Direct plans sales of life Insurance companies increase marginally

Direct plans sales of life insurance companies have picked up marginally last fiscal, shows the latest annual report of IRDAI.

Growth in sales of individual life insurance policies through direct channel has increased from 4.36% in FY 2015-16 to 4.54% in FY 2016-17, a growth of 18 bps.

While LIC procured 1.33% of its new business premium from direct sales, private companies sold 9.11% of their policies through their direct channels.

In absolute terms, of the 2.1 crore policies sold last fiscal, life insurance companies have sold 12 lakh policies directly.

Vighnesh Shahane, CEO and Wholetime Director, IDBI Federal Life Insurance feels that direct sales will pick up growth going forward. “Although direct distribution is yet to see meaningful growth, people will shift to direct plans to save on costs. Once the industry put in place a robust and user friendly system, policyholders will prefer buying life insurance online. Currently, the percentage could be small, but in absolute terms it is growing.”

Seconding Vignesh’s view, Subrat Mohanty of Springdale Insurance Broking pointed out that many people do not prefer buying insurance policies online due to complicated forms. He said, “Buying life insurance policies online is a tedious job and very time consuming for policyholders due to lengthy proposal forms and ambiguity in some sections. People prefer buying life insurance through insurance agents as they help them fill the form and explain to them the features of the policy. Also, agents can help them settle claims where as in direct route, policyholders will have to approach insurers directly for the claim settle which is time consuming.”

Meanwhile, direct sales in group life insurance policies continue to be a dominant distribution channel for life insurers. Life insurance companies have sold 95% of such policies directly in 2016-17. Most corporates prefer buying life insurance policies directly through the life insurers for their employees to save on cost and get a good deal.

Individual new business performance of life insurers for FY 2016-17 (in % of premium)