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Insurance Higher commission in life insurance help check agent attrition

Higher commission in life insurance help check agent attrition

LIC India adds 17,630 new agents while private insurers lose 23,500 distributors.
Nishant Patnaik Apr 26, 2018

Thanks to the joint efforts of insurance regulator IRDAI and a few life insurance companies, the ongoing agent attrition problem in the life insurance space has subsided marginally.

Recent data published by Life Insurance Council (LIC) shows that around close to 6,000 agents have left the distribution of life insurance policies in FY 2017-18 as against an attrition of 72,000 agents in FY 2016-17. The total life agency force fell from 20.88 lakh in March 2017 to 20.82 lakh in March 2018. Life Insurance Council (LIC) is a trade body of the life insurance industry.

IRDAI had raised concerns about the high level of attrition among insurance agents. In fact, in its 2015-16 annual report, it said high attrition might adversely affect life insurance business, policy persistency and public perception of the agency channel as a stable career. To check this attrition, it has constantly been making efforts by increasing incentives of distributors, reducing pass percentage, stepping up quality training and encouraging cross-selling opportunities.

In fact, last year, IRDAI had hiked the upfront commission to check agent attrition. IRDAI had hiked the first year commission (upfront commission) in pure risk policies like term insurance plans having premium paying term of over 12 years to 50% of annual premium. The regulator hiked commissions in other segments too.

While the total life agency force has declined marginally, state owned LIC India, has added 17,630 agents in the past one year. It added around 3.40 lakh agents while it terminated 2.70 lakh agents in FY 2017-18. The increase in agency force was due to improvement in recruitment standards. Experts are of the view that LIC has improved their agent recruitment process and training quality in order to create skilled distribution force to grow business.

On the other hand, private players lost 23,500 agents last fiscal. Experts attribute this attrition to low persistency ratio and termination of inactive agents.

Typically, insurance companies set minimum criteria for an agent to be considered active. It depends on new business premium and persistency ratio of agents. Insurance companies terminate those who fail to meet these two criteria.

Attrition in life insurance companies

Company

No. of agents  as on March 2018

No. of agents as on March 2017

Change

Private

933857

957341

-23484

LIC India

1148811

1131181

17630

Total

2082668

2088522

-5854

 

Source: Life Insurance Council

6 Comments
Rakesh kumar · 1 month ago
But is there any company paying 50 percent commission On first year??

Let me know

Prashant · 1 month ago
Well well first reduce and then increase. If they wouldn't have reduced in the first place this wouldn't have happened. Basically all this is done for the benefit of the companies. Previously company wanted to save on first year and renewal commission both but now companies realising that without agents it is not possible to get quality business because banks only missell.
Shame shame shame
LI agent · 1 month ago
"banks only missell". Pre-dominantly true statement.
The implied statement: "Only banks mis-sell, agents don't" - Pre-dominantly false.
Hiren · 1 month ago
Hi
Reply
Hiren · 1 month ago
I would also like to know which insurance company gives 50 % commission on term Plan.
This is PURE OPPORTUNISM by insurance companies n IRDA together. Financial Markets are cyclical, specially Life Insurance business. I feel last few years Equity Mutual funds had a nice run-up, which affected growth of insurance companies overall. Now the insurance companies have observed revival trends in the industry and they are envisaging growth opportunities for next 2-3 yrs, that's the very reason they are hiking commission's. After all this business faces the larger competition within (peers) and with other Financial Products (Equity,MF,FD,Post etc). They will keep changing commission structure as per their convenience of opportunism.
Hiren · 1 month ago
I would also like to know which insurance company gives 50 % commission on term Plan.
This is PURE OPPORTUNISM by insurance companies n IRDA together. Financial Markets are cyclical, specially Life Insurance business. I feel last few years Equity Mutual funds had a nice run-up, which affected growth of insurance companies overall. Now the insurance companies have observed revival trends in the industry and they are envisaging growth opportunities for next 2-3 yrs, that's the very reason they are hiking commission's. After all this business faces the larger competition within (peers) and with other Financial Products (Equity,MF,FD,Post etc). They will keep changing commission structure as per their convenience of opportunism.
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