BW Businessworld Life Insurance Summit 2017 | 'Industry And Agents Need To Collaborate To Increase Persistency Ratios'

The speakers at the summit spoke about the problems in persistency and how can the insurance sector strengthen their administrative decisions and company regulations. The products are one part of the problem when it comes to persistency and Yashish Dahiya, Co-founder & CEO, PolicyBazaar contributed to the panel by discussing some key points.

“In today’s time 100 per cent renewals are processed on few policies and people know what they are buying The primary reason for miss selling are people who believe they have been cheated. Miss selling takes place in various formats and nearly 95 per cent of policy sales would not exist without the concept of miss selling. You do not find the same persistency problems in term insurance business. The reason why persistency is a problem in the insurance business is because the product that is being sold technically does not exist. I think I can say that on PolicyBazaar consumers compare their policies with other policies and hence we are accurate on the kind of right products that exist on our platforms.”

The panel discssed about the financial year 2013,14,15 and 16 each year has been increasing in terms of finance and wealth acquisition for companies. Except for LIC many other companies have suffered persistency problems at mass. The reason for persistency is because policy agents need to develop a trust with customers and Ashish Vohra, CEO, Reliance Nippon Life Insurance elaborates his views at the panel.

“The problem is more than the product sold. India is not a high finance literate country and I’d rather say we have complexity in products. The problem is largely because there is no fixed system that describes the functionality of insurance organizations. Today I manage 900 branches across the country but if I’m asked where all I have my branches placed then I may not be able to provide the answers because there is no system in place apart from depending on excel sheets. In my company the worst channel has a persistency of 40 per cent and the best is 88 per cent. There is a big difference in these channels for the similar reason that insurance sectors have no fixed administration along with a lack of market ethics.”

Vikash Khandelwal, CEO, SREI Insurance Brokers states that a regulator body must exist in the insurance sector in order to develop faith and encourage the customers to invest in insurance and policies. The lack of persistency levels revolves around the problems of fake products and lack of information and the interference of regulatory bodies can govern policy bodies and ensure customer safety and satisfaction.

“Life Insurance is more of a savings product. The way we are structured in this business is mainly commission based and the structure is built upon the commission earned on every policy sold. 5 per cent is provided on every deal that is carried forward irrespective of being a missed sale or not. Hence the lack of awareness impact persistency levels. So when we talk about regulatory bodies have been progressive over the years. We as an industry need to change our approach and bring about a fundamental change.”

Niraj Jain, CEO, Lambach Life Insurance Brokers explained that customer interest plays a key part in the world of policy buying. Insurance needs to have a certain kind of approach that can influence customers and excite their interests in buying insurance products. The panel discussions spoke about the glitches and faults in the insurance industry and now the panel also discussed how customers should develop interest.

“Insurance should be technically bought instead of being sold. In a consumer’s mind they are more engrossed in getting details while buying other products like cars or houses but when it comes to buying insurance they oversee the details and end up buying policies blindly. The behaviour of the consumers need to change and be more careful in buying insurance and policies and this is one field that needs more attention especially in matters of money.”

Rohit Kumar Sharma contributed to the discussion by stating that the policy sellers are not going in the wrong direction but it is the market conditions that drives the wrong practices. He said “The people are not bad but the situations are. The renewal operations and strategic management of companies are the new business. The reality is that the deals in life insurance have increased up to 3-4 times. A lot of companies called persistency as collections at one point of time and that is a very strong word. Can’t we empathise with the customers and develop this strategic issue? Hence we need to market the products we are selling very well and with utmost transparency in order to resolve the persistency issue.”

Dr Anjana Grewal shared a few analysis and discussed the importance of persistency in the insurance sector. She also explained that persistency and profitability go hand in hand for insurance companies.

"We looked at public disclosure for 15 life insurance companies as of December 2016, there has surprisingly been an improvement in persistency. There has been a higher consciousness for persistency to improve. The conclusion is that since deregulation, for the first 10 years the industry went through a high phase of growth, so the interest was towards market share. The industry then faced a slowdown and is now once again in a growth phase. There is now a higher focus on persistency and life insurance companies should make it easy for everyone internally to understand how persistency can improve profitability", says Dr Anjana Grewal, Director-Centers of Excellence- MISB, Bocconi India.