GIVEN the stiff rivalry prevailing in our market, getting new business is such an exciting experience to insurers. A lot of work is required as competitors will not easily give up on a business opportunity.
As I discuss this topic I am reminded of a particular client I pursued for a number of years without much success. The customer uses certain tactics I now consider unethical to pay lowest premiums.
When renewal period approaches this customer will supply data and invite insurers to provide quotations. Upon receiving the quotations the customer engages insurers one by one.
He will first request for the best terms particularly on the price from each insurer. After giving the negotiated best price then he will tell you (insurer) of a much lower ‘figure’ that another insurer has given him.
On my second attempt I gave my best terms thinking I have got the business only to receive a call from this customer that I was being invited for a final meeting. I went for this meeting only to be told that I needed to review my quotation because another insurer had offered better price than my quote.
I tried to convince the customer to look at other benefits including the service levels but he was adamant on price, ‘the first and major issue to me is price’ he roared.
I had in mind of the minimum rates provided by the Pensions and Insurance Authority (PIA) which I labored to explain but to no avail. I then decided to leave this meeting by putting my foot down on my best price in compliance to PIA guidelines.
Surprisingly on my way out I spotted a competitor’s vehicle in the car park and saw a familiar face waiting to see this customer.
I was not privy to whatever they discussed but I later on learned that the same insurer I spotted in the car park got the business to my astonishment.
The following year I thought I should give another try hoping tactics had changed but it was the same old story. I then decided to stop wasting efforts on this customer.
I asked myself serious questions; why should a customer play us insurers like that. Are we that desperate or have our standards degraded that low?
I then concluded that this customer was just using bad tactics to reduce price as much as possible. He was able to play insurers probably due to lack of coordination amongst ourselves (insurers).
It seems many insurers are preoccupied with meeting budgets at all cost as the famous maxim goes ‘the end justifies the means.’ While this may be true it is worth noting that insurance is a unique product which is priced on rigorous scientific methods.
Premiums that are collected create a fund or a pool where losses of the unfortunate few are paid by the contributions of the fortunate many. Therefore collecting insufficient premiums means that insufficient resources to the pool which results in a struggle to pay claims or paying losses from other customers pools.
I look forward to a time where insurers will be so much united that the above tactics will be difficult or better still impossible to implement.
In the near future I will be discussing the minimum rates so that members of the public will be weary of ‘desperate’ insurers. A customer should challenge the insurer to justify why they (insurer) are quoting below the minimum rates.
This may sound too theoretical but with more publicity such levels are not insurmountable.
Comments: webster@picz.co.zm or webster_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055
(The Author is a Chartered Insurer with 10 years industry experience).