Insurance sale over the phone can help reduce premiums

Allowing insurers to conclude contracts over the phone will bring down the cost of insurance on low value covers. This channel would help the industry reach out to a section of buyers who do not want to deal with agents.

Concluding the sale over the phone makes it easier and more cost effective. The more cost effective it is, the lower will be the premium for customers. At present, direct marketing involves a two-stage process, where in the first stage, the prospect is convinced to buy a policy and at the second stage a representative approaches him for a signed proposal. This two step process makes it more expensive and reduces the rate of conversion.

The committee has suggested that the Indian regulator could consider allowing insurance companies to conclude a proposal through the telephone instead of insisting on a signed proposal form. The condition was that the conversation should be recorded and retained for at least two years. When insurance regulations were first drawn up, the technology for recording and storing voice conversations was not widespread. Today, most companies already record conversations between tele-callers and customers on grounds of monitoring quality.

Transactions over the phone would protect the interest of clients better as compared to a signed proposal form. For instance, in the case of proposal forms, there could be a case where the agent disregards material facts that are disclosed to him by the proposer. But in the case of phone contracts everything is on record. The insured has the option to change his mind as the 15-day ‘free-look’ period will be available. Also, cover begins instantly, the moment the payment is effected. In countries like Korea, such direct sales account for close to a fifth of sales. Insurance companies receive calls from prospective customers following an advertisement campaign. The tele-caller explains the terms of cover and concludes the contract over the phone and also receives payment by either credit/debit cards or through funds transfer.

Direct marketing is not expected to result in channel conflict between the agent and the company’s call centre. Direct marketing usually involves one or two simple products. The agent would have the full menu of products which would be much more complex than the ones sold over the telephone.

Source: Insuremagic