RAMAKRISHNA MISSION VIVEKANANDA COLLEGE (AUTONOMOUS)

DEPARTMENT OF COMMERCE

TOPIC: INSURANCE

ASSIGNMENT NO.1

NAME. : [Link]

DEPT NO : UCOB1719

CLASS : 2nd [Link] ‘B’

SUBJECT: INSURANCE AND RISK MANAGEMENT

PRINCIPLES OF INSURANCE

Some of the principles of insurance are;

INDEMNITY;​ A ​ contract of insurance is a type of contract of indemnity ( except in the case of

life and personal accident insurance) in which an insurer contract with the insured to mitigate
any monitory loss held to the insured on happening of some event as mentioned in the
contract.

It is necessary that some monitory or pecuniary loss happen to the insured due to happening
of some event.

The insured is not permitted to make profit from the insurance. Suppose Mr. X taken a policy
to insure his car against theft and accident of Rs. 1, 00,000. He got the accident and
damage cost is of Rs. 10000. Then the insurance company will allow his claim up to Rs.
10000 only. In case his car has been stolen then they may claim maximum claim of Rs.
100000 in case of total loss.

GOOD FAITH​; The contract of insurance must me on good faith. The insured is of the
obligation to declare full and true disclosure of facts to the insurer. The insurance company
on the facts declared by the insured will decide the type of insurance and the liability and as
well as the premium. So the true disclosure of all facts is necessary. The insurance company
may declare any contract as void, if later found that the facts declared by the insured are not
true.

So all contracts of insurance are the contracts “ Uberrimae fidei”, i.e., the contracts of utmost
good faith and therefore non disclosure of a material fact entitles other party to avoid the
contract.

Note: a new material fact , which is not material at the time of entering into the contract but
later it became material during the course of time on the basis of which the insurer may
declare the contract void or not ready to renew the contract , should be declare by the
insured to the insurer as soon as he came to know the fact.

Any material facts comes in the knowledge of the insured subsequently need not to be
disclosed.

INSURABLE INTEREST;​ it is some monetary or pecuniary interest. A person is said to have

an insurable interest when he is so situated with regard to thing insured that he would have
benefit from its existence and loss from its destruction.
The insured must has insurable interest in every contract of insurance with respect of any
object or life.

A factory owner has insurable interest in the factory or if a person has a car has insurable
interest in the car. Suppose Mr. A has car and the car cannot insured by Mr. B, since Mr. B
has no insurable interest in Mr. A’s car.

The insurable interest of a husband will be in the life of his own and his wife or wife has
insurable interest in the life of her own or his husband in case of life insurance policies.

The insurable interest must be pecuniary interest.

CAUSA PROXIMA;​ i.e. the “proximate cause” this is applicable in case of marine and fire
insurance. In these cases when damage has resulted due to two or more causes, we have
to look to the proximate or the nearest cause of damage, although the damage might have
not been taken without remote cause. In the case of loss the proximate cause should be
considered not the remote cause. If the cause of the loss is the peril as mentioned in the
contract then the insured will get the claim otherwise not.

As held in case of Pink v. Fleming (1899) 25 QBD 396, lord Esher observed, “The question,
which is the cause proxima of a loss, can only arise where there has been a succession of
causes. When a result has been brought by two causes, you must, in insurance law, look to
the nearest cause; although the result would no doubt not have happen without the remote
cause. In the above case the ship collided with another ship, resulting in delay and
mishandling of cargo of oranges which deteriorated. It was held that the deterioration of
oranges was not due to collision of ships (peril insured) but that was due to mishandling and
improper storage.

MITIGATION OF LOSS; ​it is an important principal of insurance, that in case of peril or

accident the insured must try his best to save insured interest in the property or life. That he
must take all measures to minimise the loss that he would have taken if the property were
uninsured.

RISK MUST ATTACH;​ the risk must attached i.e. the insurer receives the premium in a
contract of insurance for running a certain risk. If the risk is not run or not continuous on the
business or the property of the insured then the premium received by the insurer should be
returned.

SUBROGATION​: it applies in case of fire and marine policies Subrogation is a right of the
insurers to enforce for their own benefit all the rights and remedies which the insured posses
against third parties in respect of subject matter. Subrogation is thus the substitution of one
person in place of another in relation to the claim, its rights, remedies or securities.

Suppose two ships were insured and belong to Mr. X and Mr. Y, they have collided and Mr.
X received insurance claim from insurance company. Now in this case insurance company
may sue Mr. Y for negligence and claim for damages.

CONTRIBUTION​: Where a particular property is insured with two or more insurers against
the same risk, it is called “double insurance”. In the event of loss, the insured will get
compensation only for the amount of actual loss. He will compensated by the concerned
companies on the basis of “principal of contribution”. The insurers must share the claim to
the extent sum insured with them. If in this case whole loss is paid by one insurer then it is
entitled to demand contribution from other insurers.

Note: in this case it is necessary that the different insurers insure the same interest, in
respect of the same property and the same peril.

FUNCTIONS OF INSURANCE

Insurance becomes very useful in today’s life. It plays significant role in this
competitive era. One should know the functions of insurance According to Sir
William Beveridge the functions of insurance can be divided into three categories.

1) Primary Functions
2) Secondary Functions
3) Indirect Functions

1.​ PRIMARY FUNCTION

(A) TO PROVIDE PROTECTIONS

​ he most important function of insurance is to provide protection against risk

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of loss. It is one check the reality of the misfortune happening, and pay the cost of
damages of losses.

(B) TO PROVIDE CERTAINTY

​ e know future is totally uncertain. Any misfortune happening may occur at

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any stage of life. The amount of loss and time of losses both are uncertain. No doubt
better planning and administration can reduce the chances of happening these types of
accidents but it requires lots of attention towards strengths and weaknesses, special
knowledge of the field after all these precautions, the uncertainty remains steady.
Insurance provides certainly towards the losses. The policy holders pay the premium
to by certainty.

(C) DISTRIBUTION OF RISK

It is a co-operative effort where the risk is distributed among the group of

people. Thus, no one have to bear the losses occurred due to uncertainty.

2. ​SECONDARY FUNCTION
(A) HELPS IN ECONOMIC PROGRESS -

I​ nsurance plays an important role in economic progress. It gives fully certainty

to the industrialists towards the risks. The entrepreneurs can more concentrate on innovative
and profitable techniques of the production. They should not require
thinking over the risks.
The industrialists can establish new industries in environment. Thus, industries
have got development in economic and commerce of the nation.

(B) IN PREVENTS LOSSES

Insurance plays vital role in preventing the losses. The amount of premium be
minimized by using such appliances like the fire extinguisher. If one uses interior
machinery which may be caused for misfortune, the amount of premium will be high.
Thus, indirectly, insurance provides help to minimize the chances of risks. It will be
useful for the agencies which are directly related with the same function like,
a) Loss prevention association of India.
b) The salvage crops of loss prevention association of India.
c) Survey and inspection of risks, etc.

3. INDIRECT FUNCTION

(A) A FORCED SAVINGS

​ ife Insurance is also a method of savings in India. Income Tax Act gives
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relief in payment of income tax because government wants to habituate general public
to save money. It encourages the habit of thrift and savings among the people. Thus, it
becomes compulsory savings to people of nation.

(B) POMOTE FOREIGN TRADE

It is compulsory to take marine insurance policy in foreign trade in India.

Foreigners can’t issue the foreign trade bill unless the cargo is fully insured. Thus
foreign trade is totally depends upon the insurance sector of the nation. It gives relief
to entrepreneurs from the uncertainty of foreign trade.

(C) OTHERS

Insurance provides certainties towards risks in entrepreneurship. It gives

confidence in general public. It is one of the important source of investment which
develops the trade and commerce of the nation.

SELLING PROCESS OF INSURANCE POLICY

Sales process

Every one of us is engaged in selling almost from the day we were born. Each day we try to
persuade, influence and induce one another to do (or not to do) things in the way we want.
However this does not mean that we are all sales professionals.

Definition
Selling as a profession refers to the act of inducing a commercial transaction through
inducing the purchase of a product or service, such act being carried out with the intent of
earning remuneration.

The salesperson thus seeks to make a livelihood out of selling. Insurance agents are sales
persons who seek to induce members of the community to buy insurance contracts written
by the insurance company that they represent. The remuneration they enjoy in return is
known as a commission.

Diagram 1: Insurance sales

Types of sales in other industries and life insurance

While all selling involves inducing someone to buy, the nature of the sales process can differ
from industry to industry and would depend on the nature of the product and industry. The
sales person’s role also consequently changes.

Example
i. Fast Moving Consumer Goods (FMCG): are typically mass marketed through malls and
other retail sales outlets. A product like soap, for example, is promoted through mass media
(particularly ads in TV and other visual media) and the customer asks for it at a retail outlet
(e.g. a shopkeeper or mall).

ii. Showroom sales: A car in a show room costs much more than a bar of soap and the buyer
has to be naturally careful when taking a decision to buy. The sales person does not go to
the prospect but instead it is the prospect who visits the showroom. The sales person has to
win the prospective customer’s confidence and make a convincing case for purchase of the
car. The role is essentially to convert an enquiry into a sale.

iii. Medicines and Drugs: are usually brought from a chemist after being prescribed by a
doctor. Medical Representatives of pharmaceutical companies visit doctors’ clinics to sell
their company’s products and their features to the doctor. Here the target of sales efforts is a
medical expert who prescribes the brand for the end buyer who buys it from the pharmacy.
The salesman’s role is basically sharing hard medical information with a professional.

iv. Business to Business (B2B sales): Here the customer is another firm. The decision to buy
may be taken by multiple individuals and often it is a panel who decides. Purchase is
typically through floating a tender and the selection criteria are fixed and measurable.
Decisions are taken on the basis of careful consideration and evaluation of alternatives. The
sales person’s role is to effectively demonstrate how the product and company meets the
buying criteria better than the competition. It requires presentation skills, building good
relations with multiple players and being sensitive to feedback and information that can help
clinch the deal.

There are two points which distinguish life insurance selling from other products and
industries:

i. Firstly it is said that ‘life insurance is sold, not bought’. In case of many other products, the
prospect has a need for the product and initiates the enquiry. In the case of life insurance, it
is typically the sales person who has to go to the prospect and induces the need to buy.
ii. The second major difference is that in life insurance, unlike many other products, one is
not selling any tangible product but only an idea – a promise that would be realised only in
the future.
The role of the insurance salesman is to sell this promise and relate to the prospective
customer in such a way as to win trust and confidence about the fulfilment of the promise far
into the future. The element of person to person, eye to eye selling is perhaps far more in life
insurance than any other business. It is one of the reasons why life insurance is considered
difficult to sell. It is also for this reason that some of the world’s greatest and best known
salesmen won their wings in the life insurance industry.
Sales Process
Selling is both an art and a science. It is an art in the sense that every sales person brings
his own distinct style in the way he communicates, builds rapport and relations with
prospective customers, engages in fact finding and presents solutions. Does this mean that
only a few individuals who have these distinctive skills can succeed?

It is true that sales people may differ much in style and skills and their chances of success
may vary. Some of them may be able to quickly make contacts with a lot of prospects and
convert them effectively into customers in a short time. Others may be slower to learn and
may move more slowly. The truth one needs to know is that so long as one does not give up
or slacken but persists on the path, even when there are failures, the law of averages would
come to one’s aid.

What is this law? It means that if a sales person on average is able to convert one out of
every twenty or thirty persons contacted into a customer, he or she simply needs to adopt a
standard process and keep contacting more and more persons without giving up. The
customer base will begin to build over time. Some sales persons may take longer than
others but success is sure. Persistence is what pays off in the business.
This brings us to the importance of adhering to a well-defined sales process with clearly
sequenced steps. Let us outline the steps:

Diagram 2: Sales Process

Let us look at each of these processes in some detail.

1. Step I: Prospecting (To identify and build up a list of prospects)

Prospects are people to whom we can sell our products. Prospecting is the process of
gathering names of people whom one can approach to secure a sales interview. Continuous
prospecting is absolutely vital to a successful sales career.

The key to effective prospecting is to target particular markets where we will be calling on
people who have one or more characteristics in common. By cultivating strong relationships
with these people, we can get them interested in the products we sell immediately, making
the process of prospecting much easier. Let us look at some of these markets.

a) Immediate group

The easiest people to approach would be one’s family and friends. We know the needs of
these people and would be able to approach them on a favourable basis. Also relatively
easy to approach are people with whom we do business; people who work in the food
stores, clothing stores, banks, etc. Other such people would be those who know us such as
friends, acquaintances, people who belong to the same organisations, and so forth. To sum
up, these prospects form part of what we call the sales person’s natural market. They are
people who should at least grant us an interview if we contact them.

b) Natural market

A second source of contacts is the natural market. This consists of people who may not be
part of one’s immediate circle of relatives, friends and other acquaintances but one is in a
position to know and get acquainted with them because of sharing something in common
with these people. If we just look around we would see many groups who may form part of
our natural markets:

• members of a caste or community association;

• members of a church congregation or a Satsang group;
• members of a parents – teachers association (PTA);
• members of a cultural association or a temple festival committee or a trade union

c) Centres of influence (COIs)

One way to get to a large number of prospects is by taking help from people who are visible
and influential leaders and whose words are valued by others. We are referring to centres of
influence – community leaders, social and political workers, professionals like Chartered
Accountants or Lawyers or well-known businessmen.
The secret is to secure this person as a satisfied client whom you have served well and then
to seek his or her help to find other new prospects. Even if he or she is not yet your client, it
is enough he or she should know about your dedication and passion to help other people
and should be confident about your knowledge and sense of professionalism. Another
important condition is that he or she should like you and be interested in helping you.

d) References, introductions and testimonials

Just as you can tap a centre of influence, you can also seek the help of other satisfied
customers as well as prospects who has not yet bought or may not buy from you for some
reason, but still has been impressed and favourably disposed to you by your dedication and
professionalism.

i. A reference is a name of another potential prospect which is provided as a lead, by your

client or prospect or centre of influence or any other person, whom you may be able to
support with your solutions.
ii. Introduction: An even better way may be to ask for an introduction. Here the salesperson
asks for a small letter of introduction or a note to the person referred. Typically one could ask
for a visiting card at the back of which or attached to which, a small note may be added,
introducing one to the referred person. The best form of introduction would off course be
where one’s benefactor picks up the phone and calls his or her contact to introduce the
agent, intimating that she would be contacting that person shortly. One’s chances of success
would multiply, especially if the person who refers is one whose word is respected and taken
seriously.
iii. A testimonial is a kind of statement which one may seek from a satisfied customer,
affirming that the latter has done business with the salesperson and has been very satisfied
with the services and solutions rendered. It is a kind of vouching for the sales person’s
credentials. A testimonial would be very relevant when one is dealing with a circle of
professionals who want adequate proof about the sales person’s professional credentials.

e) Other service providers

There is a whole range of service providers who are not our competitors. They may include
laundry men, real estate agents, lawyers, shop keepers, doctors and others whose services
are regularly needed and sought by members of the lay public. The basic principle applied
here is that of reciprocity. The agent agrees to be the eyes and ears for the other party, and
in turn gets them to make her visible and recommended.
Good agents use this source very effectively. Indeed if were to make a visit to our milkman
or laundryman, we may see a sign board asking one to contact so and so, with a contact
number, for all one’s insurance needs.

f) Conducting seminars and events

This is a professional, efficient method of selling, on a group basis. We can use it to attract
both new and existing customers alike. Since we’re already dealing with existing customers,
we can always ask them to invite a friend or partner along with them. Advertisements in the
area of the seminar also can increase the numbers.

g) Information pieces, newsletters, blogs and web based networking

It may not be easy or even viable to conduct seminars and events on a regular basis.

i. Email

Another way to get your message and presence registered in the minds of a large number of
prospects is to send them information by mail or hand drops on a regular basis. This can be
done almost free of charge today in the form of e–mails.

ii. Newsletter

Another way to communicate regularly is through a newsletter. In both cases, the purpose is
to inform readers about various subjects in the form of well-informed write ups. In designing
newsletters you can involve some of your important customers and prospects, especially if
their views are sought by members of their network.

iii. Personal website or blog

Yet another approach is to have a presence on the worldwide web in the form of a personal
website. It may be a little expensive to begin with but it is a way for getting across to a wide
circle of individuals who today spend a lot of their time in cyber space.

iv. Social networking sites

Finally there is Facebook and other social networking sites where you can access millions of
others almost anywhere in the world.

h) Cold calling

This approach is used by many sales people in many different industries, not just financial
services. This is where we make approaches to people or companies unannounced. It is
tough and we have to able to accept rejection, but it can be a very quick way of gathering
names and getting people to see. A good number of top sales people allocate some of their
time to cold calling simply because it works.

i) A prospects’ file

It is most important that we establish a prospects’ file. This is simply a book or register or
data base containing all the vital information about each of our prospects with details and
date when the prospect should be called on. A prospects’ file is an ever-changing tool. New
names must be added continuously on a daily basis and old names must be discarded if the
individual is not receptive to our sales efforts. We must be sure that we have enough
prospects to call on each day.

2. Step II: The pre-interview approach

Qualifying every prospect in the prospects’ list and getting appointments is the next step.

Definition
"Qualified" prospects are those people

• who can pay for insurance,

• who can pass the company underwriting requirements,
• who have one or more needs for insurance products, and
• who can be approached on a favourable basis

We need to gather enough meaningful information on each name in our prospect-list before
we can call on them. The process is called qualifying the prospect.

It is important to collect as much relevant information as possible so as to proactively ensure

that one’s efforts are in the desired direction. This also enables us to convince the prospect
that we do possess necessary knowledge and skills to meet his or her particular needs, thus
making a favourable impression.
The initial contact can be made through a letter, by telephone, or in a face-to- face meeting.
Whatever method is used, the objective is the same: to get the prospect to consent to an
interview where we can understand his or needs and in turn get an opportunity to explain the
service that we have to offer.
In order to do this our pre-approach communication should include:

• Something that will arouse the prospect's interest

• Offering of a valuable service
• Making it clear that no commitment is being made
• Use of a third party influence, if possible
• Use of alternatives in order to get an affirmative response
• Obtaining a definite appointment

It is important that during our first contact with the client, we introduce ourselves in a manner
that can generate rapport and also some trust and comfort feeling.
3. Step III: The sales interview: Conducting a need – gap analysis

After being successful in obtaining an interview, it is vital to do it in a systematic and

professional manner. The first step is to make a proper approach which automatically and
smoothly leads to the fact finding part of the sales interview. The approach basically consists
of an introductory conversation in the course of which we are able to identify one or more
needs of the prospect and get the latter to agree that these are significant needs for
insurance protection. Once there is mutual agreement on these one can move forward.

In need gap analysis we engage in a process of gathering detailed information about the
prospect’s insurance requirements, to identify and determine the assets and perils for which
there is inadequate coverage. The objective here is to collect as much additional information
about the prospect as possible. This additional information helps to identify specific needs of
the prospect in a more cogent way, to suggest solutions to those needs, and to help the
prospect find the money to pay the premiums.

Need Analysis Method

In need analysis method we do the following things:

i. the present and the future needs of the family are analysed;
ii. the monetary value of these needs are then calculated;
iii. the difference between the funds so needed to meet these needs and the available fund
with the family as at present is ascertained This difference is taken to be the required
amount of risk cover.

Needs method takes account of the pressing needs of the family, showing how insurance
can be added at various stages in the individual’s life as needs increase and income also
improves. However the estimation of the potential estate of the insured, that we considered
earlier when we talked about Human Life Value, is ignored here. The needs approach
however makes selling easier.
The needs of the family can be enumerated as under:

i. Clean-up funds for medical expenses, funeral expenses, succession/inheritance expenses,

outstanding loans etc.
ii. Readjustment income: enough income for permitting enough time to smoothly shift to a
required adjustment in living conditions;
iii. Income for family: till children are self-supporting;
iv. Life income for spouse: after children become independent;
v. Special needs: mortgage redemption, emergency medical needs, marriage of daughter,
and higher education of children etc.

The above broadly covers all the foreseeable needs and substantially defines the ambit that
an insurance salesperson can address.

4. Step IV: Designing the solution

After completing the previous steps, we should know enough about the prospect to design
and recommend a solution that is best for him or her at this point in time given all of his or
her financial circumstances. In many cases, especially if the problems and solutions are of a
simple nature, we would be able to recommend a solution and move on to closing the sale in
one interview.

In other cases, where the situation is more complicated, we may need to spend some time in
our office for developing the proper solution, then return to the prospect and make our
recommendation in a second interview.

If we attempt to conduct the fact-finding session and present our solution all in one interview,
we must be prepared to build a bridge from the fact-finding phase to the solution and
recommendation phase. This requires identifying the prospect's most critical need, pointing
out that need and getting an affirmative reaction from the prospect that this is indeed a very
important need in his or her mind. We would then be in a position to present our prospect
with a solution to the problem.

Typically one should conclude the initial fact finding interview with a promise to return soon
with appropriate solutions to the prospect’s identified needs. One should then return to one’s
office where one can analyse the prospect's problems in depth, design one or more solutions
to these problems, prepare one’s proposals and recommendations which would lead to the
sale, then make an appointment with the prospect for the second interview.

There is no specific rule which states the number of interviews one must have with the
prospect. It will depend from case to case. There may be situations where you may have to
conduct more interviews to develop a satisfactory solution and also win the prospect’s
consent to listen to the solution and consider it.

5. Step V: Presenting the solution

The most important point to remember when presenting our solution is to be thoroughly
prepared. Prior to making our proposal we would want to review the prospect's needs in
detail, go over our solution one final time, and plan to make our presentation so that it will
appeal to our prospect's buying motives. We would also want to anticipate what objections
the prospect might raise to our proposal.

It is necessary to arrange for presenting our proposal to the prospect, at a time and place
that will be free from interruptions and distractions. As we begin presenting our solution, we
must put the prospect at ease while at the same time making sure that he or she
understands that this is a decision-making session.

We need to begin by reviewing all the data we obtained in the fact-finding session and
stating each of the prospect's problems in an affirmative manner. We must ensure we
convey to our prospect that we have spent a lot of time reviewing his / her situation, and that
we are quite confident our recommendations are the best possible solutions to these
problems. It is very important that we relate each feature of our recommendation to some
particular benefit which the prospect will gain from, if he or she buys our proposal. Rather
than describing what we have to offer in technical terms, we should explain how the prospect
will be getting what he or she wants and needs.

6. Step VI: Handling objections (if any)

Diagram 3: Handling objections

The list of possible objections is a long one. It ranges from prospect being busy, not
interested, thinks he has all the insurance he needs, already has an agent he deals with, has
no money etc.
Finally there is the prospect who may agree with all that you say and have no objections, but
decides to buy the product solutions from someone else. In all instances it means that the
prospect does not have sufficient information to help him make the decision to buy from you.

If a prospect is “too busy now,” it means you have not provided information that could pique
his interest or overcome his wariness of being ‘sold to’. Similarly the objection of “no money”
can mean that he is not convinced adequately about why and how he can pay for the
insurance. If he does not trust you, it is because you have not communicated enough
information to overcome his doubts.

The least a salesperson can do is to accept and take responsibility for the fact that one has
not adequately done the job of giving prospects the information they want to hear and see if
there is anything one can do about it. Whatever the type of objection, we can handle it with
this approach. The idea is not to treat it as a battle between us and the prospect where we
win and they lose, but a discussion in which our sharing of what we know helps to convince
them about the importance of meeting and buying from us.

a) Handling objections through LAPAC

One of the important techniques that one can use for handling objections is known as
LAPAC (Listen, Acknowledge, Probe, Answer and Confirm). This method can be used to
deal with objections at any stage of the sales process. It respects the prospect’s point of
view, shows we are listening and persuades rather than attacks the prospect. Let us look at
its elements:

i. Listen

Actively pay attention to all statements and gestures. This becomes important especially to
know what the underlying concern is. Sometimes the prospect may need to be gently probed
with questions to clarify the issue.

Example
What does the term ‘no money’ mean?

• Is it that there is no money now or

• Is it that the price is too high to buy it or
• Is it that the prospect does not feel that the money is worth spending?

ii. Acknowledge

It is very important to affirm aloud so that both the prospect and the salesperson are on the
same page. Acknowledgement is also linked to another very critical act, namely empathising
with the prospect. Empathy does not mean that one necessarily agrees with the position
taken by the other party. But it certainly means that one respects and tries to see it from the
other person’s point of view.

Example
Once you are able to see the prospect’s reluctance to spend the money, you must express
that you can see and understand how he feels. Probably you have faced a similar situation
and some sharing on your part could demonstrate your understanding of what the other
party is going through.
iii. Probe

This step is intended to seek more information about the prospect’s concern area.
Remember that if the prospect has a problem in buying, that problem or set of problems
have to be sorted out by the prospect himself, either by making a change in his thinking and
mind-set or his action.

Example
If the prospect is too busy, he / she must find the time and inclination to meet you. If money
is the problem, he / she needs to find ways to generate it.

Probing can do two things. If done in a counselling oriented and friendly manner, a set of
gentle questions could guide the prospect towards finding answers to his / her own
concerns. Probing can also help to elicit further details of the problem situation which causes
the objection. Such information could be important and cannot be overlooked when one is
answering the objection.

iv. Answer

The task here is to obviously provide a carefully worded reply that suits the situation and is
convincing to the prospect. Answers must be directed at and address the concerns that are
raised. They must not be evasive or seek to deflect the concerns.

v. Confirm
The last step is to confirm whether the prospect is satisfied with the answer and if there is
anything else needing to be known. If the body language and other signals make you feel
that the prospect is not fully convinced, you may need to offer alternative options that he
could consider. Getting this confirmation is very important because once a prospect says he
/ she is satisfied, the ground is laid for moving to the close of the sale.

7. Step VII: Closing the sale

Closing is the process of persuading the prospect to buy now. The key to successful closing
lies in helping the prospect to want to say "yes".

We begin by summarising the presentation, making sure that the prospect understands
exactly what the proposal is, and then leading the prospect into an affirmative answer. At this
point, when we know that the prospect understands the proposal and is in an affirmative
mood, we can conduct a definite close.

a) Closing methods

i. Implied consent

One approach often used is the "implied-consent" method. We simply start filling out the
application asking a simple question such as "now, your last name is spelled as ". If the
prospect does not stop us, the sale has probably been made.

ii. Offering alternatives

Another closing method is to offer the prospect an alternative between two minor decisions,
either of which would lead to a close. For example, we may ask the prospect if she would
prefer to make his payments once a year or twice a year. Here assumed consent is
combined with a seemingly minor decision.

While making a close it is important that one should not try high pressured tactics to make a
prospect buy something for which there is no real need or where the prospect cannot afford
what is being recommended. Such practices of selling are unethical.

In other cases where we are persuading the prospect to take positive action, we must be
aware that we are actually rendering an important service to the prospective customer,
which the latter would eventually recognise and appreciate.

8. Step VIII: Sales follow-through

Between the time that the application is submitted and the policy is completed and delivered,
the four most important responsibilities of the agent are to see that:

i. The application is clear, complete and accurate

ii. Being actively involved in making sure that any further investigations that are required gets
completed in a convenient and timely manner
iii. The client's advisors, such as accountants or attorneys, are treated in the same manner
that our client is treated and that we do not invade their areas of expertise, and
iv. That all questions and requests are promptly followed up

[Link] IX: DELIVERY PROCESS​: Delivering the policy is an extremely important step in
the insurance sales cycle. It provides the agent with the opportunity to perform four important
functions:

i. To resell and reaffirm the need

ii. To get the client thinking about the next purchase
iii. To get referrals and
iv. To build prestige

a) Policy delivery procedure

As with the sales process, a proper policy delivery requires a structured, step- by-step
procedure such as:

i. Check the entire policy for accuracy

ii. Prepare the policy and the policy wallet, if available
iii. Telephone the client for an appointment
iv. Thoroughly prepare for the delivery interview
v. Congratulate the client for purchasing the insurance
vi. Explain the features, advantages, and benefits of the policy. Relate all benefits to the
client's actual situation using names of family members, motivational stories, etc.
vii. Prepare the client for the next sale. Remind the client of the needs that have not yet been
covered. Tell him or her of the need to periodically review these
viii. Commit sincerely to the client's service. Tell the client we will contact him / her regularly
and that he / she should call us immediately if there are any questions or problems
ix. Ask the client for referred leads

10. Step X: Commitment to service

Service on the part of the agent is an integral element of the sales cycle. Essential to a
commitment to service is a structured program for maintaining contact with our clients. Such
a program could consist of:

a) Conveying clearly

At the time of the policy delivery, we need to make a service commitment to our client. We
should tell the client that at least once a year we will call to carefully review his / her
insurance program. Many good agents set the exact date for this service call before leaving
the delivery interview.

b) Committing to continuous contact

Throughout the year a good agent should keep in touch with the client in as many ways as
possible. The agent may want to send greeting cards on birthdays, wedding anniversaries,
etc. A small gift that is personal and useful may be sent from time to time. Newspaper
clippings, insurance related items, picture postcards when on trips, are all tokens of the
agent's thoughtfulness and may be sent to the client on a random basis.

c) Annual service review plan

At least once a year, one must schedule an annual service review with the client. We should
schedule this service call well in advance. During the annual service review, one can take
the opportunity to remind the client why he / she purchased his / her latest policy, may
discuss any needs of the client which are yet unfulfilled, and if appropriate, can suggest to
the client that additional insurance be purchased at this time to cover his / her outstanding
needs.

Persistency

One of the important reasons for having a proper sales and service follow up is to ensure
that the policy holder continues to keep the policy in force through regular payment of
premiums.

Definition
Persistency may be defined by the percentage of policies / premiums introduced in a certain
year that have been renewed in subsequent years.

It is observed that most policies which lapsed and are not renewed do so within the first
three years. When policies lapse the company loses, because the heavy costs that have
been incurred at the time of acquiring new business may not have been recovered. More
significantly, low persistency is also often a symptom of dissatisfaction and loss of
confidence of the insured with the insurer. If the agent does not take care of his or her client,
both during the sales and post sales stages, such dissatisfaction can soon lead to loss of
credibility of both the agent and the company he or she represents. Hence it is very
necessary to carefully monitor persistency rates as it is a sure sign of the health of the
company.

The importance of continuous service cannot be overemphasised. It is one of the critical

keys to high persistency. We, particularly in insurance sales, always need to remember that
while our purpose is to provide a need based solution to the customers we must also
sincerely commit to a continuous service that cannot be matched by any other competitor.

​THANK YOU​ :)