
the agent is the primary component of the channel. He is the
equivalent of the retailer. The supervisor of agents, by whatever name
called, is an important part, because it is he who, by creating and
training agents, makes the channel effective. New agents widen the
channel.
Equally important would be the other intermediaries, like brokers and
insurance consultants. Some life insurers are trying to eliminate
intermediaries to save costs. Direct selling is one such attempt. This is
increasing in foreign countries. In India, people, by and large know
about life insurance, but still have a lot of wrong notions about it.
Personal contacts by agents may continue to be necessary for quite
some time.

BARRIERS

Prospects will raise objections, one after another; Objections are a part
of every sale. If prospects did not object, there would be no need for
salesmen. People would buy on their own. Also, if the prospect
remained silent, you will not know how his mind is working. The
Objection is his way of referring to the further information that he
needs.

The entire selling process is therefore, interspersed with objections. At

the state of approach itself the prospect may say “I do not believe in
Life Insurance”, “I do not need Life Insurance” etc. Such Objections
are not against Life Insurance but rather against the agent whom he
wants to put off gracefully, or signs of indecisions or of a fear of being
“forced” in buying.

Then there are objections raised at the closing stage, such as, “I will
think it over”, “I will consult my father”, “See me next month when I
get confirmation/increment/promotion”, etc. These objections reveal
an inability to take a major decision.

Objections cannot be treated in a summary manner. The answers must

be complete and convincing to the prospect. He needs help to make
the decision to buy. His doubts or difficulties need to removed or
clarified. The agent while answering the objections should never get
into an argument. The “yes…but” method is the most effective. You
agree (say, yes) in principles with what the prospect says under
circumstance assured by him; “but”, you say, “The actual
circumstances are different “and then convey your point. The secret of
successful selling is to make the prospect feel that he has taken than
decision – you only help him in the process by answering his objection.
Agents should remember that an objection is a “Blessing in disguise”.
It is also a stepping stone to a sale.