Life insurance companies are increasing focus on insurance brokers for selling insurance policies; this became evident as despite commissions paid by eight large life insurers to different distribution channels has decreased by 7.25% in FY12, but commission paid to brokers increased by 13.34% in FY’12 to Rs 223 crore as against Rs 197 crore in FY’11. Consequently, the portion of commission to brokers has increased to 7% in FY’12 as compared to 5.65% in FY’11.
Eight life insurers that are considered for the analysis include ICICI Prudential Life, HDFC Life, SBI Life, Reliance Life, Max Life, TATA AIA Life, Birla Sun Life and Aviva Life.
In FY’12 total commission paid by eight large insurers to all distribution channels stood at Rs 3,242 crore. Out of which about 50% was paid to corporate agents, 43% was paid to individual agents and 7% was paid to brokers.
In FY’11 total commission paid by insurers stood at Rs 3,495 crore. Of which 46% was paid to corporate agents, and 46% was paid to individual agents.
In FY’12 HDFC Standard Life witnessed a steepest increase in commission paid to brokers, from Rs 3 crore in FY’11 to Rs 19 crore in FY’12. Commissions paid to its brokers by ICICI Prudential increased by 41%. However, brokers earned 49% less commission from TATA AIA Life in FY’12.
Insurance Brokers tie-up with various life and non-life insurance companies and are allowed selling products of any insurer. Moreover, only corporate entities are allowed to be brokers and they are governed by Insurance Regulatory and Development Authority (IRDA) norms. Brokers are required to have minimum capital of Rs 50 lakh and certain minimum level of educational qualification, while it is not required in case of individual or corporate agents. Individual or corporate agents can sell products of only one insurance company.
In FY’12 commission paid to individual agents decreased by 12.83% to Rs 1,411 crore as against Rs 1,619 crore in FY’11. TATA AIA Life paid 38% less commission to individual agents in FY’12 as against FY’11.
However, in FY’12 corporate agents witnessed a growth of 0.62% on year-on-year basis in their commission income to Rs 1,607 crore.
Main reason for the decline of individual agent’s commission is the cap on commissions on Unit-Linked Insurance Plan (ULIPs). Earlier they use to get 14-15% commission now which has come down to 6-7%. There has been also a shift to traditional products in the industry; this has also affected the commission income of various channels. Posted on July 23, 2012 by Akanksha
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