Of 37 lakh valid life insurance
agency licenses in India, only 24 lakh agents are active, says IRDA.
More
than 13 lakh agents (35% of total valid agency licenses) in India have left
distribution of life insurance policies, shows Insurance Information Bureau of
India’s (IIB) report. IIB has been set up by IRDA to compile and analyze the data.
Experts
attribute this decline to recruitment of non-serious individuals and reduction
in commission structure.
Pankaj
Mathpal of Optima Money feels that laxity in agent’s recruitment process is a major
reason behind exodus of life insurance agents. He says that some private
insurance companies often recruit unskilled people to achieve their internal
targets. Such agents, after acquiring a few clients from their family and
friends circle, usually leave the profession. He stressed the need of
recruiting committed agents who want to opt for distribution as a full time profession.
“For
last three years, agent commissions have fallen drastically due to regulatory
constraints which has made many agents to discontinue their distribution business,”
says Subrat Mohanty, Head Distribution, Bajaj Allainz Life Insurance. He
expects that dropouts of agents will persist since new products come with a reduced
commission structure and higher transparency. On the flip side, only serious
players will continue with the new model thereby reducing mis-selling and ensuring
better quality service, he added.
According
to the study, the number of agents increased in certain states like UP, Bihar,
West Bengal and Chhattisgarh which had proportionately less agency penetration.
Further,
it shows that top 50 districts account for close to a third of life insurance
agency licenses in the country. These districts have 26% of the total insurance
offices.
In
addition, the penetration of insurance agents in these districts is more than 7
agents per thousand population whereas bottom 120 districts have an average
penetration of less than 1 agent per thousand population. Agency penetration is
defined as the number of valid life insurance agency licenses per thousand
population.
Penetration of agents
Of
611 districts, Chandigarh, Goa and Delhi have recorded highest agency
penetration while Meghalaya, Bihar and Lakshadweep witnessed least penetration.
On
under-penetration of agency in small districts, IRDA has said, “While appetite
for insurance could be relatively low among the low-income segments, thereby
causing under-penetration of agency, it is true that the poorer
states/districts could also suffer from additional disadvantages such as
non-availability of qualified agent-candidates in these locations, problems of
access requiring the candidates to travel very far for agency training and tests,
low ticket sizes and agency recruitment costs and viability issues for life
insurers.”
Also,
the study shows that there are many districts in the country with population
well above a lakh but having no life insurer’s office.
“Many
private insurers usually not prefer to open branches in small cities and districts
since they chase bigger ticket sizes,”
said Mathpal. Mohanty said that it’s not viable for insurance companies to
carry out branch operations in small cities due to higher recruitment and
operational costs.
Mohanty,
however, said that FM has recently allowed insurance companies to open branches
in small districts having population of upto 10,000 without prior approval of
IRDA. This move is expected to boost penetration of life insurance industry in
such areas, he added.
Source: Team Cafe Mutual
