Questions on the sales management in insurance industry.
Rahau, Loredana ; Ciotea, Valentin Florin ; Ciotea, Margareta 等
1. INTRODUCTION
Insurance present a great importance for the economy of a country
because it participates to the process of creating added value and
because it provides jobs. It also participates in the bid of lending
capital on the financial market intermediary between those insured and
the applicants for loaning resources. We are talking in general about a
process of nonmonetary financial intermediation with positive effects on
the stability of the national currency, because the flows of financial
resources that start from insurance companies to various beneficiaries
do not increase the monetary mass in circulation, they only redistribute it. Insurance Companies influence (positive or negative) the payment
balances of the country when making, in addition to direct insurance,
reinsurance operations because of occurring foreign exchange flows
expressed in the shape of denominated premiums, commissions,
compensation, participation in benefits received or paid, all reflected
in balance of payments. The insurance business contributes to reducing
economic uncertainty and creates the possibility to resume unwanted
interrupted activity as a result of sinister product.
2. BODY OF PAPER
On the world market there is a trend of globalization of the
insurance business, three regions (North America, Europe and Asia)
contributing each about one third of the total gross premiums collected.
On the American insurance market, North America holds first place, but
in South America the insurance market knows a slow development, as it is
strongly affected by economic crisis. The European insurance market
holds the western European and eastern European Markets. The first is
dominated by the markets of industrialized states while the markets of
Eastern Europe holding several sufficiently financial solid competitors
are barely consolidating. Asia is dominated by the Japanese market,
Japanese insurers being considered the most important in Asia, despite
their diminishing market share, as a consequence of American and
European expansion (Cistelecan, 2006).
In the developed countries, the insurance is a market of buyers
with a wide offer of insurance products and heavy competition.
(Petrescu, 2005). Increasing life expectancy of people, the emergence of
web portals that enables comparison of the insured's offers,
efficient risk management of insurance companies are several factors
that contributed to reducing the premium rates and increased interest in
insurance products.
In Romania, the insurance market is in training and constantly
increasing. This is demonstrated by the favorable evolution of
indicators such as the degree of insurance penetration of the economy
and insurance density. The degree of penetration has seen a slow and
constant growth, but is situated at a low level compared with that
recorded in the states of the European Union. Insurance density has
increased every year, also. The insurance is a competitive market, but
most of the specific activities (over 80%) is undertaken by a limited
number of companies (the first top 10 companies). In terms of
geographical distribution, but also the types of insurance products
required, the insurance demand is not uniform. The difference is
manifested between effective demand and potential demand of insurance.
Reviewing offer insurance, we can observe the trend of diversification
of the insurance portfolio, the emergence of specific insurance
products, the increase of quality insurance products offered, the
increase of the professional level of insurance staff.
The products offered by insurance companies must be sold to
potential consumers of insurance (individuals or legal persons).
Purchasers are seeking insurance protection, saving and fruitfulness
through insurance, and the insurance company wants to make a higher
profit. We believe that the satisfaction of the buyer of insurance
products and the insurance company's gain depend both on the
preparation and training of personnel involved in the sale of insurance
and the coordination of insurance. This means that sales management is
vital for the sales activity insurance.
Management of sales is regarded as a process by which the planning,
organizing, directing, endowing with personal and the control of
operations and sales made by sales agents of a company to achieve its
objectives are accomplished (Donaldson, 2001). In insurance, sales
management represents the application of the management process in sales
and takes into account the sales strategy, the specific objectives of
the sale, the sales budget, sales policy and procedures used in these
domains (Cistelecan, 2006).
The hypothesis from we started in this research carried out is
that, in the field of insurance in Romania, sales management features
are compared with other industries.
Primarily, the main factors that determine specificity of the sales
management process in the insurance field are (Vorzsak, 2004):
--the insurance products are non-sought products, which the
consumer avoids to buy, although he is aware that they are needed;
--insurance is a specific non-corporal product and the risk is the
object of any insurance contract;
--differences between the insurance products are hardly notice to
the ordinary consumer;
--the insurance products are too complex to be explained by
advertisements in various media of communication.
Secondly, the management of sales activities in insurance agencies
or other subsidiaries in the territory of an insurance company (offices
or work points) highlights the role of insurance agent in managing its
business. Insurance agencies meet two main functions: the sale of
insurance products and providing services for the insured. If the
insurance contract is not closed, the customer can no longer be served
and it is possible that he may seek the services of another insurance
agency. Therefore, the success of the insurance agency depends on the
efficient completion of the two fore mentioned functions.
Thirdly, sales staff (insurance agents at the various steps of
their career) is the direct link of the insurance company to the
insurance consumers. There are situations when the customer signs a
contract of insurance due to the confidence given by insurance agent.
Why? Because offering insurance products are actually offering promises.
Fourth, if is the case of non-life insurance the classic steps of
the process of selling personal life insurance are being taken in the
private life insurance market several stages are being taken:
prospecting, contact, preliminary discussion, interview and follow-sale,
the insuring of the insurance policy and post-sales contact. If not so
long ago the only concern of the insurance agent was selling, now this
is not enough. Competition in the insurance market, the variety of
insurance products, consumer reluctance for the insurance are some
causes for which the sale activity is only one of the tasks accomplished
by the sales agent now, who is also undertaking the following
activities: prospecting (assumed to discover and contact new customers),
communications (assumed to transmit customer information relative to
products offered by insurance), services (counseling, financial
assistance); collection of information (the agent is collecting
information useful to the society for which he works, draws up at
regular's intervals reports on the visits made and results).
Fifth, in the Romanian insurance practice, we can identify two
sales management systems:
--a top-down, case is which, the management sets long term as well
as short term objectives for the activity of sales, then determines the
ways in which they can be achieved. For each insurance agent is
established, annual and monthly minimum number of insurance contracts to
be concluded and the minimum total annualized insurance premium;
--a bottom-up, when each insurance agent will mention the results
that are expected to be achieved, then these results will be examined,
discussed and reformed at each hierarchical level, until a single global
sales plan is achieved. The aim of the insurance agent is a minimum
number of insurance contracts to be made monthly and annual, increase
and a minimum of the first annualized insurance.
These two sales management systems are similar because the business
planning and long-term measurement results are made at top management
level, but differ in the way they set the targets of the insurance agent
at the individual general and level.
We appreciate that whatever system used, the management of
insurance agency must ensure the operational frame for the process of
management sales, must weigh the weaknesses and strengths, should
provide tools for overcoming the problems that arise, whether they would
mean a more numerous, better prepared personnel. Insurance companies
must carefully determine the specific objectives to be achieved by their
sales agents. These objectives are represented by the number of
annualized gross premium contracts, the value of the contract.
Sixth, training and improving staff involved in the insurance sale
is achieved through participation in courses organized by the insurance
companies with their own trainers. Recruitment and retention of officers
insurance is more difficult than in other areas. To attract
professionals they need, the insurance companies must rethink the system
of recruitment, payroll, training of employees.
In the countries of Central and Eastern Europe we can find that a
growing number of people involved in selling insurance, but this
increase is lower than the revenue growth of insurers' gross
premiums received, which demonstrates a high productivity in the field.
Insurance companies are investing in training of insurance agents
through programs aiming several objectives: knowing the company for
which they work for and identify with it; knowledge of company products;
knowledge of the customer's defining traits, knowing how to conduct
effective commercial presentations, understanding the methods and
responsibilities involved in field work. For the improvement of
insurance personnel, insurance companies may opt for staff training
system (mostly used) or staff training in specialized units. Companies
seek the achievement of efficient management's sales activities.
The effectiveness of insurance products sales may be measured by the
ratio between the number of insurance agents, the number of insurance
contracts sold and the annual average premium of a contract.
The Annual Reports of the Commission of Insurance Supervision
published in Romania until 2006 find that in 2004 the number of
contracts of insurance in force was 9,030,820 in the year 2005 we see a
growth of 17.71% and in 2006 the growth was 20.45% compared to the
situation in 2005. The number of insurance agents (working with a
working card and collaborators) rose from 36,130 in 2004 to 43,260 in
2005 and
45,462 in 2006, namely an increase of 25.82%. If we refer to the
earnings from subscribed gross premiums, then we find a real annual
growth of 17.01% in 2005 versus 2004 and 23.68% in 2006 compared to the
situation in 2005 (CSA Annual Report 2004-2006). These recorded
increases; we believe are a result of improving management of insurance
sales, other factors of influence being the increasing confidence of the
public in insurance and measures to provide information about insurance.
3. CONCLUSIONS
Research carried out on the insurance market in Romania shows that
the management of sales activities is important for the insurance
company, pursues large underwritten gross premiums, insurance benefits
in the smallest amount possible and a profit as large as possible.
The undertaking and correct application of the personal sale
process is vital because insurance has certain characteristics:
intangibility, loss of value through the inflation effect, negative
association, lack of awareness of the need. Achieving proper management
in sales activity involves security: human resources (insurance agents)
appropriate numerically in terms of competence, motivation, hierarchical
control, recognizing that insurance agents constitute the basic
operators in promoting insurance products, business insurance agents
activity is reflected in the management, training and improvement of
insurance agents through specific programmers in the insurance field.
The continuation of this research will be a comparative analysis of
insurance sales management life and nonlife.
4. REFERENCES
Annual Report of the Commission of Insurance Supervision, 2004-2006
collection, ISSN 1841-7256, Bucuresti
Cistelecan, L. (2006). Insurance, Petru Maior University Publisher
House, C.Z.U. 368 (075.8), page 160-165, 191-192, Targu-Mures
Donaldson, B. (2001), Sales management, Codecs Publisher House,
ISBN 973-8060-37-0, Bucuresti
Petrescu, E.C. (2005). Marketing insurance, Uranus Publisher House,
ISBN 973-7765-10-9, Bucuresti
Vorzask, A.(coord.) (2004), Marketing services, Presa Universitara
Clujeana Publisher House, ISBN 973-610305-6, Cluj Napoca
