China is home to a dynamic and fast-growing life insurance market. The mass-affluent segment – forecast to represent 55% of urban households by 2020 – will fuel the growth. This segment will increasingly demand more sophisticated financial products, consultation with trained experts, and higher service standards.
In 2017, the agent workforce in China contributed about 50% of life insurance gross written premiums. However, average productivity per agent has remained stagnant. One reason for this is that nearly half of China’s eight million life insurance agents started in their roles after 2015. And while leading insurers have made strides in recent years, much more can be done to improve agent productivity and professionalism.
The best way to spur sustained growth in the near term is by transforming the life insurance agency channel. Insurers that move quickly to transform their agency forces will position themselves for accelerated growth. Such transformation will require four strategic shifts from Chinese insurers to boost productivity, and professionalize their core distribution channel.
Insurers must realize that professionalizing the agent workforce begins with agent managers being redefined as leaders, shifting responsibilities toward coaching and development, and rethinking management team structure and incentives. They should carry out a change-management program to help managers become inspirational field leaders and entrepreneurial partners who work to enable the success of others. As leaders, agent managers should set demanding but achievable targets for their agents, derive a competitive growth plan and suggest different dimensions to measure success.
Today, agent recruiting falls under the responsibility of individual agents who want to build their own teams, and success ultimately lies in finding suitable candidates. Instead, insurers should treat recruiting as a strategic process and move from mass recruiting to talent sourcing. This involvement should include enabling analytics-driven agent assessments, gaining control of the recruitment process, and centralizing recruitment efforts in a regional office. A regional office team, equipped with adequate management and support resources, can administer the recruitment process to ensure consistency and effectiveness. It can also continue to improve the recruiting process through the testing of new recruiting initiatives or methods, as well as to help coordinate resources for the organization of marketing events and career workshops.
The current part-time nature of a Chinese life insurance agent is evidenced by a recent industry survey that highlighted only 39% of agents worked at least six hours per day. The activity rate is low, with 70% of agents making one to three customer visits a day, while full-time capacity agents make an average of three to five visits per day. Maintaining a large, part-time, and unproductive workforce is costly and unsustainable. Insurers should transform their agents to be more productive by shifting agents from part-time capacity to full-time, creating a premium career track for top performing agents, offer robust professional development, and develop compensation and incentives geared towards career focused agents.
Many Chinese insurers have developed different digital solutions intended to help agents with different management tasks. The adoption rate of such solutions is usually low because these isolated solutions help agents become more efficient administratively but not more productive on sales. Insurers should develop an integrated, end-to-end digital platform designed around customer analytics to generate leads, enable a dynamic, engaging sales and onboarding journey, manage customer relationships via social media, and reimagine existing digital service offerings to provide customers with multiple options for digital engagement, research, and outreach. Indeed, customers’ increasing preferences for digital channels are well documented: the average Chinese adult spends three hours per day accessing the internet from their mobile device.
Chinese agency distribution will be one of the primary forces of value growth for life insurance. To take advantage, insurers must start making the strategic shifts mentioned. Such shifts do not require years of planning. Rather, insurers can get started right away to better address customer needs and improve the productivity of their agents.
The first steps could involve i) rapidly designing a new sales manager role and getting a small group of managers to trial it in a key sales territory, ii) test recruiting and candidate performance monitoring, and assess historical methods against new analytically driven approaches, iii) build the development journey for agents, and select existing medium and high performers to begin field and forum training, and iv) develop and roll out the initial versions of customer analytics models to help agents target their behaviours.
Insurers that get these shifts right will see a marked bottom-line improvement, and it is expected that a more professional workforce will see a three to five-fold increase in productivity over current levels. While these shifts might seem daunting, carriers can get started right away and use their success to drive even larger changes.
Arthur Bi is partner at Mckinsey Beijing, while, Brad Mendelson is senior partner, David Schiff is partner, and Raymond US is associate partner at Mckinsey Hong Kong