Insurance is a method of protection against risk. It works on the principle that clients, or policyholders, pay sums of money (premiums) to an insurance company, which invests the sums collected and gives the customer a policy- a written statement detailing the amount payable in the event of a claim. Money to pay claims is acquired by investment and by the fact that some claims will never be made. Insurance is in fact a sophisticated form of gambling.
Most people paying for accidents or travel insurance, for example, never make a claim. Their money is there to pay out to those who do. Some policies, however, have high claim rate. In some cases such policies experience about 100% claim rate. An example is life insurance, which is paid in the event of death or, the policy holder is paid an agreed sum after a certain number of years.
Insurance companies are of two types. The first type is the mutual company owned by policy holders. The second type is made up those listed on the stock exchange, which must make profits for their shareholders.
The following pages cover most careers in insurance companies. Although these jobs exist in every insurance company, exact job definitions may vary from company to company.
Agents bring in new business by selling insurance to customers. They may act on direct request-that is, a customer has contacted the company and requested information-but more often they are responsible for creating business by identifying prospective customers and persuading them to use their company. They are frequently given targets to reach in the form of new contacts made and sales agreed.
Agents make contact with potential customers. They may do so following a direct request or by cultivating links with professionals (such as bank managers, estate agents, and lawyers) who may be encouraged to refer likely clients to them.
They may call on clients in their homes or more often, telephone or write to them. The next step is to persuade potential clients to make an appointment to discuss insurance. If successful, they explain the terms and benefits of their policies, and if they close a sale, help clients to fill in the forms.
Good agents always look for further opportunities. For instance, if they have been invited to discuss life insurance, they may ask whether the client has thought about retirement income or a policy to cover the cost of their children’s education. Some offer to undertake a complete financial assessment and recommend the appropriate type of insurance and savings plans.
Agents also maintain contacts with their established clients in order to alert them to new types of policy and to create further sales opportunities. They have to a great deal of paper works and input all details of clients and transactions unto computers. Although they may be based in offices or works from their own homes- agents spend most of their time visiting clients. Their hours are irregular and involve a good deal of evening and weekend work. All agents need a complete and thorough understanding of their company’s products and they must stay up to date as new ones are introduced.
SKILLS AND PERSONAL QUALITIES
- Attention to detail
- Business sense
- Communication skills
- Computer skills
- Flexibility and adaptability
- Good with people
- Technical knowledge
Training is mainly on the job- learning from experienced agents – and attending short courses on product knowledge and selling skills. Agents are most often appointed in their twenties and thirties following experience in other areas of insurance work or in sales.
There are examinations, set by professional bodies in most countries and study for these is part time. In some countries, there are regulations governing minimum qualifications for agents. Examination subjects usually include life insurance fundamentals, investment business law, finance, pensions, taxation, and trusts.
There are opportunities to work for companies that cover all types of insurance risks, as well as for those that specialize in only one type, such as life insurance. Openings exit in most areas, since customers are usually visited at home or at work. Employment prospects are expected to show some growth. There are always new openings since staff turnover is high. Some agents are paid a fixed salary plus commission on sales made. Others are paid on a commission-only basis. In terms of promotion, agents can progress to managing an area or regional insurance sales team or they can move into other types of insurance work with their companies or a rival company.
Insurance brokers form a link between clients who wish to take out insurance and the insurance companies who provide cover. The clients of insurance brokers could be individuals who wish to cover a moderate risk, such as a car or a house, or companies needing to insure very large risks, such as business premises and stock.
The job of an insurance broker is not unlike that of an agent, but there is one essential difference: brokers are independent – that is, an insurance company does not employ them. Their duty is to shop around between insurance providers and find the best policy for their clients. They have a completely free choice as to which provider to approach. Brokers must put the interest of their clients first – even though they receive all their earnings as commission from the insurers with whom they successfully place business. In some countries, it is illegal not to do so. If, for example, it can be successively proved that brokers have not given their clients the best advice in order to earn a higher commission, they could lose their license to work.
Brokers must first establish exactly what cover their clients require. They may, if they feel it necessary, advise an increased amount. From their knowledge of the different insurance providers, they are normally to estimate for the client exactly how much a policy would cost and can often quote on the spot from companies that charge standard prices. If the risk to be insured is unusual or complicated, they may have to approach several different underwriters for quotations. This could involve giving full written details of the risks, arranging for a valuation, and including documentary and perhaps photographic evidence. When insurance brokers have obtained a number of quotations from insurers, they return to the client and offer advice on which one to accept.
Sums insured are huge, so no single underwriter accepts more than a percentage of the risk. And sometimes, this may be as low as half of one per cent. Brokers, therefore have to persuade many underwriters to accept varying proportions of the risk until they have full cover. They then produce o policy documents that each underwriter signs. They also have to keep records, maintain contact with existing clients, and develop new business.
Some brokers specialize in different types of insurance, for example, property, marine or fire. Other brokers provide a more general service. The big divide is between life insurance (or assurance) and all other types of risk referred to as property and casualty in some countries. Although brokers are based in offices, they may spend at least half of the week out of the office, visiting clients. If they negotiate policies for clients with overseas interests, they may travel abroad as part of their job.
The usual method of training is from within a brokerage firm. The length and type of training varies. Large companies offer structured training and give their trainees experience in all types of insurance. Many brokers are, however, only small organisations and trainees may be expected to take most of the responsibility for their own training – by working closely with experienced brokers.
All insurance brokers need to pass examinations. These are a legal requirement before they may practice. The examinations and regulatory bodies are similar to those described under Insurance agent.
Employment prospects vary dramatically from country to country. There are in some countries, for example, more than 4000 broken firms. Some of these may have several thousand employees and offices in several countries, while others will employ less than 10 people. In the U.S.A. alone, nearly half a million people hold licenses to work as agents.
Job prospects are growing, since more people perceive a need to insure their property and lives. Brokers in large companies may be promoted to head a team of brokers or a department. There are also opportunities for self-employment.
A DAY IN IN THE LIFE OF AN INSURANCE AGENT/BROKER
The people involved in the insurance industry profess that they provide security for a living, since their product is financial protection in event of a crisis or emergency. This protection is always in demand, and the insurance industry in most countries, is thus one of the nation’s largest employers.
Seventy percent of them are involved in administrative or sales posts in three main areas: life, health, property and liability. The life insurance agent collects monthly or yearly payments from a policyholder, if the policyholder dies while covered by the policy, the designated members of his family receive a substantial sum of money.
Sometimes life insurance agents arrange for more creative benefits, such as college tuition payment for children. Ensuring proper coverage for hospital and doctor visit is the domain of the health insurer, who most likely works for groups of employers rather than soliciting clients among the general public. Some health insurers are employed by government to enforce medical policies. Finally, property and liability agents insure instances of damage done both to and by their policyholders. They must also be fluent in the world of health insurance since they cover workmen’s compensation; an employee injured at work will deal with this agent rather than a health insurance agent.
Agents work for one insurance agency, whereas brokers work independently and sell policies through many agencies. Beyond this distinction, however, agents and brokers fill many of the same functions. Each meets with potential clients and advises them on the most appropriate coverage. When claims are made, they have to settle the claim equitably between the client and the agency.
Agents and brokers can be salaried employees of an agency, or more likely, work partly or fully on commission, they must spend quite a bit of time networking and finding new customers. Some large agencies cover all areas under one of the three divisions, while smaller ones specialize in one area – car insurance – for instance. Besides keeping up with customers and courting new ones, insurance agents and brokers have administrative tasks to do, such as keeping records of sales. Lucky and successful agents will have a staff to handle these matters.
PAYING YOUR DUES
National and other regulatory bodies must license life and health insurance agents and brokers, which means passing an insurance examination. The National Association of Security Dealers or the Securities and Exchange Commission must also license agents who sell investment-oriented policies. While a degree is not necessary for these positions, many agencies are seeking well-educated applicants, and a degree is an especially good idea if you want to advance to managerial positions. Some agencies even offer training programmes for undergraduates, in the hope that the students will work part time while in school and become full members of the company upon graduation. Some of these programmes even provide tuition reimbursement for students employed with their agencies.
Occasionally insurance agents have dual professions – some proper insurance agents are also real estate agents, for example, Field representatives attempts to generate new business for agents and brokers. They conduct and attend insurance conferences in order to remain fluent in the latest topics in insurance. At times field representatives will educate insurers about advancements in the field.
The underwriter, who has the stressful task of reading applications that are submitted by agents to determine whether the agency should accept the risk a particular client presents, holds the most prestigious title in the insurance industry. Underwriters depend on studies done by actuaries that determine levels of risk. Insurance adjusters are also players in the industry. When an accident occurs, an adjuster visits the site to assess the damage and determine the funds the insurer will award.
PAST AND FUTURE
The concept of insurance has been evolving, as long as there have been communities. Thousands of years ago, for example, a form of insurance began in China when people shipped goods across the sea in sometimes – hazardous conditions. Boat owners began putting a little bit of each owner’s cargo in every boat, so that if one boat sank, each owner would be sure that most of his products would still reach the shore. When European settlers came to America, each member of the community would help if one person’s house burned down.
Pitching in to help rebuild someone else’s house, a community member was insuring that he would receive help if he suffered a similar loss.
As society became enlarged and more complex, insurance began to take the strictly monetary form we are familiar with today. Now, a person pays one amount, called a premium, to insure that if he falls victim to disaster he will be protected – at least financially. The agency charges the client a fraction of the rebuilding cost and is able to pay for any reconstruction by using the premiums of those who do not ever suffer any losses. The insurance industry is continuing to grow at an average pace. The public’s growing concern for security, an elusive concept that money seems to provide in an increasingly fragmented society, has fuelled a rise in the need for insurance providers. Product liability insurance industries continue to grow as people purchase more advanced home technology.
Changes seem to be ahead: insurance may become more complicated and competitive as healthcare financing is rearranged, and banks may start underwriting insurance policies previously drafted by agents. Those working in insurance now have better than average chances for advancement into newly developing positions.
QUALITY OF LIFE
Insurance agents are often frustrated in the beginning of their careers. They are just learning the ropes and do not have many clients. There is a lot to learn. Progress seems slow, hours are long, and paychecks are usually small.
Those agents that remain at this time find that they are working more hours to generate even greater numbers of clients. They are relieved by the similarity of the position and enjoy seeing the occasional high paycheck.
Many agents break away from their firms to become independent brokers. Others seek advancement by gravitating to the field of underwriting or becoming an actuary or adjuster.
FOR FURTHER INFORMATION CONTACT:
Chartered Insurance Institute of Nigeria
27 Lagos Street,
P.M.B. 1053 Ebute-Metta
Tel: 4705512, 58711453