Knowing the purpose of insurance

Published in Mint on 15th January, 2018. Written by Kapil Mehta.

Last week, I received a new year’s Whatsapp greeting from Kalu. He was a poor worker who had been insured through a Trust that bought health insurance from us 4 years ago. I remember Kalu’s case well. For the first 4 months of that group insurance, there were no claims, despite the number of insured members being large. On investigation, we found that workers lacked the confidence to walk into private hospitals and when they did muster up courage, they were turned away by the reception. To set this right, I requested an office colleague to accompany Kalu, who was then suffering from a kidney disease, to the hospital and help him get past the formalities. Subsequently, Kalu’s surgery was successfully completed, a kidney removed and the hospital bill of Rs85,000 paid for by insurance. Four years later, Kalu obviously feels cheerful enough to send me a video of flowers blooming in a time-lapse.

I narrate this incident because it illustrates the purpose of insurance, which is to pay claims. The number of claims paid is significant. In the financial year 2015-16, there were about 3,800 death claims; 30,000 health claims; and 20,000 general insurance claims paid every single day.

Behind these statistics are stories that are often not told or understood, even by many within the industry itself. This is a major reason why job attrition in the sector is so high. There are over 2,00,000 people working in insurance and at least 60,000 of them change jobs each year. In the sales teams that interact with customers, attrition rates are far higher. Such high attrition takes its toll. Policy lapses and complaints shoot up when the person that made the sale leaves. A stable employee base leads to higher insurance renewal and pushes the company to keep improving its products. The best insurers in the world have staff that routinely spend a majority of their life working at the company.

In exit interviews, executives often point to the stigma associated with insurance. They complain about facing brickbats from unhappy clients and family pressure to get into other professions. There seems to be a complete lack of understanding of the larger view, the main purpose of why they sell insurance. These executives may just as well have been selling any other financial product. When people understand the true value of insurance, they stay for long, push the company to develop more customer-friendly products and have a positive impact on clients. Appreciating the true value of insurance can galvanise action.

I once asked an extremely successful insurance salesman in New Jersey what the turning point in his career was. He said that 20 years before, at a social gathering, a relative turned away when he approached. That’s when he decided that he would work so hard to sell good insurances to his customers that one day the relative would approach him, unsolicited, for advice. This did eventually happen.

Good claims advice has real impact. Two years ago, a batchmate from business school called. She had ovarian cancer but her health insurer declined the claim because she had not disclosed her medical history properly when buying the insurance. We discussed this and drafted a response to her insurer where she apologised for the non-disclosure but also pointed out that the current ailment was medically unrelated to her non-disclosure. To the insurer’s credit, they decided to settle the claim.

There are many such stories. I remember a decisive moment 10 years ago when a salesperson sold life insurance to a person who was a Subedar. The Subedar wrote out the cheque but tragically died in an accidental explosion before underwriting could be initiated. In that case, the insurer made an ex-gratia payment even though there was no claim payable. There are hundreds of such admirable stories that take place but get buried in corporate busyness.

If the people who join insurance would only realise the impact they can have if they persevere and keep their client’s interest first, I doubt they would ever leave the industry. This was reinforced last year when the batchmate I described earlier called again. It turned out that her cancer treatments had failed, and she had just a few months to live, but wanted to thank me properly for the help on her claim several years ago. In that moment, she made my work special and reminded me of the purpose of insurance.

 

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