Protection Is Keyword for Life Insurance
Prudential Life Insurance is unique. It has been concentrating on whole life insurance while others turned to variable insurance amid the bullish stock market. It has stuck to its own salespeople whom it calls life planners, while others dug new sales channels such as bancassurance, telemarketing, or home shopping channels.
Life Insurance Should Stick to Stability
The recent fall of global insurance giant AIG showed once again that life insurance companies should be financially strong. ``Despite the global financial crisis, Prudential was safe. Its solvency margin ratio stands at over 260 percent, and it has been the highest in the industry for the past decade,'' Hwang said in an interview with The Korea Times.
``Customers sometimes get the insurance money after decades. The most important capability required of a life insurer is the capability to keep the promise for a long time. Being capable of paying insurance money to customers should be the top priority,'' he stressed.
Hence, Prudential focused on stable management of assets, not investing in any derivative products. He explained that insurance companies are not for investment like securities companies or asset management companies.
Insurance Stands for Protection
People subscribe to insurance policies for various reasons. Providing protection against unsolicited incidents in life such as death, disease or injury is the fundamental function of life insurance, but investment has become another theme in the market during the past few years with the surge of variable insurance products amid bullish stock markets and the development of IT and financial engineering. Variable insurance invests part of the insurance premium in stocks. Prudential, however, has been concentrating on protection type insurance here.
``Insurance is for protection. For savings, one should go to the bank, and for investment one should go a securities company. I don't think insurance companies can do these better than them,'' Hwang said.
However, it isn't easy to sell these products. People don't expect to die, and they don't want to talk about death. Even so, protection should be the keyword of life insurance. ``In such tragic events, people lose capability to fulfill their responsibility to the family. Protection against these events should be guaranteed first, and only then comes preparation for retirement.''
``Insurance is about protection and risk management,'' he said.
Some have a pessimistic view on the protection type insurances. In case of whole life insurance, for example, many fathers already have one. Hwang, however, said it still has much room for growth.
The ratio of insurance protection to GDP here is only around one quarter of that in Japanese and U.S. households, according to the CEO. Korean households have an average 30 million won worth of protection. ``Do you think that is enough for the bereaved family to lead a stable life afterwards?'' Hwang asks.
He added that even people with many assets subscribe to insurance policies to include in the inheritance portfolio ― often for tax benefits. He cited examples of those who set up scholarship foundations with the insurance money to cherish the memory of late family members. ``Insurance is about love for one's family. It's more than the money. I think the market is infinite as long as the family unit exists, as long as the love for family exists.''
Prudential Sticks to Life Planners
Prudential was the first to introduce male, college graduated insurance salespeople here. Before then, insurance salespeople were mostly housewives without much training, who used to sell insurance to relatives and friends. After being depleted of family sources, they quit. Some jokingly said that 40 percent of the Korean population were ex insurance salespeople.
Hwang said that as Prudential concentrated on protection type insurance, it couldn't turn eyes to sales channels other than its own qualified, educated, and trained salespeople, or life planners.
``It didn't require specialized, professional salespeople when insurance was like savings and protection type insurance was a luxury, with people having little income.''
Protection type insurance, however, is complicated. Hwang says that the insurance products that Prudential sell don't fit bancassurance.
``We also seriously considered bancassurance, doing research for nearly a year. We concluded that bancassurance would be good for the company, okay for life planners, and banks wanted to do it with us. However, we decided not to do it as it wasn't good for customers,'' the CEO said.
``Information is symmetrical in commodities, but it isn't so with insurance. It's complicated. When added up for lifetime, insurance premium is more expensive than a Mercedes. Since it's such an expensive, long-term product, customers should fully understand it.'' He doubted whether customers should be so with bancassurance.
He added that insurance customers also need after-sales services. ``The household economy faces many changes. Insurance policies also should be checked up on regularly by professionals, just like cars. Would banks do that?''
Hwang also has experience as a life planner. His first customer was his wife. After having dinner, he went out again and knocked on the door while his wife was washing dishes. He came in, and started consulting. ``I talked with her until 1:30 a.m., but she rejected. She said she knows that one needs insurance, but what I recommended her was not what she wanted.'' He listened to her needs, and suggested other products that suited her the next day. She said ``Yes.''
The CEO cited ``honesty,'' ``benefit of customers'' and ``listen'' as keywords for successful life planners.
Insurer that Wants to Give Money
Prudential tells its life planners to help customers get insurance money, and not only in words. It poured in money and efforts to give back insurance money, even pennies, that customers forgot. It checked every policy canceled or expired since its foundation here, and even traced ex-customers who had migrated to other countries.
``It was a hard task, but it gave the message that Prudential believes that insurance money should be given to customers,'' Hwang said.
Prudential's policy contrasts with the general conception that insurance companies tend to be reluctant to payout money. When asked whether such policy wouldn't benefit fraudsters, Hwang said insurance is based on ``utmost good faith.'' ``We are strict from the beginning. Not everybody can subscribe to Prudential insurance policies. One out of 10 are rejected. Some criticize us for being proud, but we want to make only promises that we can keep.''