Exploring Need-based Sales Model For Individual Life Insurance Distribution

Individual life insurance, started not long ago in China, has grown from nothing to a strong force in the financial sector, from insignificant to an important player in the market. Individual life insurance distribution started from 1992, when individual tied agency has been introduced into China by AIA Assurance. Over the days, bank distribution (or bancassurance), telemarketing, online marketing and brokers and independent agencies have been emerging and gaining momentum. However tied agents still remain the most import distribution model in the Chinese market given its scale, premium product quality, shares in insurer book of business, and contribution to insurer profitability.Individual tied agent model is a product orient sales model as it sales through product pushing by selling to all consumers the same product without giving heed to consumer needs. This model employs individual tied agents, who are captive agents that affiliate to the insurers and that cannot provide meaningful options. In addition, the sales force is organized in pyramid structure that embeds inhabitant impulse to grow size rather than improve professional skills. Such model cannot meet the needs of increasingly sophisticated consumers, who requires comparative shopping and professional advice services, in particular the needs of people in affluent coastal regions. In addition, the massive obstacles that resulted from product driven sales jeopardizes the efforts to professionalize the sales force, resulting in low income, low integrity, difficulties in recruiting, low social esteem and low service levels, hindering the growth of the entire insurance industry.The solution lies on rolling out need based sales models that involves need based consultative sales approaches, executed by independent agencies or broker channels that organized in professional organization focusing on quality improvement. Need based sales model is imperative by the market development, meeting consumer needs, and professional improvement of agents, as well as strengthening competitiveness of the life insurers. This article explains what it means by individual life insurance sales model and analyses problems in the Chinese individual life insurance distribution. Based on these, it explores international best practices in the UK, US and Japan, before pointing out that need based individual life insurance sales model is what it takes to truly satisfies consumer needs, improving insurer competitiveness, sales people productivity and efficiency, and achieving win-wins for insurer, sales people and consumers.This articles takes its insights from a broker company case, which is a real example in the Chinese market carrying out need based sales model. It explained the company case as well.This article concludes by proposing to insurers and regulators on how to change to embrace an era of need based distribution in China.