Ethical Insurance

GROWING up, we all must have heard the tale of a goose that laid golden eggs. While the caretaker was required to care for, feed and nurture the goose everyday; the goose delivered only one golden egg per day. Patience and greed hardly stay longer in one room. So the caretaker decided to slaughter the goose thinking the goose would have hundreds of golden eggs inside her. The result: the caretaker remained a pauper by choosing immediate nirvana over long-term wealth. Indeed a childhood moral tale has its limitations; but as one replaces the goose with the affordability and the needs of a customer and the greedy caretaker to the insurance agent, a larger question of ethics emerges.

A subject matter of solicitation, the regulations requires Insurance to be requested or asked by the customer and cannot or precisely should not be sold to him/her. However, it would be foolhardy to believe that the same exists in India - primarily because of the lack of awareness of the larger population and a dismissive attitude about the probability of risk affecting them in the future. Therefore, insurance in the country continues to be "sold through education" across large parts of the country. While the customers are increasingly becoming vary of "ignorance is bliss" mindset; the companies are driving amidst higher competition to educate and empower customers using vast variety of insurance products.

Amidst this, a large role in inspiring the decisions of the customers is that of an agent. Insurance agents work on the commission basis - therefore it is in their interests if the policies are sold across the spectrum. However, the corporates too play a vital role in sensitising the agents through proactive customer education, frequent agent engagements and training programmes to ensure that one, the policy is not sold to people unnecessarily; and two the features of the product should add value and satiate the requirements of the customers.

Therefore, stressing on the merits of ethical selling which for all practical purpose has been a key focus area for all the leading players in the industry.

So what is ethical selling in insurance? The answer to this question has by far baffled the experts. The answer is totally subjective to the environment, customer segment and product landscape. Steve Jobs once said, "A lot of times people don't know what they want until you show it to them". This sums up the dilemma of the insurance companies and the agents alike. For a business that I represent, general insurance sector is still at a very nascent stage in terms of customer recall. Therefore, it is sometimes not easy to differentiate if the realm of ethics has been breached to promote sales of a product; or the fear of being unethical has been a hindrance to growth. Either way, one has to be responsible and patient; and not fall into the greed trap as the caretaker.

In my three decades of career I have always believed in one simple fact - one has to always lead the change - by setting an example. So when it came to us at Royal Sundaram India Insurance Company, we created an ecosystem based on ethics. To achieve this, we have instituted an extensive ongoing training program to instill and reiterate ethical practices for agents.

That said, while humans may be prone to error, technology is more certain. Therefore to ensure that the calculation of premiums for policies is devoid of human error, insurance companies can adopt 'e-motor' technology based interface, which enables agents to calculate the premiums just by filling in the required info of the customers. The premium amount then is derived automatically, thereby ensuring that the amount is charged in commensuration of the risk and is devoid of any judgment errors.

As part of the ethical selling practice, once the premium is decided and policy is sold, insurance companies can follow up by calling up customers and explaining the coverage again so that there is no room for ambiguity. Another element that be brought in is that of pre-sales calls, so that the purchase of an insurance policy is an informed one.

It is important that insurance companies must engage with their present and potential customers, educate them about the sector and the gamut of plans available as per their requirement, and take feedback across their geographies of presence. The "volume of business" should not be the sole criteria for judging the performance. In doing so, companies will have the opportunity to institute, revisit and improve relevant processes, even as the scale of operation grows.

We believe that any product/solution created for the welfare of the public at large always finds its feet. The process albeit long can only be supported to an extent and not forced, as we all know every butterfly has to bloom out of the cocoon on its own. Checking the greed and yet expanding one's potential demands patience and determination. And that's what I would say ethical selling would aim at. Any business is about sustained value creation and once that goal is clearly visible, ethics pave the way for persistence towards attaining it. It also attracts like-minded talent and creates an ecosystem of trust, long-term partnership and mutual benefits. As Aristotle once said, "Educating the mind without educating the heart is no education at all". Holds true - every word of it.

Author: Ajay Bimbhet - Managing Director, Royal Sundaram Alliance Insurance Company.

This article was originally published on 'The Tribune' newspaper dated 4-Aug-2014.