NATIONAL LAW UNIVERSITY, JODHPUR

School Of Insurance Studies

SERVICE MARKETING AND INSURANCE

DISTRIBUTION CHANNEL

Assignment on:

Challenges Of Selling Micro Insurance Products

Submitted to: Submitted by:

Dr. Ashish Barua Khusboo Balani

School Of Insurance Studies MBA INSURANCE-IV

Roll No. : - 1060

2018- 20
Selling microinsurance is not easy; convincing low-income clients of the value of insurance is
difficult. The challenge is compounded when sellers have no previous insurance experience or
have other responsibilities in addition to selling insurance.

The vulnerability of the target clients and their limited exposure to insurance makes it crucial to
get the sale right. When insurance is not explained properly or mis-sold, clients may not
understand what they are buying and have inaccurate expectations on the policy, leading to
dissatisfaction and reputational risks not only for the insurer and distribution channel, but for the
entire concept of insurance. Mis-sales also have financial consequences for the insurer as they
lead to policies being cancelled or not renewed.

However, when a sale is done right, clients are more likely to recognize the benefits of the
protection, understand when and how to claim, and renew their policy. A positive experience with
the sales process and a better understanding of how insurance works can contribute to creating a
culture of insurance in low-income communities.

Adequate Training, Incentives, and Monitoring of the sales force are indispensable for Selling
Microinsurance effectively, and ultimately extending insurance care to millions of vulnerable
households. A properly trained and motivated sales force is needed to reach scale, and cost-
efficient sales methods can enable microinsurance programmes to be viable.

The act of selling includes: determining eligibility and screening candidates, providing premium
and policy information and advice, and enrolling new clients. Sales activities, as defined in this ,
do not involve marketing campaigns or post sales services, such as claims processing.

As a result, the focus is on improving the performance of staff that sell directly to clients, both to
individuals and groups. These staff are referred to as “sales staff” or “sellers” in the report. The
report does not focus on senior coordinators or managers of sales teams, or an insurer’s sales team
that might be responsible for selling to partner organizations. Based on the study’s definition,
sales staff are frontline staff, involved in microinsurance sales. The level of time allocation to
microinsurance sales ranges from less than 10 to 100 per cent.

What is a Micro Insurance?

A simple definition of micro insurance is that it is an insurance that

(i) operates by risk pooling

(ii) financed through regular premiums on policies and
(iii) planned for the poor and rural population

Micro Insurance is basically for the low-income population, to protect for specific risks, payment

of proportionate premium for probable risk, with easy plans and policies to understand, with low
premiums to pay and maximum sums insured for this insured risk and easy documentation for the
claims on calamity etc.
TYPES OF MICROINSURANCE

 Life Insurance- Life insurance pays benefits to designated beneficiaries upon the death of the
insured. There are three broad types of life insurance coverage: term, whole-life, and endowment.
Term life insurance policies provide a set amount of insurance coverage over a specified period of
time, such as one, five, ten, or twenty years. Whole life insurance is a cash-value policy that
provides lifetime protection. This is hardly offered in low-income markets in the developing
countries. Endowment life insurance pays the face value of insurance if the policyholder dies
within a specified period.

 Health Insurance- Health insurance provides coverage against illness and accidents resulting in
physical injuries. MFIs have realized that expenditures related to health problems have been a
significant cause of defaults and people's inability to continue improving their economic
conditions. Several MFIs have therefore, either started their own health insurance programs or
have linked their clients to existing programs.

 Property Insurance- Property insurance provides coverage against loss or damage of assets.
Providing such insurance is difficult because of the need to verify the extent of damage and
determine whether loss has actually occurred.

 Disability Insurance- Disability insurance in most cases is tied to life insurance products. It
provides protection to the policy holder and her family, should she or some of her family suffers
from a disability.

 Crop Insurance- Crop insurance typically provides policy holders protection in the event their
crops are destroyed by natural calamities such as floods or droughts. To improve the ability of
rural farmers to repay loans from agricultural development banks (ADBs), many governments
developed crop insurance programs in the 1970s and 1980s.

 Disaster Insurance- Disaster insurance is through a reinsurance arrangement that broadens the
risk pool across countries and regions, and protects insurers against catastrophic losses.

 Unemployment Insurance- This insurance provides cash relief to individuals who become
unemployed involuntarily and who meet certain government requirements. It also helps
unemployed workers find jobs.

 Reinsurance- Reinsurance is the shifting of part or all of the insurance originally written by one
insurer to another. This is a central feature of the operations of all commercial insurers.
MICROINSURANCE PLAYERS AND PRODUCTS IN INDIA

S.No. Name of Insurer Name of the product Logo

1 Aviva life ins. Co. India Pvt. Grameen Suraksha
Ltd.

2 Bajaj Allianz Life Insurance Bajaj Allianz Jana Vikas Yojana.

Co. Ltd
3 Birla Sun life ins. Co. LTD
4 DLF Pramerica Life Insurance
Co. Ltd
Bajaj Allianz Saral Suraksha Yojana.
Bajaj Allianz Alp Nivesh Yojana.
Birla Sun Life Insurance
Bima Suraksha Super.
Birla Sun Life Insurance Bima
Dhan Sanchay.
DLF Pramerica Sarv-Suraksha.

5 ICICI Prudential Life Insurance ICICI Prud. Sarv Jana Suraksha

Co. Ltd

6 IDBI Fortis Life Insurance Co. IDBI Fortis Group Micro insurance
Ltd. Plan

7 ING Vysya Life Insurance Co. ING Vysya Saral Suraksha

Ltd.

8 Life Insurance Corporation of LIC's Jeevan Madhur. LIC's Jeevan

India Mangal.

9 Met Life India Met Vishwas

10 Sahara India Life Insurance Co. Sahara Sahayog (Micro Endowment

Ltd. Insurance without profit plan).
11 SBI Life Insurance Co. Ltd. SBI Life Grameen Shakti.
SBI Life Grameen Super Suraksha.
12 Shriram Life Insurance Co. Shri Sahay.
Ltd. Sri Sahay (AP).

13 Star Union Dai-ichi SUD Life Paraspar Suraksha Plan.

Life Insurance Co. Ltd.
14 TATA AIG Life Insurance Co. Ayushman Yojana. Navkalyan
Ltd. Yojana. Sampoorn Bima Yojana.
Tata AIG Sumangal Bima Yojana.
Major Challenges Faced In Selling The Micro Insurance Product:
The major challenges in sales of micro insurance product are Recruiting , Adequate Training,
Incentives, and Monitoring of the sales force and Selling Microinsurance effectively, and
ultimately extending insurance care to millions of vulnerable households. A properly trained
and motivated sales force is needed to reach scale, and cost-efficient sales methods can
enable microinsurance programmes to be viable.

RECRUIT

Organizations select candidates based on the structure of the programme, the seller’s job
description (which can include non- sales related activities), and governing regulation. The
selection pool often consists of candidates with a basic education, little experience of selling,
and limited prior exposure to insurance, making it difficult for organizations to use past
experience to select candidates.

TRAINING

Training becomes an even more critical function when considering the relative inexperience
of new sales staff. Even sales staff with previous selling experience (like loan officers of
MFIs) might not have the required knowledge or skills to sell insurance, as the products are
different.

Before developing the knowledge and skills necessary to sell, organizations might need to
create a belief in the value of insurance amongst the sellers. One way to inculcate this belief
is to stress the social and economic benefits of insurance for clients.. Many insurers train staff
using passive learning methods, such as presentations or lectures. This approach may work
when training staff with a college background, since they are accustomed to a more academic
learning experience. Presentations are more difficult to digest for sellers with basic levels of
education and little prior exposure to sales or insurance.

INCENTIVIZE

To promote desired behaviour, employees need to have intrinsic and extrinsic motivation.
Intrinsic motivation refers to motivation that exists within the employee and is driven by an
interest, enjoyment or belief in the task. This type of motivation is not dependent on an
external reward or incentive. Extrinsic motivation is dependent on the receipt of an external
reward for performing a task. Extrinsic motivation relies on the use of financial and non-
financial incentives.

Each type of incentive has pros and cons, with some potentially leading to negative
behaviour. Incentives, hence, need to be carefully designed and monitored. Selecting which
incentive is most suitable depends on the type of organization, maturity of the programme,
profile of sales staff and the ability to monitor staff actions and measure client satisfaction.
MONITOR

Monitoring is critically challenging for microinsurance for a number of reasons. Given

clients’ limited experience with insurance and the low demand for microinsurance, sales staff
have to push sales. Monitoring allows organizations to track whether sales are accurate and
the cover is appropriate and understood by the client. Having the right client profile covered
is important from the company’s perspective as well. Further, monitoring enables
organizations to learn and innovate, allowing organizations to adapt quickly; this is
particularly important as many microinsurance schemes are still evolving.

Some Other Challenges Faced In Selling The Micro Insurance Product:

1). The micro insurance industry is faring very well for the past few years in India and further
growth in value and volume. Still, it is facing many challenges on the systemic, institutional,
operational and financial front. They can be narrated as follow:

2). Micro insurance operators and their distributors are still not able to decide if this
activity /business to be continued as the main business with independent revenue or to
continue as additional activities only.

3). The absence of financial literacy in rural and village population which do not allow them
to understand the required insurance product and select the wrong Thus, lack of insurance
literacy amongst the people slows down the growth of activities of micro insurers.

4). The rural micro insurance is riskier compared to regular insurance and thus the companies
are less interested to expand fast.

5). There is a wide gap between demand and supply for micro insurance, especially in rural
areas. This also hinders the expansion of micro insurance business in our country.
6). General awareness of people for insurance and products features is very limited in our
rural population and this limits the growth of micro insurance.

7). Many of micro insurance products do not take care of problems like the adverse selection
of products, moral hazards, and fraud in the transaction.

8). There is still a need for progress in regulation that can be effective for consumer
protection and service rendered by micro insurers. The regulations should be flexible and
simple to understand by the rural population.

9). At the Microinsurance Provider’s & Broker’s level

Establishing the network of microinsurance agents (MI Agents) is a real challenge because:

 prospective MI-Agents lack basic education, thus, training them is a challenge;

 some commercial insurance agents are not willing to take-on insurance business with
very small premium.

10). Negative insurance experience because of industry dysfunctions like:

 premium collectors no longer around after payment of first year premium

 branch is already closed when filing claims
 cheated by sales agent 

Concluding thoughts
Micro insurance business holds a lot of potentials to expand and develop in India. However,
the insurers must take into account the specific needs of the clients and formulate a proper
solution to meet their needs at a reasonable price to the rural population. The risk assurance
or risk cover offered to the clients must be easy to understand and simple to follow without
any hassles as the rural clients are generally illiterate.

However, micro insurance is becoming very popular nowadays in our country. The micro
insurance figures reveal that there is a regular rise in its business. Further, with publishing the
notification of the IRDA (Micro-insurance) Regulations 2005, by the Regulator, the design of
products offered to the poor and rural population has grown consistently.

To overcome the challenges, it is imperative that measures are taken to encourage regulatory
modification, product development, distribution optimization, and financial education.
However, in spite of all challenges, micro insurance industry offers a great scope for
development in our country and that is the reason for big insurance players entering this
sector.

The challenges faced by India offer learning opportunities for the countries where
microinsurance is still in its infancy. To overcome the challenges, it is imperative that
measures are taken to encourage regulatory modification, product development, distribution
optimisation and financial education. Regulators need to move away from the prescriptive
regulation towards a regulatory framework that incentivises innovation, so that insurance
industry stakeholders can innovate flexibly.

There is no one-size-fits-all approach to recruitment. Each model and

RECRUITMENT indeed each insurer prioritizes selection criteria based on regulation,
the structure of the programme, and the sales staff’s job description.

Tips:
 Integrate recruitment with upfront training. Integrating
training and recruitment is innovative and particularly
effective when recruiting candidates with basic education or
when candidates are difficult to differentiate based on their
past experience. Trainers can assess candidates based on their
performance on exercises involving everyday tasks, and hire
staff accordingly. The relatively small additional cost of
training extra candidates is likely to pay- off, as selected
candidates convert more clients in the long-term.

 Use communities to source and screen sales staff. Hiring sales

staff that have gained the trust of and have a rapport with a
target community is a key success factor, particularly for sales
staff that live and work in a community. Some organizations
prioritize hiring community leaders or using leaders to screen
potential candidates.
Experiential training is an effective approach for sales staff with basic
TRANING levels of education and little prior exposure to sales or insurance.
Good practices involve role-play and games to give sellers a safe
space in which to understand concepts, practice selling, obtain
targeted feedback, and build confidence.

Tips:
 Practice role-plays. Using sales scripts, logic trees10, videos
and graphical slides allows trainees to re-enact a sales
conversation, and to receive immediate feedback from
trainers.

 Play games focused on insurance literacy. Interactive games

can give staff a first-hand experience of the implications of
risk and thus the benefits of insurance, such as MicroEnsure
Tanzania’s risky- business training game.

 Build on local traditions. Use locally accepted traditions, for

example “hand full of rice”, to illustrate the concept of
insurance, and to show that insurance is not a new concept.

 Sell the microinsurance to sales staff. Insurers can encourage

sellers to personally experience the product, for example by
providing a discount to sales staff. Sales staff can sell the
product to each other during the training programme,
providing trainees with a practical experience of the sales
 process too. If sales staff pay for and use the product, they
will have a personal understanding of the product, and convey
their experience to potential clients.

Sales force should optimize both for the number and the quality of
INCENTIVE sales. Good quality sales increase the likelihood of renewals, thus
protecting clients against risk in the long term and enhancing the
sustainability of the insurance scheme. In addition, non-financial
incentives can give sales staff recognition or a tangible reward for
strong performance. Intrinsic motivators are particularly important
when financial incentives are too small. A balanced approach that
incorporates both financial and non-financial incentives can reduce
mis-selling.

Tips:
 Don’t rely on volume-based financial incentives alone.
Volume-based financial incentives alone, especially if not
monitored properly, can lead to mis-sales. Using a balanced
incentive structure can be more effective.

 Reward sales staff for the quality of a sale. Rewarding staff

for sales quality improves the likelihood of renewals. Quality
can be measured quantitatively (e.g., renewals, transaction
speed, mistakes, staff punctuality) or qualitatively, (e.g. client
satisfaction surveys, audits to check client’s understanding of
a product, supervisor assessments).

 Use a range of non-financial incentives. Give sales staff

recognition for their work, for example through a mention in
an internal staff newsletter, or with additional professional
training.Alternatively, offer sellers prizes or entries into a
raffle for good performance.

 Use team-based financial incentives. Group financial

incentives help motivate a team to work together towards a
common objective.

 Encourage a distribution partner to give financial incentives

directly to sales staff. For models that rely on sales staff that
are located within a distribution partner, agree on the level of
financial incentives distributed to sales staff upfront. Use a
monitoring system to track the progress of each seller, and
check whether the partner has shared the financial incentives
according to the agreement.

 Leverage social benefits: Intrinsic motivators allow the sales

force to feel part of a broader movement that benefits society
and protects the poor. Models involving community-based
sellers can emphasize this dimension to motivate sales staff.
 Systematic monitoring is important for all models, and critical for
MONITORING models where the sales force is outsourced or located within a
distribution partner. Integrating feedback from monitoring into on-
going training allows organizations to diagnose issues and promptly
equip staff with the tools they need to be successful. Integrated
monitoring helps insurers use resources effectively to accurately
target specific individual and group training needs over time.

Tips:
 Implement systematic monitoring systems. Quality assurance
systems can involve listening to sellers’ calls to ensure that
they meet compliance requirements. The same calls can be
used to assess sellers’ performance and support the design of
on-going training or the provision of incentives. Supervisors
can monitor sellers in the field or conduct follow-up spot
checks.

 Clearly outline targets for conversion rates and quality

standards. Clear performance metrics set expectations up front
of what is required of sales staff. Systematic monitoring helps
assess their performance, particularly when staff are located
within a distribution partner or are outsourced.

Properly trained and motivated sales staff can ensure that clients have positive experience
with the sales process and a better understanding of how insurance works, leading to
improved demand for insurance amongst low-income communities. Cost- efficient sales
methods can enable microinsurance programmes to reach scale and become viable. The
emerging practices need to be further evaluated from these two perspectives, scalability and
cost-efficiency.