Higher commission and stringent recruitment help check agent attrition

The ongoing agent attrition problem in the life insurance space has subsided.

Recent data published by Life Insurance Council (LIC), a trade body of the life insurance industry shows that the total life agency force went down to 20.72 lakh in June 2018 from 20.82 lakh in the previous quarter; that means 10,646 agents left the industry. While the industry added 1.29 lakh agents, 1.39 lakh agents called it quits.

However, the quantum of such an attrition has reduced substantially. Close to 72,000 agents have left the distribution of life insurance policies in FY 2016-17.

Earlier, 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.

State owned LIC India has added 17,837 agents last year. It added around 3.30 lakh agents while it terminated 3.6 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 28,483 agents. 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

Source: Life Insurance Council