Insurance intermediaries not only facilitate the placement and purchase of insurance, but also act as links between insurance companies and their clients. Traditionally, insurance intermediaries can be categorised into insurance agents or brokers. The difference between the two relates to the manner in which they function in the field of business acquisition.
In recent times however, the unconventional practices of some insurance agents has deepened the already unpleasant perception about insurance by a section of the insuring public, further mitigating against the rate of penetration in Ghana which is currently under two per cent.
Distribution of insurance products
Indeed, most insurance companies, especially life insurance, rely heavily on their trained agents in the distribution of their products. Pundits have raised issues about agents not being properly trained; hence “the way they do their things”.
However, I tend to disagree with this assertion, as to the best of my knowledge, most agents are given proper training and retraining by their companies but are just comfortable doing their own things on the field when confronted with various challenges. From mis-selling to outright mis-representation of their companies, some agents cannot escape being caught in the web. They often fail to explain the details of policies to clients and sometimes suggest things that the policies can do which may not be true.
What insurance agents really do
Insurance agents are, in general, licensed to conduct business on behalf of insurance companies. Agents represent the insurer in the insurance process and usually operate under the terms of an agency agreement with the insurer. The insurer-agent relationship can take a number of different forms.
In some markets, agents are typically independent and work with more than one insurance company. The practice in Ghana is that, agents operate exclusively by representing a single insurance company selling specific lines of business. Meanwhile, some general insurance agents are also permitted to sell for non-life insurance companies, provided they are licensed by the National Insurance Commission (NIC) for both companies. Typically, agents may operate either as independent, exclusive, insurer-employed or self-employed.
Increasing client sophistication
Given the increasing client sophistication, agents provide their clients with the necessary information required to make informed decisions. By their training, agents help their clients to establish their needs in order that they can make informed choices in terms of products and premiums.
This, therefore, enables insurers to offer desirable policies; served mainly through their agents and at competitive premiums. This reinforces the need for insurers to continue to enhance the capacity of their agency force in order to remain competitive and contribute to national development.
Recruitment, placement and profiling of agents
In Ghana, agents are mainly recruited through radio/tv adverts, announcements in churches and mosques, referrals and online job placements. Successful candidates are then trained after a thorough screening process, which includes the basic qualifying criteria of 18 years and above and WA/SSCE (with passes in English and Mathematics). Meanwhile, agents with diplomas and degrees are usually placed in the upper market, while the WA/SSCE holders, who easily fall-out after training are placed in the mass market.
These agents earn commission, but sometimes with an overriding commission component. Similarly, single parents and students with higher degrees tend to be more successful in the insurance agency. For instance, while single parents are often motivated by the need to provide for their children, higher degree holders are usually motivated by a desire to be independent and entrepreneurial, with control over their earnings.
Training and re-training of agents
Instructively, most insurers pay particular attention to the continued skills development of their agents, usually in the form of periodic in-house refreshers. Thus, insurers spend a fortune to train their agents on the concept of insurance, product updates, customer service, and selling skills among others, and this, by no means, enhances their capacity.
Poised to go into the sales battle and believing that ‘being asked to go to battle requires individual strategy to either come back alive or otherwise,’ some miscreant agents employ unethical practices such as spewing lies and/or deliberate misinformation in their engagements with the public.
Unfortunately, these unacceptable practices not only affect the agent in terms of commission loss, but most importantly, deny the client access to quality service delivery.
Additionally, the company’s revenue for investment is lost and the industry is denied the positive public perception required to increase insurance penetration.
When agents leave their jobs, their clients become orphaned! Because some agents may be personally known to their clients, their exit tends to create a fertile ground for their clients to sever relationship with the insurer since they were most comfortable dealing with those agents.
This phenomenon, therefore, affects the growth of insurers, as it increases the rate of policy surrenders; thus, denying the insurer of revenue for investment. Meanwhile, other causes of policy surrender include mis-selling, misrepresentation and deliberate untruths by agents.
In as much as people would want to have insurance protection, they would not want to be misled into doing it. Besides, there may be other competing interests all requiring appropriate evaluation before a choice is made.
The way forward
Insurers must focus on recruiting only prospective agents with a minimum of diploma rather than SHS graduates most of whom are mostly desperate to mobilise funds for further education.
Meanwhile, the agents’ recruitment process should be enhanced through the involvement of professional recruitment agencies and experienced sales consultants.
Moreover, the refreshers must emphasise insurance policies as long-term rather than short-term. orphaned clients must also look beyond their personal relationships with agents and rather strengthen their relationship with the insurer, albeit through their contact agents.
After all, they will still get their proceeds with or without their contact agents. similarly, disgruntled clients must rather seek clarity on the product details and continue with same. Agents must also endeavour to live by the ethics of their job at all times.
Until next week, “this is insurance from the eyes of my mind.”