7 out of 10 life insurance policies sold by agents

Seven out of ten life insurance policies (new individual business policies) were sold by individual insurance agents in FY 2015-16, shows an annual report published by IRDAI.

IRDAI data shows that individual agents have sold 68% of the new individual life insurance policies in FY 2015-16. However, the overall contribution of individual agents in the new business premium had declined from 71% in FY 2014-15 to 68% in FY 2015-16. Experts attribute this marginal decline to high attrition rate in the life insurance industry.

Of the 2.67 crore policies sold during the previous fiscal, individual agents sold 1.87 crore policies.

LIC agents continued their dominance in distribution business by selling 1.97 crore policies or around 97% of total  LIC policies sold during FY 2015-16. LIC had collected Rs.97,700 crore in new business premium last fiscal.

Unlike LIC, many private insurance companies sell their policies through their corporate agents, particularly banks. In fact, life insurance companies like Canara HSBC, Star Union Daichi and India First had sold over 90% policies through banks in FY 2015-16.

The CEO of a private insurance company told Cafemutual that many insurance companies have banks as their parent company or majority shareholders. For example, Canara HSBC sold its products  through HSBC Bank and Canara Bank, HDFC Life through HDFC Bank etc. He said “Some insurers like Star Union Daichi and India First have opened their distribution channel for individual agents after a few years of existence. In fact, SBI Life had opened its distribution channel for individual agents after two years of operation. These insurers are predominantly dependent on their banking channel for distribution. On the other hand, companies like us get limited business from banks. Hence, we are eagerly waiting for banks to acts as insurance brokers.”

The IRDAI report states that the contribution from banks in the individual new business premium of private insurers had increased from 47% in FY 2014-15 to 52% in FY 2015-16. In fact, the total share of banks had increased from 20% to 24% during the same period.

In the last few years, the life insurance industry saw a slight dip in new business premium collection from individual agents while there was a marginal rise of 5% in the share of banks, said IRDAI.

On the other hand, LIC has channelized only 3% of its policies through banks during the previous fiscal.

IRDAI said, “LIC had procured 96.50% of its individual new business premium through individual agents while the share of individual agents was 31.90% for the private sector.” In fact, LIC is said to have increased the gratuity of agents who have completed 15 years with the company from Rs.1.50  lakh to Rs.3 lakh. The company has over 10 lakh agents as on March 2016.

Individual new business performance of life insurers for FY 2015-16 (in % of premium)

Source: IRDAI