Customer protection in insurance sector

Insurance represents a tool of prime importance in modern economies. It enables the insured to reduce and better manage their risk exposures. The basic feature of an insurance contract is that the insured buys a future promise of payment contingent upon the occurrence of specified events. This means the insured pays his consideration at the very beginning of the contract. But before the insurer is called to "perform its part," the security profile of the insurer may have changed with time. Therefore, the long-term reliability of an insurance company must be beyond doubt. This has led the regulatory authority to enact regulations aimed at securing the long-term reliability of insurers. The concern for consumer protection has expanded the scope of insurance supervisory body and, therefore, greater consideration may be given to insurance consumers' protection measures. The measures may be summarised as follows:
(a) Increased standards for capital and solvency requirements
(b) Prudent investment and reserving rules
(c) Establishment of an effective information system
(d) Improvement of market transparency
(e) Providing all relevant information to insurance consumers
(f) Entertaining insurance customers' complaints.
Supervisory body need to frame rules/regulation, guidelines to ensure customer protection measures. Strong commitment, integrity and honesty are essential qualities for all positions within the insurance industry. Further, to keep up with the times, on-going training and retraining of key personnel are a necessity. A properly performing insurance industry is not only beneficial to consumers but also the economy as a whole.
The government regulatory body needs to ensure that the insurance companies adhere to the basic rules and ethics of business, which appears to be lacking. Executives of private insurance company feel that their professional background, education and training in marketing are of little use in the company. This is simply because the present-day unhealthy competition has led to unethical rebating practices. It is an open secret that some bank officials are actively involved in channelising the risks of their clients. It is alleged that there are gross violations of business norms and rules in respect of collection of premium, documentations, payment of commissions etc. The professionals should realise that the unethical practices and untoward business tactics should be halted once for all for bringing about the desired discipline in the insurance industry.
Insurance is a community-based business, whereby the policyholders contribute to a common fund and those who suffer losses are paid from that fund. This makes insurance a method of cooperation amongst the policyholders. Insurers are the custodians of policy holder's money and they are supposed to protect best interest of the policyholders. Insurers need to treat their customers fairly and at the same time must provide the services timely. In Bangladesh, Insurance Development and Regulatory Authority (IDRA) has been constituted with one of the specific objective of protecting the policyholders interests. We will discuss in this paper, the role of insurers and regulators in protecting policy holder's interest.
First of all, insurers need to be transparent and disclose/clarify all terms and conditions of insurance contract to policyholders. For this, the insurers need to recruit capable and trained people in marketing and committed people at desk. Training of the marketing/sales force is required before they are recruited and training should be made compulsory not only for agents but also for employer of agents at least once annually. This is necessary to upgrade the quality of the sales force constantly with knowledge and code of conduct. Sales people who are involved in unethical practices should be retrenched immediately with exemplary punishments. The retrenched people should be barred for recruitment by any insurance company. Secondly, the premium or contribution should be adequate but not that much excessive so as to permit the insurers to allow underhand rebate.  Thirdly, the insurers should ensure timely delivery of services.
HOW TO BUILD TRUST: Insurance is essentially a business of trust between the insurer and the insured. This trust can not be developed, if insurers rely mostly on commission-centric approach for business development in life insurance and unethical underhand rebate in non-life insurance. The only way insurers can build trust and confidence is by being customer-centric. This has to be embedded in the culture of an insurance company and get reflected in the day-to-day servicing of the policies, in meeting policyholders' grievances in the settlement of claims, in pricing the product, in the observance of business ethics and in the behaviour and attitude of insurance agents.
Customer service is an attitude, a culture and a collective way of providing best service and quickly addressing customer grievances. Insurance sales agents have to explain the features and benefits of the product and its conditions, warranties, restrictions to the prospective and existing policy holders. Honesty and integrity are important hallmarks of an insurance sales person. Salesmen need to be taught continuously how to deal with policyholders by keeping constantly in touch with them, to know their feeling, needs and grievances.
HOW TO MEET POLICYHOLDERS EXPECTATIONS: Living up to the expectations of policyholders and timely delivery of services to insurance customers are the hallmarks of good governance. This is necessary to ensure accountability and transparency in functioning of organisations dealing with services to clients. Insurance industry is essentially a service industry where expectations of policyholders are ever-increasing. Appropriate use of information technology can ensure timely delivery of service to the policyholders while helping towards orderly growth of business.
Ensuring timely delivery is a core competence of an insurance company. This creates sustainable competitive advantage for a company. It is a deep proficiency and requires coordination of several departments and sections. It allows insurance companies to differentiate them from others and set strategies that unify the entire organisation. In order to ensure timely delivery of services by an insurance company, all the departmental and sectional heads need to understand how customer's value is created through unique capabilities of the company. Then it is necessary to develop unique capabilities and qualities that are difficult for competitors to copy. Insurance companies may create a strategic roadmap that sets goals and yardsticks for competence building. Core competency should be developed in the areas of product development, distribution, underwriting, claims management, risk management and so on.
There are companies in the market, who do not know what their core competencies are. There are insurance companies who fail to understand that it is by developing core competencies, they can gain competitive advantage. Providing timely services every time is a very highly demanded competency of an insurance company.  If this is earned, the company can meet its challenges and business competition.  By earning this, insurance companies can win the hearts of its customers, attract more customers, increase market share and ultimately serve the expectorations of all the stakeholders.  
The writer is Chief Consultant to the Board, Prime Islami Life Insurance Limited
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