Insuring Incentives

Incentives and loyalty are definitely two intimately associated issues.
  • Sneha Jha (CIO India)
  • 20 October, 2008 13:40

"Companies that outperform their rivals are the ones which find the circumstances they want, and if they don't, strive to create them." Sitting in his sixth floor office, Ravishankar Subramanian, director IT and corporate services of the US$234 million ING Vysya Life Insurance, recalled the words of his superior at a previous organization. It made a lot more sense now.

In a highly-competitive industry that believes in the survival of the fittest, following the herd can mean death. Subramanian knows how competitive the insurance industry can be. It demands innovation -- innovation that can create the circumstances your organization needs.

But Subramanian knows he can't get there alone. Not when the business depends on a multitude of people -- people who don't cater exclusively to you. And, in insurance, those people form the very spine of the organization: the sales force.

These agents are the pivotal link between the company and its customers. In the insurance business, agents are not on company rolls. They work freelance, often for multiple insurance agencies. They are guerillas who work for the highest price. Insurance companies have learnt the hard way that keeping them satisfied is critical; give them a reason to sell your product over others. It all boils down to incentive schemes.

Incentives and loyalty are definitely two intimately associated issues.

"We need to keep the sales force energized by coming up with frequent incentive schemes, which need to be different. We can't have the same scheme running for a very long time otherwise they will lose interest. So, we need to come up with new schemes based on the company's objectives," says Subramanian.

Every insurance company has its own set of incentive schemes. These range from monetary incentives to club memberships and free trips.

The sales people need to be aware of the schemes well in advance, so that they know how much they need to achieve in the next week or two before the incentive scheme closes. The sales support team, who are directly employed by ING Vysya Life, need to communicate this information to the sales force. The sales support team also needs to monitor the working of the sales agents.

At ING Vysya Life, like most other insurance companies, this vital data was managed on Excel sheets -- a system the company used since its inception in 2001. Needless to say, this information was plagued by inaccuracy and a lack of transparency.

The sales support team had to answer frequent queries and address the grievances from the field force. They had to explain to the agents why they did not make it to a particular scheme.

"The problem was that as there was no proper communication throughout the process, at the end of the day when the payment was made the sales force wondered how the support team arrived at it. It was a very people hungry process. This would waste a lot of time of the sales support team," says Subramanian.

But that was just the tip of the iceberg.

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Invalid Policy

Established in 2001, ING Vysya Life is the insurance wing of the ING group and is headquartered in Bangalore, India. It has over 5,000 in-house sales managers, 40,000 freelancing advisors selling insurance, and it also availed the services of alternate channel partners -- like banks -- to promote their products. In order to keep the freelancers motivated the company needed to come up with frequent incentive schemes, which had to be innovative and attractive.

But ING Vysya Life were not the only ones trying to do this. With so many players in the market, all selling the same products, insurance companies need to keep modeling their incentive schemes to create that difference.

"Companies need to diversify distribution channels to deepen the process of product penetration. In a bid to combat commoditization, insurers add new products and services to their product portfolio. But while doing so they should ensure that their communication with the field-force must address this complexity," says Y.V.D.V Prasad, director, business development, ING Vysya Life Insurance.

As the company expanded its reach across multiple channels; delivering accurate, relevant and timely information became a monumental task. It was hard to meet the growing demand for transparency in information -- both for the company and the sales force. Whenever the company came up with a new scheme, or added a new feature to the existing schemes, the sales force needed to be informed. And the only communicator between the freelancing sales force and the sales support team was an inaccurate, manual and opaque excel sheet.

"Market conditions demanded constant change in incentive designing to engage and entice distribution channels. We wanted to ensure auditable and accurate payment of incentives," says Subramanian.

The manual system had few modeling facilities thereby limiting innovation in designing incentive schemes. Relying on that was beginning to prove dangerous for the company.

ING Vysya Life needed an incentive management system to automate the process and bring in transparency. And they needed it fast.

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Play It by the Rules

Subramanian and his team explored all the possibilities available in the market and then zeroed in on a rules engine -- a novel concept for the insurance industry.

A rules engine is a graphical business rules development environment that reduces maintenance and enhancement costs by cleanly separating business rules from application code. It comes with productivity enhancements that detect errors and conflicts automatically. But Subramanian was not sure where to go for a rules engine that would fit his requirements.

"We evaluated ready-made packages in the market. These were inflexible and did not meet our requirements in features, availability and modeling capabilities. We needed something that was rapidly configurable and would work with minimum IT resources," explains Subramanian.

The company formed a cross-functional team, which comprised two to three people each from IT, business and sales support. The hunt for a vendor began.

The search ended at the doorstep of YASU Technologies, a Hyderabad-based rules management systems firm. YASU was just the perfect fit for ING Vysya Life.

But this was not a clear case of build or buy. It involved a little of both. "We used some of the resources from YASU to build the software and then when the IT team became proficient with it, it took over the project and is now taking care of the incentive schemes,' says Subramanian.

Proud with the implementation, and the fact that he took his company to a level few insurance companies in India have managed to reach, Subramanian was beginning to rest on his laurels. Blissfully unaware of what the future had in store -- a future that was going to give him sleepless nights.

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Sudden Death

Like other success stories with a twist, ING Vysya Life's story was no different. Just when Subramanian and his team were finding their feet with the new system, they were hit by a storm in the form of a software giant. YASU Technologies was bought over by SAP, leaving ING Vysya Life in a lurch.

There was an initial wave of frustration. As a consequence of the acquisition, the senior team at YASU was replaced and they could not see the company through the implementation. Everybody was anxious that this could hamper the project. At this nascent stage, sturdy support from its implementation partner was of paramount importance. This had an adverse effect on the go-live date of the project.

"We wanted the system to be up and running by December 2007. But it got postponed to March because we did not get support from our partners. We had to reschedule the project and delay the go-live by three months. We would have had large incentive schemes running on the system during the peak period of January, February and March. The fact that we could not do that was a small setback because then we had to wait for the next peak period," says Subramanian.

Another cause of concern was the fact that ING Vysya Life had no industry parallels or benchmarks that they could follow, as the project was unique.

The company did not have a precedent to show its end users. "We could not show them an example of a company where this kind of an approach had been adopted so we could not show them how it would work. We had to show them some small prototypes how the rules engine would work, how the rules would be defined, how easy it would be for them to define the rules," says Subramanian. At the same time the company wasn't sure if SAP would support them. With so many issues mounting on him, Subramanian was down but not out.

"We were left high and dry. The end users had to engage in a lot of self-learning because after the implementation partner failed to extend its support to the end users, they had to repose their trust in the notion of 'learning by doing'. They threw themselves at the problem with a passion that I have rarely seen. They were bullish about this because they were convinced that they would emerge richer by the experience. It was a self-propelling situation," admits Subramanian.

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Rising From the Ashes

The system has offered several competitive benefits. It has led to enhanced process efficiency, data accuracy, transparency and reduced dependence on IT.

The system is now able to design, devise, model and run incentive plans on its own. This has helped the sales support team communicate effectively across channels. No manual work of calculating contest outputs is required now. Thereby avoiding incorrect payouts to the sales force. By linking the rules engine to the existing reporting application, communicating the results to the field has become an easier and efficient exercise. Post-implementation the sales support team saves 1.2 hours a day on manual compilation and communication of scheme outputs.

It also has a dedicated resource to reply to queries pertaining to MIS sent to the field. This has reduced the contest related queries by 50 to 60 percent.

Now that the project has brought in more benefits than it promised, it has infused confidence in Subramanian, "Having proven that the rules engine can work for us, we are ready to make the next big investment. Even if we have to buy a much bigger and a little more expensive rules engine we will go ahead and do that," reveals Subramanian.