Many people cannot afford treatment for depression because the either lack health insurance or their insurance does not adequately cover the costs. Coverage varies, and there is no definitive answer to the benefits health maintenance organizations and employer based group health plans provide, according to the American Association of Health Plans.
As most holders of health insurance know, insurance is a contract between two entities, usually an insurance company and an employer. The level of benefits agreed upon by the two parities is the amount paid when a claim is made. Some states mandate minimum or maximum benefit levels for group contracts in their state, usually a specified number of visits or inpatient days per person, year of lifetime. State laws vary considerably.
A person purchasing individual insurance may or may not be offered mental health cover-age, depending on the insurance company contacted and the person’s medical history. The coverage offered will probably have the same deductible/co-payment as the physical health coverage but may have some inside limits on annual or lifetime maximum payments for mental health services.
In 1996 the Mental Health Parity Act was signed into law, but loopholes in coverage exist. According to the Health Care financing Administration, group health plans are not required to include mental health coverage in their benefit packages and at this writing, can set terms and conditions relating to the amount, duration or scope of mental health benefits.
Some states and members of Congress have made efforts to eliminate the disparities is insurance coverage of mental disorders by fighting for equal rights for health insurance coverage of mental ailments, and Congress has been considering legislation that would bar health insures from paying less for mental disorders than for physical disorders.
This is a step in the right direction because as Dr. David Satcher pointed out in Mental Health : A report of the surgeon General equality between mental health coverage and that for other illness is an affordable and effective objective. The Surgeon General’s report stated that when mental health care is properly coordinated by an HMO or a firm specializing in such care, parity causes negligible cost increases.
Medicare pays for a variety of mental health care services, but people must meet certain conditions to qualify.
Monday, May 26, 2008
Saturday, May 24, 2008
Home Insurance
Contract of Insurance
When the insured pays the premium and the insurer accepts the risk, the contract of insurance is concluded. The policy issued by the insurer is the evidence of the contract.
Like any other contract, the contract of insurance is completed when one party accepts the offer made by the other party. The offer usually comes from the proposer and the offer is known as the proposal. Insurers indicate acceptance by the issue of a cover note or a letter of acceptance. In the latter event, the acceptance letter becomes another offer which is accepted by the payment of premium by the insured. Following are the products of general insurance
• Home owners insurance
• Fire insurance
• Marine insurance
• Motor insurance
• Personal accident insurance
What is homeowners insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.
What is in a standard homeowner’s insurance policy?
A standard homeowner’s insurance policy includes four essential types of coverage. They include:
1. Coverage for the structure of home.
2. Coverage for personal belongings.
3. Liability protection.
4. Additional living expenses in the event person are temporarily unable to live in his/her home because of a fire or other insured disaster.
1. The structure of the house
this part of policy pays to repair or rebuild home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of home, it is important to buy enough to rebuild home.
Most standard policies also cover structures that are detached from home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance on the structure of home.
2. One’s personal belongings
Furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance having on the structure of home. So if one has $200,000 worth of insurance on the structure of his/her home, he/she would have between $1,00,000 to $1,40,000 worth of coverage for his/her belongings. The best way to determine if this is enough coverage is to conduct a home inventory.
This part of your policy includes off-premises coverage. This means that his/her belongings are covered anywhere in the world, unless he/she have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance he/she has for his/her possessions. One has up to $500 of coverage for unauthorized use of his/her credit cards.
Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, one has covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if he/she simply loses that item. And there is no deductible.
Trees, plants and shrubs are also covered under standard homeowners insurance. Generally one is covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease
3. Liability protection
Liability covers against lawsuits for bodily injury or property damage that the person or his/her family members cause to other people. It also pays for damage caused by their pets. The liability portion of policy pays for both the cost of defending in court and any court awards—up to the limit of the policy. It covers not just in home, but anywhere in the world.
Liability limits generally start at about $100,000. However, experts recommend purchasing at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. One can purchase an umbrella or excess liability policy which provides broader coverage, including claims against for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 and $350 for $1 million of additional liability protection.
4. Additional living expenses.
This pays the additional costs of living away from home if one can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while his/her home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on house. One can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.
If one rents out part of his/her house, this coverage also reimburses him/her for the rent that he/she would have collected from his/her tenant if his/her home had not been destroyed.
When the insured pays the premium and the insurer accepts the risk, the contract of insurance is concluded. The policy issued by the insurer is the evidence of the contract.
Like any other contract, the contract of insurance is completed when one party accepts the offer made by the other party. The offer usually comes from the proposer and the offer is known as the proposal. Insurers indicate acceptance by the issue of a cover note or a letter of acceptance. In the latter event, the acceptance letter becomes another offer which is accepted by the payment of premium by the insured. Following are the products of general insurance
• Home owners insurance
• Fire insurance
• Marine insurance
• Motor insurance
• Personal accident insurance
What is homeowners insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.
What is in a standard homeowner’s insurance policy?
A standard homeowner’s insurance policy includes four essential types of coverage. They include:
1. Coverage for the structure of home.
2. Coverage for personal belongings.
3. Liability protection.
4. Additional living expenses in the event person are temporarily unable to live in his/her home because of a fire or other insured disaster.
1. The structure of the house
this part of policy pays to repair or rebuild home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of home, it is important to buy enough to rebuild home.
Most standard policies also cover structures that are detached from home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance on the structure of home.
2. One’s personal belongings
Furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance having on the structure of home. So if one has $200,000 worth of insurance on the structure of his/her home, he/she would have between $1,00,000 to $1,40,000 worth of coverage for his/her belongings. The best way to determine if this is enough coverage is to conduct a home inventory.
This part of your policy includes off-premises coverage. This means that his/her belongings are covered anywhere in the world, unless he/she have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance he/she has for his/her possessions. One has up to $500 of coverage for unauthorized use of his/her credit cards.
Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, one has covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if he/she simply loses that item. And there is no deductible.
Trees, plants and shrubs are also covered under standard homeowners insurance. Generally one is covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease
3. Liability protection
Liability covers against lawsuits for bodily injury or property damage that the person or his/her family members cause to other people. It also pays for damage caused by their pets. The liability portion of policy pays for both the cost of defending in court and any court awards—up to the limit of the policy. It covers not just in home, but anywhere in the world.
Liability limits generally start at about $100,000. However, experts recommend purchasing at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. One can purchase an umbrella or excess liability policy which provides broader coverage, including claims against for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 and $350 for $1 million of additional liability protection.
4. Additional living expenses.
This pays the additional costs of living away from home if one can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while his/her home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on house. One can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.
If one rents out part of his/her house, this coverage also reimburses him/her for the rent that he/she would have collected from his/her tenant if his/her home had not been destroyed.
Friday, May 23, 2008
Role of Insurance in Economic Development
For economic development, investments are necessary. Investments are made out of savings. A life insurance company is a major instrument for the mobilization of savings of people, particularly from the middle and lower income groups. These savings are channeled into investments for economic growth.
An insurance company’s strength lies in the fact that huge amounts come by way of premiums. Every premium represents a risk that is covered by that premium. In effect, therefore, these vast amounts represent pooling of risks. The funds are collected and held in trust for the benefit of the policyholders. The management of insurance companies is required to keep this aspect in mind and make all its decisions in ways that benefit the community. This applies also to its investments. This is why successful insurance companies would not be found investing in speculative ventures. Their investments benefit the society the society at large.
The system of insurance provides numerous direct and indirect benefits to the individual and his family as well as to industry and commerce and to the community and the nation as a whole. Those who insure, both individuals and corporate, are directly benefited because they are protected from the consequences of the loss that may be caused by the accident or fortuitous event. Insurance, thus, in a sense protects the capital in industry and releases the capital for further expansion and development of business and industry.
The very existence of risk that is, uncertainty concerning the future, is a severe handicap in economic activities. Insurance removes the fear, worry and anxiety associated with this future uncertainty and thus encourages free investment of capital in business enterprises and promotes efficient use of existing resources. Thus insurance encourages commercial and industrial development and there by contributes to a vigorous economy and increased national productivity.
Present day organization of industry, commerce and trade depend entirely on insurance for their operation, banks and financial institutions lend money to industrial and commercial undertakings only on the basis of the collateral security of insurance. No bank or financial institution would advance loans on property unless it is insured against loss or damage by insurable perils.
Insurers are closely associated with several agencies and institutions engaged in fire loss prevention, cargo loss prevention, industrial safety and road safety.
Before acceptance of a risk, insurers arrange survey and inspection of the property to be insured, by qualified engineers and other experts. The object of these surveys is not only to assess the risk for rating purposes but also to suggest and recommend to the insured, various improvements in the risk, which will attract lower rates of premium and what is more important , reduce the loss potential. For example, burglary surveyors make recommendation in regard to security measures such as better locking system, appointment of Watchman, etc. Engineering surveys play a most useful part in accident prevention as valuable technical advice is provided in respect of plant and machinery.
Insurance ranks with export trade, shipping and banking services as earner of foreign exchange to the country. It helps to earn foreign exchange and represent invisible exports.
An insurance company’s strength lies in the fact that huge amounts come by way of premiums. Every premium represents a risk that is covered by that premium. In effect, therefore, these vast amounts represent pooling of risks. The funds are collected and held in trust for the benefit of the policyholders. The management of insurance companies is required to keep this aspect in mind and make all its decisions in ways that benefit the community. This applies also to its investments. This is why successful insurance companies would not be found investing in speculative ventures. Their investments benefit the society the society at large.
The system of insurance provides numerous direct and indirect benefits to the individual and his family as well as to industry and commerce and to the community and the nation as a whole. Those who insure, both individuals and corporate, are directly benefited because they are protected from the consequences of the loss that may be caused by the accident or fortuitous event. Insurance, thus, in a sense protects the capital in industry and releases the capital for further expansion and development of business and industry.
The very existence of risk that is, uncertainty concerning the future, is a severe handicap in economic activities. Insurance removes the fear, worry and anxiety associated with this future uncertainty and thus encourages free investment of capital in business enterprises and promotes efficient use of existing resources. Thus insurance encourages commercial and industrial development and there by contributes to a vigorous economy and increased national productivity.
Present day organization of industry, commerce and trade depend entirely on insurance for their operation, banks and financial institutions lend money to industrial and commercial undertakings only on the basis of the collateral security of insurance. No bank or financial institution would advance loans on property unless it is insured against loss or damage by insurable perils.
Insurers are closely associated with several agencies and institutions engaged in fire loss prevention, cargo loss prevention, industrial safety and road safety.
Before acceptance of a risk, insurers arrange survey and inspection of the property to be insured, by qualified engineers and other experts. The object of these surveys is not only to assess the risk for rating purposes but also to suggest and recommend to the insured, various improvements in the risk, which will attract lower rates of premium and what is more important , reduce the loss potential. For example, burglary surveyors make recommendation in regard to security measures such as better locking system, appointment of Watchman, etc. Engineering surveys play a most useful part in accident prevention as valuable technical advice is provided in respect of plant and machinery.
Insurance ranks with export trade, shipping and banking services as earner of foreign exchange to the country. It helps to earn foreign exchange and represent invisible exports.
Thursday, May 22, 2008
Effective salesmanship For Insurance business
1. Prospecting
Prospecting may be defined as the art of finding out probable buyers of insurance.
Prospecting is the prime activity on which the entire selling process depends. If a salesman calls on 20 prospects, at least 10 or 12 may grant him a chance to explain how insurance can help them and at least 4 or 5 may eventually buy insurance. Thus it is seen that prospecting leads to calls, calls to interviews and interviews to sales. Prospects are the raw material on which the production of salesman depends; if there is no raw material, there is no production.
Who is a prospect? He will be a person who has a need which insurance can satisfy and who has the capacity to pay the premium. The first task of the salesman is to build up a list of such prospects. There are several methods, and the salesman can use one or more methods suitable to him, these are:
Referred leads: A relative, a friend, satisfied policy holder or even a prospect who has not purchased insurance, may arrange introduction to other persons in need of insurance.
Centers of influence: there are certain persons who command respect and prestige in their own circles. Such persons are secretaries of associations, branch managers of banks, doctors, lawyers, tax consultants, etc. a continuous flow of prospects may be expected through these centers of influence.
Nests: A large business house, an industrial estate, a wholesale market or similar groups form what is called nest. If a salesman gains an entry into these groups, he would have access to a large number of prospects.
Cold canvas: This is calling on a person whom the agent does not know, and to whom he has no introduction. A salesman, who has built up self confidence over a period of several years of experience, uses this method as a routine. Even junior salesman with sufficient self confidence has succeeded in this method.
Policyholders: the existing policy holders themselves are prospects for new and additional business.
The name of prospects should be recorded systematically. The prospects may be classified into different categories according to their insurance need, e.g. householders, small businessmen, exporters and importers,, professional men, trading concerns, contractors, transport companies, manufacturing concerns, etc. this would enable the salesman to adopt the appropriate sales strategy for each class of prospects.
2. Pre approach of preparation for sales talk
Having compiled a list of prospects, the next step is to gather as much information as possible about the prospect, his property, his business, etc. this information will help in identifying the needs of the client and types of covers that he will need, and ascertaining his socio economic background and premium paying capacity.
The information can be gathered from a variety of sources through mutual friends, policyholders, trade associations, the balance sheets of firms, companies etc. the information may be gathered from the prospect himself through s fact-finding interview. In fact, this would place the salesman in a favorable position. The client would consider that the salesman is a professional one who believes in study before sales.
The information that has been secured will enable the salesman to discover the needs of the client, which will in turn determine the type of cover to be offered and the sales talk appropriate for the prospect.
Pre-approach is defined as a complete rehearsal of a sale without the physical presence of the prospect. This means preparation of a sales talk. The sales talk would vary according to the type of prospect and the type of his needs. For example, in selling personal accident insurance, the sales talk suitable for middle class householder would not be suitable for a rich landlord. Similarly, in selling fire insurance, a small shopkeeper would require a particular type of sales talk which will not be suitable for n industrialist. Again, a sales talk which is suitable for a personal accident plan will not be effective for a sale of a fire policy.
Thus, there cannot be a single standard sales talk. The salesman should, there for prepare in advance, basic sales talks for all the situations, and use the right sales talk as occasions demand. This preparation would also include ready answers to all the possible objections which are likely to be raised by the prospect. In short, the pre-approach becomes a complete sales interview without the physical presence of the prospect. A good pre-approach gives the salesman necessary poise and confidence to call on the prospect.
3. Sales interview
The starting point of the sales interview is the preliminary contact or approach. At this stage, the immediate job of the salesman is not to sell insurance but to sell himself. The observations made earlier on the sales personality are relevant in this respect.
A favorable impression will be created on the prospect if the salesman observes certain basic rules. The sales man should fix the appointment in advance, observe punctuality, present a neat and clean appearance with a pleasing smile, and open the interview with greetings to the prospect. The actual sales interview would begin thereafter: through introduction and purpose of calling, he would make himself acceptable.
For reasons already mentioned, it is not possible to give illustration of standard sales interview. However, certain basic rules for conducting an effective interview are dealt with. To start with an interview, it is necessary to explain the basic functions and benefits of insurance in general. This should be followed by pointing out the prospect’s insurance needs and containing the cover available to protect those needs. Briefly, the salesman should explain the risks covered, the risks excluded, the basis of settlement of losses, the claims procedure, and the cost of the policy.
During this exercise, the proposed may be expected to ask questions or raise objections. This is to be welcomed because questions or objections indicate the prospect’s interest in the insurance policy. They also indicate his line of thinking which helps the salesman to adopt a suitable approach to meet the objectives.
Again there cannot be standard answers to objections. The type of questions will indicate the nature of replies to be given. Some of the objections are mere “put-offs” or excuses other objections indicate that the prospect is ignorant of the benefits of insurance or the working of the insurance system.
However there may be real and genuine objections on two grounds: 1. absence of a particular need, and 2. absolute inability to pay. If this is so, it would mean that prospecting and pre-approach have been faulty and it would be wise to give up.
During the salesman interview, the salesman will have to apply motivation. Motivation means making an appeal to the prospect’s emotions rather than his intellect. This can be done by several methods. For example, newspapers cutting of news and pictures of fires, accidents, etc. when shown to the prospect, would move him to action. Real-life situation stories or loses suffered by other policyholders will make him emotionally ready to buy insurance protection.
The conduct of the interview should follow certain other rules. The salesman cannot afford to argue with the prospect. However foolish may be the prospect’s objections, the salesman should not show any trace of irritation and impatience. He should remember that “the customer is always right.” The rule is to agree with the prospect, and then slow politely how he is wrong.
4. Completion
The completion or closing of the sale will follow if the prospecting, pre approach and interview have been done property. The time to close is immediately after the prospect is satisfied that the insurance cover is suitable and desirable. This is the most important stage in the process of selling, when the prospect takes the decision. Too long and too much talk is to be avoided at this stage.
Once the prospect decides to buy, the next step is the completion of the proposal form, if require, and the collection of the premium cheque, if the rate of premium is known. In some cases, the premium will have to be given or confirmed by the insurers. In completion of the forms, the prospect must be guided to follow the instructions of the insurer.
The four stages of the process of salesmanship have been explained. But in actual practice, it may not be possible to draw a definite line between prospecting and pre-approach, or interview and close etc. Salesmanship is not a mechanical process. A salesman deals with people, and no two people are alike or react exactly in the same manner. Over a period of time, the salesman will gain enough knowledge of human behavior to be able to adopt and follow a process of salesmanship suitable to his personality and method of working.
Prospecting may be defined as the art of finding out probable buyers of insurance.
Prospecting is the prime activity on which the entire selling process depends. If a salesman calls on 20 prospects, at least 10 or 12 may grant him a chance to explain how insurance can help them and at least 4 or 5 may eventually buy insurance. Thus it is seen that prospecting leads to calls, calls to interviews and interviews to sales. Prospects are the raw material on which the production of salesman depends; if there is no raw material, there is no production.
Who is a prospect? He will be a person who has a need which insurance can satisfy and who has the capacity to pay the premium. The first task of the salesman is to build up a list of such prospects. There are several methods, and the salesman can use one or more methods suitable to him, these are:
Referred leads: A relative, a friend, satisfied policy holder or even a prospect who has not purchased insurance, may arrange introduction to other persons in need of insurance.
Centers of influence: there are certain persons who command respect and prestige in their own circles. Such persons are secretaries of associations, branch managers of banks, doctors, lawyers, tax consultants, etc. a continuous flow of prospects may be expected through these centers of influence.
Nests: A large business house, an industrial estate, a wholesale market or similar groups form what is called nest. If a salesman gains an entry into these groups, he would have access to a large number of prospects.
Cold canvas: This is calling on a person whom the agent does not know, and to whom he has no introduction. A salesman, who has built up self confidence over a period of several years of experience, uses this method as a routine. Even junior salesman with sufficient self confidence has succeeded in this method.
Policyholders: the existing policy holders themselves are prospects for new and additional business.
The name of prospects should be recorded systematically. The prospects may be classified into different categories according to their insurance need, e.g. householders, small businessmen, exporters and importers,, professional men, trading concerns, contractors, transport companies, manufacturing concerns, etc. this would enable the salesman to adopt the appropriate sales strategy for each class of prospects.
2. Pre approach of preparation for sales talk
Having compiled a list of prospects, the next step is to gather as much information as possible about the prospect, his property, his business, etc. this information will help in identifying the needs of the client and types of covers that he will need, and ascertaining his socio economic background and premium paying capacity.
The information can be gathered from a variety of sources through mutual friends, policyholders, trade associations, the balance sheets of firms, companies etc. the information may be gathered from the prospect himself through s fact-finding interview. In fact, this would place the salesman in a favorable position. The client would consider that the salesman is a professional one who believes in study before sales.
The information that has been secured will enable the salesman to discover the needs of the client, which will in turn determine the type of cover to be offered and the sales talk appropriate for the prospect.
Pre-approach is defined as a complete rehearsal of a sale without the physical presence of the prospect. This means preparation of a sales talk. The sales talk would vary according to the type of prospect and the type of his needs. For example, in selling personal accident insurance, the sales talk suitable for middle class householder would not be suitable for a rich landlord. Similarly, in selling fire insurance, a small shopkeeper would require a particular type of sales talk which will not be suitable for n industrialist. Again, a sales talk which is suitable for a personal accident plan will not be effective for a sale of a fire policy.
Thus, there cannot be a single standard sales talk. The salesman should, there for prepare in advance, basic sales talks for all the situations, and use the right sales talk as occasions demand. This preparation would also include ready answers to all the possible objections which are likely to be raised by the prospect. In short, the pre-approach becomes a complete sales interview without the physical presence of the prospect. A good pre-approach gives the salesman necessary poise and confidence to call on the prospect.
3. Sales interview
The starting point of the sales interview is the preliminary contact or approach. At this stage, the immediate job of the salesman is not to sell insurance but to sell himself. The observations made earlier on the sales personality are relevant in this respect.
A favorable impression will be created on the prospect if the salesman observes certain basic rules. The sales man should fix the appointment in advance, observe punctuality, present a neat and clean appearance with a pleasing smile, and open the interview with greetings to the prospect. The actual sales interview would begin thereafter: through introduction and purpose of calling, he would make himself acceptable.
For reasons already mentioned, it is not possible to give illustration of standard sales interview. However, certain basic rules for conducting an effective interview are dealt with. To start with an interview, it is necessary to explain the basic functions and benefits of insurance in general. This should be followed by pointing out the prospect’s insurance needs and containing the cover available to protect those needs. Briefly, the salesman should explain the risks covered, the risks excluded, the basis of settlement of losses, the claims procedure, and the cost of the policy.
During this exercise, the proposed may be expected to ask questions or raise objections. This is to be welcomed because questions or objections indicate the prospect’s interest in the insurance policy. They also indicate his line of thinking which helps the salesman to adopt a suitable approach to meet the objectives.
Again there cannot be standard answers to objections. The type of questions will indicate the nature of replies to be given. Some of the objections are mere “put-offs” or excuses other objections indicate that the prospect is ignorant of the benefits of insurance or the working of the insurance system.
However there may be real and genuine objections on two grounds: 1. absence of a particular need, and 2. absolute inability to pay. If this is so, it would mean that prospecting and pre-approach have been faulty and it would be wise to give up.
During the salesman interview, the salesman will have to apply motivation. Motivation means making an appeal to the prospect’s emotions rather than his intellect. This can be done by several methods. For example, newspapers cutting of news and pictures of fires, accidents, etc. when shown to the prospect, would move him to action. Real-life situation stories or loses suffered by other policyholders will make him emotionally ready to buy insurance protection.
The conduct of the interview should follow certain other rules. The salesman cannot afford to argue with the prospect. However foolish may be the prospect’s objections, the salesman should not show any trace of irritation and impatience. He should remember that “the customer is always right.” The rule is to agree with the prospect, and then slow politely how he is wrong.
4. Completion
The completion or closing of the sale will follow if the prospecting, pre approach and interview have been done property. The time to close is immediately after the prospect is satisfied that the insurance cover is suitable and desirable. This is the most important stage in the process of selling, when the prospect takes the decision. Too long and too much talk is to be avoided at this stage.
Once the prospect decides to buy, the next step is the completion of the proposal form, if require, and the collection of the premium cheque, if the rate of premium is known. In some cases, the premium will have to be given or confirmed by the insurers. In completion of the forms, the prospect must be guided to follow the instructions of the insurer.
The four stages of the process of salesmanship have been explained. But in actual practice, it may not be possible to draw a definite line between prospecting and pre-approach, or interview and close etc. Salesmanship is not a mechanical process. A salesman deals with people, and no two people are alike or react exactly in the same manner. Over a period of time, the salesman will gain enough knowledge of human behavior to be able to adopt and follow a process of salesmanship suitable to his personality and method of working.
Monday, May 19, 2008
Purpose and Need of Insurance
The business of insurance is related to the protection of the economic value of assets. Every asset has value. The asset would have been created through the efforts of the owner, in the expectation that, either through the income generated there from or some other output, some of his needs would be met. In the case of a factory or a cow, the production is sold and income generated. In the case of a motorcar, it provides comfort and convenience in transportation. There is no direct income. There is normally expected life time for the asset during which time it is expected to perform. The owner, aware of this, can so manage his affairs that by the end of that life time, a substitute is made available to ensure that the value or income is not lost. However, if the assert gets lost earlier, being destroyed or made non functional, through an accident or other unfortunate event, the owner and those deriving benefits there from suffer. Insurance is mechanism that helps to reduce such adverse consequences.
Assets are insured, because they are likely to be destroyed or made non-functional through an accidental occurrence. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. The damage that these perils may cause the asset, is the risk.
The risk only means that there is possibility of loss or damage. It may or may not happen. There has to be uncertainity about the risk. Insurance is done against the contingency that it may happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against.
There are other meanings of the term ‘risk’. To the ordinary man in the street risk means exposure to danger. In insurance practice risk is also used to refer to the peril or loss producing event. For example, it is said that fire insurance covers the risks of fire, explosion, cyclone, flood etc. again, it is used to refer to the property covered by insurance. For example, a timber construction is considered to be a bad risk for fire insurance purpose. Here the term risk refers to the subject matter of insurance.
Conceptually the mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of the members suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to the same risk related to water damage, ship sinking, piracy, etc. those owning factories are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightening, burglary, etc. like this, different kinds of risks can be identified and separate groups, made including those exposed to such risks. By this method, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all.
The manner in which the loss is to be shared can be determined before hand. It may be proportional to the likely loss that each person is likely to suffer, which is indicative of the benefit he would receive if the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid.
A human life is also an income generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disabilities caused by accidents. Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of one’s retirement, when it could be expected that the income will normally cease, the person concerned could have made some other arrangements to meet the continuing needs. But if it happens much earlier when the alternate arrangements are not in place, insurance is necessary to help those dependent on the income.
In the case of a human being, he may have made arrangements for his needs after his retirement. Those would have been made on the basis of some expectations like he may live for another 15 years, or that his children will look after him. If any, of these expectations do not become true, the original arrangement would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks which need to be safeguarded against. Insurance takes care.
Insurance does not protect the asset. It does not prevent it loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It compensates, may not be fully, the losses. Only economic or financial losses can be compensated.
The concept of insurance has been extended beyond the coverage of tangible assets. Exporters run the risk of the importers in the other country defaulting as well as losses due to sudden changes in currency exchange rates, economic policies or political disturbances. These risks are now insured. Doctors run the risk of being charged with negligence and subsequent liability for damages. The amounts in question can be fairly large, beyond the capacity of individuals to bear. These are insured. Thus, insurance is extended to intangibles. In some countries, the voice of a singer or the legs of a dancer may be insured; even through the advantages of spread may not be available in these cases.
Satisfaction of economic needs requires generation of income from some source. If the property, which is the source of such income, is lost fully or partially, permanently or temporarily, the income too would stop. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few, through the help of the fortunate many, who were exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share losses and substitute certainty by uncertainty
.
There are certain basic principles which make it possible for insurance to remain popular and a fair arrangement. The first is the fact that people are exposed to risks and that the consequences of such risks are difficult for anyone individuals to bear. It becomes bearable when the community shares the burden. The second is that no one person should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of as arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental and not the deliberate creation of the insured person.
Assets are insured, because they are likely to be destroyed or made non-functional through an accidental occurrence. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. The damage that these perils may cause the asset, is the risk.
The risk only means that there is possibility of loss or damage. It may or may not happen. There has to be uncertainity about the risk. Insurance is done against the contingency that it may happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against.
There are other meanings of the term ‘risk’. To the ordinary man in the street risk means exposure to danger. In insurance practice risk is also used to refer to the peril or loss producing event. For example, it is said that fire insurance covers the risks of fire, explosion, cyclone, flood etc. again, it is used to refer to the property covered by insurance. For example, a timber construction is considered to be a bad risk for fire insurance purpose. Here the term risk refers to the subject matter of insurance.
Conceptually the mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of the members suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to the same risk related to water damage, ship sinking, piracy, etc. those owning factories are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightening, burglary, etc. like this, different kinds of risks can be identified and separate groups, made including those exposed to such risks. By this method, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all.
The manner in which the loss is to be shared can be determined before hand. It may be proportional to the likely loss that each person is likely to suffer, which is indicative of the benefit he would receive if the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid.
A human life is also an income generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disabilities caused by accidents. Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of one’s retirement, when it could be expected that the income will normally cease, the person concerned could have made some other arrangements to meet the continuing needs. But if it happens much earlier when the alternate arrangements are not in place, insurance is necessary to help those dependent on the income.
In the case of a human being, he may have made arrangements for his needs after his retirement. Those would have been made on the basis of some expectations like he may live for another 15 years, or that his children will look after him. If any, of these expectations do not become true, the original arrangement would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks which need to be safeguarded against. Insurance takes care.
Insurance does not protect the asset. It does not prevent it loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It compensates, may not be fully, the losses. Only economic or financial losses can be compensated.
The concept of insurance has been extended beyond the coverage of tangible assets. Exporters run the risk of the importers in the other country defaulting as well as losses due to sudden changes in currency exchange rates, economic policies or political disturbances. These risks are now insured. Doctors run the risk of being charged with negligence and subsequent liability for damages. The amounts in question can be fairly large, beyond the capacity of individuals to bear. These are insured. Thus, insurance is extended to intangibles. In some countries, the voice of a singer or the legs of a dancer may be insured; even through the advantages of spread may not be available in these cases.
Satisfaction of economic needs requires generation of income from some source. If the property, which is the source of such income, is lost fully or partially, permanently or temporarily, the income too would stop. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few, through the help of the fortunate many, who were exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share losses and substitute certainty by uncertainty
.
There are certain basic principles which make it possible for insurance to remain popular and a fair arrangement. The first is the fact that people are exposed to risks and that the consequences of such risks are difficult for anyone individuals to bear. It becomes bearable when the community shares the burden. The second is that no one person should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of as arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental and not the deliberate creation of the insured person.
Saturday, May 17, 2008
Life Insurance a Basic Need
Life insurance is a contract providing for payment of a sum of money to the person assured or, failing him, to the person entitled to receive the same, on the happening of certain event.
A family is generally dependent for its food, clothing and shelter on the income brought in at regular intervals by the bread winner of the family. So long as the he lives and the income is received steadily, that family is secure; but should death suddenly intervene the family may be left in a very difficult situation and sometimes, in stark poverty.
Uncertainty of death is inherent in human life. It is this uncertainty, that is risk, which gives rise to the necessity for some form of protection against the financial loss arising from death, insurance substitutes this uncertainty by certainty.
Some outstanding advantages of life insurance
1. It is superior to an ordinary savings plans: This is so because unlike other saving plans, it affords full protection against risk of death. In case of death, the full sum assured is made available under a life assurance policy; whereas under other savings schemes the total accumulated savings alone will be available. The latter will be considerably less than the sum assured, if death occurs during early years.
2. Insurance encourages and forces thrift: a savings deposit can be too easily withdrawn. Many may not be able to resist the temptation of using the balance for some less worthy purpose. On the other hand, the payment of life insurance premiums becomes a habit and comes to be viewed wit the same seriousness as the payment of interest on a mortgage. Thus insurance, in effect brings about compulsory savings.
3. Easy settlement and protection against creditors: the life assured can name a person or persons to whom the policy moneys would be payable in the event of his death. The proceeds of a life insurance policy can be protected against. The claims of the creditors of the life assured by effecting a valid assignment of the policy. A married women’s property act policy constitutes a trust in favor of the wife and children and no separate assignment is necessary. The beneficiaries are fully protected from creditors except to the extent of any interest in the policy retained by the assured.
4. Administering the legacy for beneficiaries: It often happens tat a provision which a husband or father has made through insurance is quickly lost through speculative or unwise investment or by unnecessary expenditure on luxuries. These contingencies can be provided against in the case of insurance. The policyholder can arrange that in the in the event of his death the beneficiary should receive, instead of a single sum (a). payment of the net claim amount by equal installments over a specified period of years, or (b).payment of the claim amount by smaller monthly installments over the selected period followed by a lump sum at the end thereof.
5. Ready marketability and suitability for quick borrowings: After an initial period, if the policy holder finds himself unable to continue payment of premiums he can surrender the policy for a cash sum. Alternatively he can tide over a temporary difficulty by taking loan on the sole security of the policy without delay. Further a life insurance policy is sometimes acceptable as security for a commercial loan.
6. Tax relief: for computing income tax (especially in India the Indian income tax act) follows deduction from income tax payable, a certain percentage of a portion of the taxable income of individuals which is diverted to payment of insurance premiums. When this tax relief is taken into account it will be found that the assured is n effect paying a lower premium for his insurance.
A family is generally dependent for its food, clothing and shelter on the income brought in at regular intervals by the bread winner of the family. So long as the he lives and the income is received steadily, that family is secure; but should death suddenly intervene the family may be left in a very difficult situation and sometimes, in stark poverty.
Uncertainty of death is inherent in human life. It is this uncertainty, that is risk, which gives rise to the necessity for some form of protection against the financial loss arising from death, insurance substitutes this uncertainty by certainty.
Some outstanding advantages of life insurance
1. It is superior to an ordinary savings plans: This is so because unlike other saving plans, it affords full protection against risk of death. In case of death, the full sum assured is made available under a life assurance policy; whereas under other savings schemes the total accumulated savings alone will be available. The latter will be considerably less than the sum assured, if death occurs during early years.
2. Insurance encourages and forces thrift: a savings deposit can be too easily withdrawn. Many may not be able to resist the temptation of using the balance for some less worthy purpose. On the other hand, the payment of life insurance premiums becomes a habit and comes to be viewed wit the same seriousness as the payment of interest on a mortgage. Thus insurance, in effect brings about compulsory savings.
3. Easy settlement and protection against creditors: the life assured can name a person or persons to whom the policy moneys would be payable in the event of his death. The proceeds of a life insurance policy can be protected against. The claims of the creditors of the life assured by effecting a valid assignment of the policy. A married women’s property act policy constitutes a trust in favor of the wife and children and no separate assignment is necessary. The beneficiaries are fully protected from creditors except to the extent of any interest in the policy retained by the assured.
4. Administering the legacy for beneficiaries: It often happens tat a provision which a husband or father has made through insurance is quickly lost through speculative or unwise investment or by unnecessary expenditure on luxuries. These contingencies can be provided against in the case of insurance. The policyholder can arrange that in the in the event of his death the beneficiary should receive, instead of a single sum (a). payment of the net claim amount by equal installments over a specified period of years, or (b).payment of the claim amount by smaller monthly installments over the selected period followed by a lump sum at the end thereof.
5. Ready marketability and suitability for quick borrowings: After an initial period, if the policy holder finds himself unable to continue payment of premiums he can surrender the policy for a cash sum. Alternatively he can tide over a temporary difficulty by taking loan on the sole security of the policy without delay. Further a life insurance policy is sometimes acceptable as security for a commercial loan.
6. Tax relief: for computing income tax (especially in India the Indian income tax act) follows deduction from income tax payable, a certain percentage of a portion of the taxable income of individuals which is diverted to payment of insurance premiums. When this tax relief is taken into account it will be found that the assured is n effect paying a lower premium for his insurance.
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