Wednesday, 29 June 2016

Relevance of direct selling for life insurance agents in rural India

Like many other businesses before the advent of the internet, face-to-face contact was considered essential in selling a product and the insurance no exception with agents bringing a bulk of business for insurance company. Now, at a time when direct sale of insurance policies by visiting the website of an insurance company or use of comparison websites is picking up because of the internet that eliminates intermediaries like agents, the role of agents, especially in cities and towns with audience comfortable using PC, is redefined. It can no longer be offering and collecting data from clients which can be done by clients themselves through online means. The challenge for agents here is to provide more value-added services by including insurance as part of complete financial planning. This is one of the reasons why Chartered Accountants with IRDA license are in an advantageous position to secure more insurance business because of involvement in preparation of final accounts of clients (statutory auditors are, of course, not allowed to sell insurance policies at the same time to clients under section 144 of the Companies Act, 2013).

Despite big development stories, the fact remains that literacy level in rural India is still low (without going to statistical data). A visit to a small town/village is enough to suggest that a significant section of the population is not in a position to do a research on best insurance products available online and buy by themselves. Micro insurance should continue to be an important theme for farmers, laborers, small retailers, and artisans here. Organizing insurance awareness campaign (exhibitions and fairs), meeting face to face should help add value by agents and brokers, something not possible through the direct portal of an insurance company or comparison websites. Indirectly, this should help address bad reputation that financial agents as a community have earned because of so-called chit (cheat!) funds which have made it difficult to build trust even while selling products from LIC!
Consider Met Grameen Ashray from PNB MetLife. This is a pure term micro insurance plan non-par with a minimum premium Rs. 61, maximum Rs. 1208; minimum sum assured Rs. 5000, maximum Rs. 50000. In the event of the death of policy holder during the Coverage Term, the nominee shall receive the chosen Sum Assured as lumpsum. Example, a person aged 40 years pays Rs. 395 (inclusive of all taxes at the prevailing rates) every year for a protection amount of Rs. 25,000. In a case of death during the Coverage Term of 5 years, his nominee gets Rs. 25,000.
Although very useful for rural populace, such term products are difficult to sell because there is a perception even in educated community that if I survive the policy term, I get zero return. This is a dilemma as life insurance is originally meant to cover risk related with unanticipated death in which case providing financial security to family members, the concept best reflected in term insurance. The good news is that with the launch of Aam Aadmi Bima Yojana by LIC as part of government's social security scheme (effect 01/01/2013) and intensive ads by the government using print and TV media, there is rising awareness towards life and health insurance in rural India. It is for the agents then to carry forward the momentum with their company's offerings through direct selling.


Direct selling skills can be honed by joining as a member of direct selling companies like Amway. For freelancers, joining as insurance and direct selling agent (also called distributors/business owners as in the case with Amway where designated ABO or Amway Business Owner) provides an excellent opportunity to earn while pursuing other freelance activities like writing.

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Thursday, 23 June 2016

4 things to define in project report when it comes to value creation and how online marketplaces like Amazon and Flipkart fare


When starting a new business, a project report (also called business plan) that analyses among other things prevailing market condition, investments required in short-term and long-term, and anticipated risks is crucial. 
Here are the four things to define while preparing project report for your business when it comes to value creation: 
  1. What value your business intends to provide.
  2. To whom your business seeks to provide this value.
  3. What resources/partnerships your business can mobilize to provide the value.
  4. How your business will produce added value. 
The purpose of any business is value creation (be it in a form of product or service), and a good project report should demonstrate how you are going to add value. This will help you in quicker approval of loans from banks/financial institutions. But whether you explore loans or start business with your own capital, project report assists you in a better understanding of where you stand. Employees and other stakeholders have a clearer idea of what the organization strives for with segments like mission and vision statement of the enterprise. 
Let us analyze briefly how marketplaces like Amazon, Flipkart, or SnapDeal fare when it comes to value creation. Enrolling with Amazon as seller means you reap the benefit of showcasing your products to a large number of prospects who visit them to compare before purchasing, something your stand-alone offline shop or online store/website like chumbak.com cannot do. By creating large warehouses, adding a number of employees/ delivery boys to their payroll, these companies are duplicating what traditionally taken care by a pool of retailers, distributors. If there is a slump, Amazon may have to retrench employees/labors bringing unrest to the society. For SMEs, such shock is part of their lifestyle. If I can touch and feel the mobile phone before buying from a retail store that is walking distance from my home, applying online from the comfort of home/office is no big deal. Till recently, it was deep discount/offer that kept the interest of consumers making these marketplaces suffer big losses in the name of creating an initial customer base. These marketplaces boast of allowing consumers to compare products from different vendors, which is nothing new in a traditional offline marketplace with a number of vendors (90% of start-ups are nonsense, have no meaning: KishoreBiyani).
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