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Life insurance major LIC India said that traditional distribution channels comprising individual agents and banks work best in insurance distribution business.
LIC India, in its final prospectus with SEBI, said that many life insurers have invested heavily to acquire customers through digital partnerships but this channel is yet to scale up. “Life insurance companies globally have invested heavily to acquire customers, including for scaling up agency channels, entering into for bancassurance deals and digital partnerships. Over the years, while there have been technological advancements and modernisation efforts, the digital distribution of life insurance products has not yet scaled significantly.”
LIC said that the traditional distribution method scores over digital channel due to need for human interaction to understand customers need. Also, agents can explain the features of policies and guide people to select the right policies, which is not possible through digital means, said LIC.
Citing an example of China, LIC said that the top two players – Ping An Insurance and China Life Insurance Company source majority of business through traditional distribution channels.
Both the company sourced over 82% of their gross premiums through their agency channel in calendar year 2020. They are able to serve their large client base through a network of 1.02 million (Ping An Insurance) and 1.48 million (China Life Insurance) individual agents. Both Ping An Insurance and China Life Insurance Company have witnessed consistent growth in premiums with Ping An Insurance growing at a 15% CAGR over CY 2016 to CY 2020 and China Life Insurance growing at a 7% CAGR during the same period, said LIC.
In India, LIC has the largest agent network of 1.33 million individual agents as on December 31, 2021, which accounted for 55% of the total agent network in the country and was 6.8 times the number of agents of the second largest life insurer.
While the agency channel will remain the bedrock of distribution for most life insurers, with accelerated digital adoption and technological advancements, life insurers in the next few years will focus on improving productivity and efficiency by focusing on using an omni-channel strategy and leveraging both digital and physical sales methods, said LIC India.