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
