DRIVERS OF HIGH PERFORMANCE SALES FORCE: A STUDY OF SELECT CLUB MEMBERS OF LIC AGENTS

A.RAMESH

SR ASST PROFESSOR VIGNANA JYOTHI INSTITUTE OF MANANGEMENT,

HYDERABAD, TELANGANA

INTRODUCTION

Life Insurance industry

India's life insurance sector is the biggest in the world with about 36 crore policies which

are expected to increase at a compound annual growth rate (CAGR) of 12-15 per cent

over the next five years. The total market size of India's insurance sector is projected to

touch US$ 350-400 billion by 2020 from US$ 66.4 billion in FY13. Life Insurance

Corporation of India (LIC) was established in 1956, (Life insurance industry was

nationalized by the act of parliament in 1956) with the aim of distributing life insurance

widely and mainly to the rural areas to reach all insurable persons in the country, and

give them adequate financial cover at a reasonable cost. Life insurance industry was

liberalized in 1993 (currently over 23 players) so as to increase life insurance density

and penetration of the country. However, LIC continues to be the dominant player and

market leader. LIC also ranked among “Top-10 Most Trusted Service Brands in India”

and was voted as No.1 Most Trusted Insurance Brand in the ET Brand Equity-Nielson

Survey-2013.  

Life insurance agents & Club Membership

Typically, becoming life insurance agent is considered as last resort among unemployed

youth as selling profession is not preferred. Life insurance agent is persona non grata in

Indian society. But thanks to competition and intense promotion efforts due to

advertising and internet technology ,increasing uncertainty and longevity, the need to

save, launch of innovative hybrid products ( like ULIP) the attitude towards life

insurance and agent has drastically changed in the recent decade. But being LIC

agent can also be quite lucrative as proved by Bharat Parekh’s (LIC Agent) annual

income is over Rs 4 crore, around five times more than the Rs 87 lakhs that LIC

chairman DK Mehrotra in 2012.1

  

Life insurance is typically complex and high involvement product, emphasizing the need

for effective personal selling. The old adage “life insurance is not sold but bought” also

underlines the need for relationship selling and customer orientation. Life insurance

Agents continue to be major channel for selling life insurance and LIC has formidable

agent strength of nearly 13 Lakhs. Although agents are the employees of LIC still they

constitute the back bone generating maximum business for the organization. The reach

of LIC in terms of branches and offices combined with agent force gives LIC a

sustainable competitive advantage over its competitors. LIC has developed a unique

system of incentives and perks to enhance agent’s performance. Club Membership is

the recognition bestowed upon the agents to increase their status in the society and in

the Corporation. The concept of club membership was started in 1971 and new clubs

were formed and rules are revised over a period of time.

To inculcate professionalism in agents, to motivate them for higher output and

consistency of business, and deliver quality service to policyholders and to accord them

a higher status in the organization and society, led to the formation of club memberships

at six levels. This is a landmark step to raise the status of the profession of life

insurance agent in India. LIC also conducts training to upgrade skills and knowledge.

Club membership based on business performance:

a. Distnguished agent club member

b. a.Branch manger’s club Member

c. b.Divisionalmamnager’s club Member

d. c.Zonal manager’s club Member1 http://articles.economictimes.indiatimes.com/2013-05-15/news/39282224_1_lic-agents-dk-mehrotra-life-insurance-corporation last visited on 7/4/2015

e. d.Corproate club Member

A slew of bnefits are provided to them such as (Office Allowance to maintain your own

office,Telephone/Mobile bill reimbursement.Reimbursement of Sales Promotional Gift

items,Interest free advance for purchase of Car/Motorbike,Interest free advance for

purchase of office equipments,nterest free advance for Training.Interest free Festival

Advance.Housing loan at concessional rate of interest. etc).The total monetary

equivalent of all above benefits ranges from INR 5,500 to  INR 5,50,000, depending up

on level of Club Membership. There is a minimum amount of business they have to do

every year, to maintain their status as agents on LIC's records. Agents are organized

into a hierarchy of clubs - at the branch level which is the lowest, then the division, the

zone and finally the chairman's club. Movement from one to the other depends on the

amount of business procured. The criteria is commission earned on new and existing

policies and no of lives covered in force and no of lives covered. One senior LIC

agent claims that 80% of LIC's business comes from the top 20% of its agents. Club

Year is from1st Sep to 31st August.

Life Insurance Corporation of India (LIC) has topped the company ranking list of the

Million Dollar Round Table (MDRT)2 in 2014.The ranking has 6,730 MDRT members.

It has now been decided by LIC to encourage more agents to join this esteemed group.

LIC as the aim is to achieve 13,000 members this calendar year. M.D.R.T. is for one

Calendar Year.

For criteria see Table 1

2Founded in 1927, MDRT claims to be a “an independent association of more than 42,000 of the world’s leading life insurance and financial services professionals from more than 470 companies in 71 countries”.

Table 1- Criteria for Club Membership

Chairman club Zonal DM Branch

1.Minimum net lives for

entry/continuation in

particular year

40 30 20 15

2.Net lives no of lives or no

of lives in force in the years

130

600

100

400

80

250

50

150

Source- Table developed in discussion with the club members

To declare a club an agent should qualify for the “Qualifying Year” and “2 out of 3 years”

preceding the Qualifying year or continuously for 3 years, inclusive of Qualifying

Year.Ex: For Club Year 2014-15, the qualifying financial year is 2013-14

Changing landscape of personal selling and key influencers

Given the nature of the complex and high involvement life insurance product, diverse

nature of customers from well-informed and demanding customers to less

knowledgeable customers, calls for relationship selling .The advent of internet

technology and rising competition India requires high customer orientation in life

insurance industry.

Personal selling is essential to achieve success for firms operating in competitive

environment. (Anderson 1996, Baldauf and Cravens, 1999).There is a role transition

from sales generator to relationship builders with the customers. (Weitz& Bradford,

1999, Wilson 2000, Ingram et al, 2001)

Studies by (Williams and Attaway 1996) indicate the customer oriented selling leads to

establishment of customer relationship. Producing the best product is not sufficient and

it requires effective selling and emphasizing the need for salesmanship.

Training may increase salesperson’s performance (Anderson et al. 1995) and customer

orientation (Flaherty et al, 1999)

There are several variables such as motivation, sales aptitude and role stress, job

satisfaction, leader influence (Churchill et al. Corner and Dubinsky 1985) found to

impact sales performance.

Peak performance is attributed to additional work activity done by sales person and is

beyond the call of the duty. The performance culture nurtures peak performance. It calls

for discretionary effort. Internal marketing, internal customer satisfaction is and product

support are essential for high performance sales (Steven, J Skinner 2000).

Operational effectiveness in sales is possible with superior products, marketing support

and technology. Jerome et al). (Strong 1925) emphasized that personal selling

strategies should aim at achieving customer satisfaction and purchase.

Customer orientation

A customer is the most important visitor on our premises. He is not dependent on us.

We are dependent on him. He is not an interruption of our work. He is the purpose of it.

He is not an outsider of our business. He is part of it. We are not doing him a favour by

serving him. He is doing us a favour by giving us the opportunity to do so.”3

Customer oriented also involves low pressure selling (Bursk 1947) and need

satisfaction /problem solving approaches (Gwinner 1968)

Conditions for customer orientation (Robert Axe and Bathan A Weitz 1982)

a. Complex buying factors

b. Sales person can offer range of alternatives

c. Repeat sales & referrals are important

d. Sales people has cooperative relationship with customers

These conditions are prevalent in life insurance industry in India.

3 Mahatma Gandhi In a speech in South Africa in 1890

Robert Axe and Burton A weitz (1982) have defined a scale “SOCO- Selling orientation-

customer orientation”. It consists of two components 1. Relations (the degree of long

term and cooperative relationship with customers) 2. Ability to help (product fit, support

by company, internal marketing and training, ability to spend time with customers, trust,

customers rely on sale persons knowledge and skills

Customer oriented selling involves sales people preaching the marketing concept at the

salesperson buyer interface (Saxe and Weitz 1982)

World class selling in B2B marketing

Sales performance is combination of outcome sales performance (targets, volumes, and

sales revenues) and behavioral sales performance.

(Stevens and Kinni 2007) have identified seven factors that determine B2B customers

believe that define world class sales person

1. Personally manages customer’s desired results 2.Understands customers business

3. Act as customer advocate 4.Has knowledge of applications and solves customer’s

problems

5. Easily accessible and innovative in response to customers’ needs

 Gaps in the study – To our knowledge, the studies sparse in the domain of high

performance sales force in Indian life insurance industry.

 Objectives of the study – The study attempts to understand the key drivers of

performance in terms of key dimensions (sales strategies, segments and relationship

building). The study also attempts to develop conceptual models for understanding the

above mentioned aspects of high performance sales force in life insurance industry.

Methodology– The study uses qualitative research using depth interviews to gain

insight into key drivers of high performance sales force. The study is restricted to

Hyderabad city and only to LIC. The manual coding is done to identify the dimensions.

Given the paucity of time the no of respondents contacted and interviewed: See Table 2

Table 2 – Profile of the respondents

No of chairman club

members

interviewed

No of divisional club

members

interviewed

No of MDRT

Members

interviewed

(these members

also chairman and

zonal club

members)

10 10 10

Male 5 5 5

Female 5 5 5

Some members have graduated linear progression from branch to Divisional; some

embers reached the respective club membership directly for the first time.

The findings from the study:

Business development strategies /sales strategies

From the depth interviews, it was observed that most of the customers rely on

references and centers of influence (union leader, teacher, parents etc) who may be his

friend or customer for new business. They achieve the targets, given the large

established client base developed by them over the years. The agents try to pitch new

products for the existing customers depending on the need of the customer. Agents also

do cold canvassing and convert walk-in customers. Agents also visit government

employees whenever the pay scales are revised or DA is increased. April to June is

lean periods (customers postpone their financial commitments, summer vacation for

children and schools start in March and they incur expenses) and peak period is from

December to March (used for Tax planning). Agents also mee

t professional group members (doctors, architects etc).Agents plan and control their

operations on their own to achieve targets. Cold calls are used to lesser extent as they

have established large customer base. Most of the club member agents maintain

database of customers and use it for planning on daily and monthly basis.

Some of the comments from chairman club members:Service and trust are key to develop prospects from existing customers.

We try to sell new products to existing customers

We sell products to other qualified and eligible family members

The customer’s base developed over the years puts in good position to achieve targets

We target some high income customers

We rely on middle class mass segment

Divisional club members of agentsSometimes we also do cold calling

We use centers of influence to reach out more number of customers

We get references from existing customers

I try to meet 5-10 new customers per day

I visit government employees whenever pay scales are revised or increase in DA

We also sell to professionals

We also try to meet and sell to NRI AND HNI customers

Even small premium customers important to us

We try to meet and service customers on Saturdays and Sundays

MDRT club membersI try to rely on high income professional groups (doctors)

I try to meet NRI AND HNI customers though references

We use centers of influence to reach to more customers

We service small to medium premium size customers

Quality of service is important

Sometimes we cannot make any deals and we should not lose patience

I make three calls to prospects; if there is no response else I drop,

Based on the above insights we develop the model for business development

strategies: see Figure 1 for business development strategies and Figure 2 for

market segments

Methods for new business

Prospects Cold calls Walks in at agents

office

Existing customers

Cross sell Referrals ( friends,

relatives

Centers of influence,

sell to other family

members

Figure 1 Market segment source – developed by the author Source – developed by the author

High premium Medium premium

Premium segment Popular – Mass

segment

High end – super

Premium segment

Low end segment ( low

premium)

Figure 2-Market Segments

High vo

low vol

Market segments

Market segments may be classified into four segments based on volumes of customers

and premium amount. MDRT members rely predominantly on premium segment, and

they may some super premium, customers in their kitty. While all the Divisional and

chairman club members rely on popular and premium, and low end segments. (In the

order)

Relationship building and social bonding:

The following observations emerged from the depth interviews:

The agents render desirable and essential services such as (nomination changes,

premium collection, loan, policy surrender and maturity). The quality of the service leads

to forge relationship and gain trust of the customer. Sometimes the agents render

service, beyond the call of the duty, such as visiting them at odd hours etc. Agents over

a period may become advisors and even attend to the customer’s emergencies. Agents

visit their customer homes for official purpose and sometimes attend functions. Agents

exchange greetings though SMS.

Some comments from the club members of the agent: We attend even their emergencies- MDRT and chairman club member

We are part of the family for some clients - chairman club member

We visit their homes- MDRT and chairman club member

We are invited to their functions- divisional club member

We go beyond the call of the duty and address any other problems and offer advices

I do careful analysis of his needs and advise accordingly

I offer excellent post sale services to gain trust and get references – chairman club and

Divisional club member of agent.

I remind them that they have to pay premiums and go for premium collection

Some elderly people sit in our offices to pass time and later give references

: Based on the above insights we develop the model see Figure 3 .The relationship

building comes from strong customer orientation services and social equity.

Official Personal

Relationship building approaches Figure 3 Source – Developed by the author

Company support and internal marketing

Beyond the call of the duty Becoming advisor for other issues

Discretionary effort attend emergencies Ex- Going to customers at odd hours

Send sms greetings

Attend events

Essential and desirable customer personal visits Support Services

Loan, policies surrender, maturity,

Nomination change, pre sales need

Identification

It was observed that agents take pride in their company (LIC) and firmly believe that

because of good products and marketing, training support they are able to achieve their

targets. The reward system and internal competitions held every month also motivates

them. LIC gives the list of customers from whom premiums have to be collected and this

act as good database for planning their effort. Some members get support from branch

managers. Agents believed that competition has increased marketing effort and internet

technology also helped to spread life insurance education and quality service to the

customers (online payment etc).

Some comments from club members:I take internal competitions very seriously

I attend training programs regularly conducted by LIC

I attended LUGI programs on my own expenses

LIC is a trusted brand and has good product portfolio

Attitude and motivation Most of the agents have more than decade of experience and have high vocational self

esteem. They believe persistency in efforts and patience. They plan daily and monthly

basis to achieve the targets. They are motivated to become club memberships because

of monetary benefits and esteem needs.

Some comments from club members:I am doing service to society chairman club and MDRT MEMBER

The need for life insurance has increased manifold compared to yester years

Club membership is great achievement- Divisional club member

Life insurance selling is a concept selling- Chairman club member

The club membership challenges us and gives out to deliver best – MDRT member

Based on various key dimensions, (business development strategies, relationship

building and customer orientation) the model is proposed see Figure 4

Sales strategies /Business development strategies

High performance

Commissions earned

Premiums collected

No of lives in force

Mediating variables

Customer orientation & Relationship building

Large Customer base

Figure 4-Model of high performance sales force in life insurance - Source: Developed by the author

The club members of agents adopt different segment strategies but involve customer

orientation and eventually build long relationship with the customers. However these

emerge as part of the process and may be considered as mediating variables. This

eventually results in development of large customer base, which is leveraged for getting

renewal premiums and referral customers. The high performance is not possible without

internal marketing, hence these variables (ex- good product, training, and customer

support) are considered as moderating variables.

Conclusion

Customer oriented selling approaches and diverse selling strategies are required to

achieve high performance at club memberships. Agent develops strong and large

customer base over the years, before becoming club members, which becomes useful

to them for generating business and achieving targets.LIC Agent club members are able

to achieve sales performance and build strong social relationship with customers. The

sales strategies adopted differed from MDRT to club members of LIC. But the sales or

business development strategies do not significantly differ across Chairman and

Divisional club members, although priority of market segments chosen may defer.

Agents or club members have their own self planning and control mechanisms to

achieve targets, which are quite exemplary in these days of high performance sales

driven organizations. High performance culture and internal marketing are prerequisites

to high performance of sales force and the onus of it rests on the organization. Agent’s

Moderating variables

Internal marketing: Good product, Sales training, Promotion support, customer support

skills and competencies need to be cultivated to discharge their duties effectively

towards policyholders and also geared towards high performance. Some aspects of the

world class selling in B2B may also be related and applied to B2C especially in life

insurance selling. Conceptual models developed facilitate understanding of the high

performance sales force across several key dimensions. In the days of technology

based buying, life insurance buying in India, perhaps stands tall with high degree of

social and relationship based selling. This underlines the need for personal touch in

addition to technology. The high performance sales model can be quantitatively tested

for further research. The support systems required for high performance can also be

explored for further research (training needs, technology etc).the study can be extended

into high performance sales force of private life insurance organizations and extended

to other club members of LIC.Customer perception of high performance sales force

and service quality or degree of high pressure and low pressure selling tactics, can also

be examined for further research. The study makes modest contributions in gaining

insight into drivers of high sales force performance which can be used to motivate the

other members and assist in planning the systems for internal marketing.

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