Over 1.62 lakh agents in India have left distribution of life insurance policies in just a year, shows data collated from Life Insurance Council (LIC). LIC is a trade body of life insurance industry. The total number of insurance agents went down to 20.1 lakh in June 2015 from 21.7 lakh in June 2014.
While the private life insurers witnessed attrition of over one lakh agents, LIC has lost close to 55,000 agents in a year. However, LIC has a higher number of individual agents than all private life insurers put together. As on June 2015, LIC had 11.34 lakh agents, the corresponding number for private insurers was 8.73 lakh.
In FY 2013-14, the industry had added close to 66,000 new agents. This growth was witnesed after a continuous attrition of distributors for the past three years.
The decline in agents was due to reduction in commission, low persistency ratio and recruitment of non-serious individuals, believe experts.
“Agents commission has fallen drastically over the last couple of years. Also, a few agents find it difficult to retain their clients after the initial first year. As a result, the commission income reduces due to low persistency ratio,” said a senior official of a large insurer. He expects that the attrition will come down in the coming years. “Only serious players will continue with the new model thereby reducing mis-selling and ensuring better quality service.”
Pankaj Mathpal of Optima Money feels that laxity in agent’s recruitment process is a major reason behind exodus of life insurance agents. He says that some private insurance companies often recruit unskilled people to achieve their internal targets. Such agents, after acquiring a few clients from their family and friends circle, usually leave the profession.
Earlier this year, the government gave its go ahead to the much-awaited Insurance Law (Amendment) Bill after a logjam of six years. The bill has given more power and flexibility to IRDAI to review, monitor and decide the commission structure of insurance intermediaries. In fact, the regulator has given insurers the flexibility to decide the commission structure on their own. A few media reports suggest that the first year commission of insurance agents may go up by 160%.