Insurers may be saving costs by ending agent stipends, but the resulting pressure can damage sales conduct, customer trust and, ultimately, insurance penetration.
Why do so few people buy insurance? We have asked this question so many times, and we look to awareness campaigns, pricing and regulation. Rarely do we look at how we treat the people who sell the product. Can a cost-saving decision about agent stipends increase the distrust that keeps penetration low? I believe it can.
A report from Inspensonline paints a stark picture: about 90% of job applicants refuse to appear for interviews after observing that the job involves insurance marketing. Of the 10% who attend company training, only 1% are retained after three months, as the others quit the job. The report links the exodus to the end of stipends that once supported recruits’ operational expenses.
Insurers discontinued the stipends because recruits were not meeting financial targets, and the logic is understandable: no returns, no stipend, costs saved. This is a classic example of a ‘fix that backfires’: a solution that eases a problem in the short term but worsens it in the long term.
My point is that withdrawing agent stipends puts agents under more pressure, so some may overpromise or skip crucial exclusions during a sale. Customers then expect more than the policy delivers and are disappointed at claim time. In other words, the expectations agents set at the point of sale matter. But before we crucify agents for that behaviour, we must examine the system pushing them there.
An agent who must close a sale to fund the following week’s expenses will be tempted to say whatever gets the customer to sign. That does not excuse misleading customers, but it helps explain why it keeps happening.
Consider an agent who sells a dental and optical care plan without mentioning its six-month waiting period. When the customer needs treatment during that window, they discover that the protection they thought they had is not yet available. At this point, showing the customer the details on paper changes nothing because they already feel betrayed by the company and may assume every other insurer is the same.
Customers who have such experiences eventually become living warnings to family and friends, helping to keep insurance penetration low.
On the other hand, without basic support, it is likely that mostly agents with high-profile personal connections will thrive, since they can quickly tap affluent contacts. A smaller, more connected agent force also means cover will likely continue circulating within the same wealthy circles, leaving the wider market untouched.
I certainly cannot claim that this is the only cause of low trust and penetration. It is a contributing factor, and a difficult one to see because the connection becomes apparent only when we deliberately look for it.
Two takeaways for leaders:
1. Identify the problem before choosing a solution.
Before implementing a fix, take time to understand what is driving the problem. These questions can help you look beyond the symptoms and identify where your intervention will have the greatest impact.
a. What problem are we trying to fix?
If the problem is that recruits are not meeting targets, ask why. Is it weak training, poor leads or the wrong recruits? The Five Whys technique can help here, too.
b. Will this solution solve the problem?
Will halting stipends help agents meet their targets?
c. What exactly is our goal?
Is it to save costs immediately, or to find out why agents are not meeting targets and address the underlying problem?
Note: Please do not skip ahead to question three. It is not meant to identify the problem; it tests the solution. Answered last, it reveals whether you are fixing the problem or merely cutting costs.
2. Remove friction for agents.
Agents are a key touchpoint in this sector and are often the first point of personal contact customers have with an insurance company. If you want customers to have a better experience, improve the experience of the people serving them.
Ask your agents these two questions weekly or fortnightly, then listen to what they share and address the obstacles you can.
a. What have you been working on lately?
b. What obstacle is blocking your progress?
Back to our question: does the way we treat agents worsen insurance penetration? Yes. Agents play a significant part in how people experience and perceive insurance. If we want more people to trust and buy insurance, we need to help our agents represent our companies honestly, set the right expectations and leave customers with a good experience.
Every interaction is an opportunity to build trust, and that trust can travel far beyond one customer.
Disclosure: Sarah Abaje is an independent researcher and growth strategist with a current professional interest in Nigeria’s insurance sector. The views expressed are the author’s own and are not made on behalf of any insurer, client, or employer.
Sarah Abaje is a business researcher and growth strategist. She researches the small set of high-impact factors that contribute most to sustainable business growth and designs practical strategies around them. Her current focus is Nigeria’s insurance sector, with particular interest in building customer trust and increasing penetration. Contact: [email protected] | 09122405762.
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