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Insurance Life insurance industry loses 5 lakhs agents in 5 years

Life insurance industry loses 5 lakhs agents in 5 years

The total number of agents declined from 26.08 lakh in FY 2011-12 to 20.88 lakh in FY 2016-17
Team Cafemutual Apr 24, 2017

Agent attrition has been an ongoing issue in the life insurance industry. Recent data provided by Life Insurance Council (LIC) shows that over 5.20 lakh agents left the distribution of life insurance policies in the last 5 years.  LIC is a trade body of the life insurance industry.

The total strength of insurance agents went down to 20.88 lakh in FY 16-17 from 26.08 lakh in FY 11-12. Experts attribute this attrition to low persistency ratio and recruitment of non-serious agents.

“A few agents find it difficult to retain their clients after the initial years. As a result, the commission income reduces due to low persistency ratio,” said the senior official of a large insurer. He further 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 added.

State owned LIC India, with a purely agent-driven model, lost over 2 lakh agents in five years. The company procures over 98% of its new business through individual agents.

Kapil Mehta of SecureNow Insurance Broker had earlier told Cafemutual that this attrition is good for LIC. “This attrition reflects that management is keen on reducing the cost of bearing inactive agents. LIC wants to ensure that only productive agents remain with the company. Since the total number of active LIC agents is somewhere close to 30%, we may see further attrition.”

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

However, LIC has more individual agents compared to all private life insurers put together. As on March 31, LIC had 10.62 lakh agents while private insurers had 9.55 lakh agents.

The continuous agent attrition is a growing concern for the life insurance industry. IRDAI has increased the commission of insurance agents under various policies. Budget 2017 too has some cheer for insurance agents. It has exempted insurance agents having annual income of up to Rs2.50 lakh from paying TDS.

3 Comments
dB DESAI · 3 months ago
Persistence level is not the only reason. Recruitment strategy also has to be re-examined. Let the agents sell need based policies of any company so all the agents will be available to all the companies. I fail to understand what cost(?) they talk about. No of agents is not important but actual and correct sale is more important. All Insurance companies can come together to share the cost. Discarding the inactive agents is wrong. Find out why they are not working. There are reasons in service issues, product suitability, targets etc.
Badshsah Khan · 3 months ago
DB Chutiye. It is because of unskilled and untrained agents that the consumers face a problem. Badshah Khan tere saath bushkashi khelega
nagaraja K · 3 months ago
What is persistency? Very recently there was much "shor" about persistency which got fused. Now no one talks about it. It is not because of failure to retain their client, it is because the cost of acquiring business is high. "Kitna Doge" is rampant even today. I recently asked an exserviceman, who after retiring from sevice, took up the agency and he said that he pays the first year's commission to get business. In general insurance also the competition is so high that many agents/companies give heavy discount on the OD premium as they cannot give on the TP. I feel the regulators should do away with OD premium. Thus agents ko apne dil se nahi demaag se kaam karna chahiye. My experience in this field says that an agent must not "think" he should only "do". If he starts "thinking" he will not survive in the field for long. .
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