In a major relief to individual as well as corporate agents, IRDA has done away with the requirement of meeting the minimum persistency rates for renewal of agency license with effect from July 1, 2014. The regulator has asked life insurance companies to specify their own persistency criterion for empanelment of agents.
In a circular, IRDA said, “Renewal of individual agency license and corporate agency license will not be subject to meeting the persistency rates. All life insurers are required to have their own company specific persistency criterion for renewal of individual and corporate agency from July 1, 2014.”
As of now, the minimum persistency rate for the renewal of agency license is 50% of all policies in a year. Persistency rate is the rate of renewal of insurance policies. It measures the number of policies retained in the books of insurers and reflects the insurer’s practices in selling various products. Higher persistency rates ensure higher renewal of policies.
Typically, persistency ratio is measured in 13th, 25th, 37th, 49th and 61th months. LIC agents have highest persistency rate. They maintained a ratio of 70%, 63%, 58% 53% and 43% in 13th, 25th, 37th, 49th and 61th months respectively in FY 2012-13. Among private insurers, the agents of ICICI Prudential, HDFC Standard and Max Life have maintained a good persistency ratio in FY 2012-13.
GN Agarwal, Chief Executive Officer, Future Generali Life Insurance believes that the move will attract new professionals to take up insurance advisory and also ensure retention of existing agents who have not reached the criteria due to the slowdown in industry.
Pankaj Mathpal of Optima Money points out that many policyholders have surrendered their policy in the last few years resulting in lower persistency rates. Further, with the number of active insurance agents coming down fast, the regulator does not want more drop outs because of such conditions. He is of the view that the move to modify the requirements of persistency ratio may cause mis-selling as there will be no pressure on insurance agents to ensure persistency.
Recently, Insurance Information Bureau of India (IIB) report showed that more than 13 lakh agents (35% of total valid agency licenses) in India have left distribution of life insurance policies.