MUMBAI: Rashmi Patel, a housewife and insurance agent with the country's largest insurance company, has switched her moonlighting. She now sells other financial products such as credit card and loan products of a private sector bank. The Rajkot resident is among the lakhs of insurance agents who have either switched their profession or have faced licence cancellation due to lower commission.
In the first three quarters of the financial year 2011-12, more than 3 lakh active insurance agents have quit the profession. Insurance companies such as Life Insurance Corporation of India (LIC), ICICI Prudential and HDFC Life have seen mass exodus owing to lesser incentive to agents when compare with other similar sophisticated industries.
Individual agents are the traditional channel for selling life insurance products and contribute over 50% of new sales. The percentage of new business premium collection from this channel has dropped from 55 % to 44% as the number of agents has come down to 23.78 lakh in December 2011 from 27.10 lakh last year.
"We have to increase reward for agents. I think we should figure out how to increase the productivity of agents. At present, an agent sells 18 policies on an average in a year. We have to see how we can increase it to 25 policies," Insurance Regulatory and Development Authority, or Irda, chairman J Hari Narayan said. This will ensure better income for agents, he said.
Agents are abandoning the profession after the regulator reduced commissions and introduced a host of stringent norms making insurance products, especially unit-linked insurance plans, or Ulips, less lucrative. Insurance products, including pension plans, have vanished from the market after the new norms were implemented.
"The global average life of agents is 4-5 years. A lot of agents return to their previous jobs, join a broker, start selling mutual funds after leaving the insurance sector," said Anil Jha, an agent with LIC.
Insurance companies are also asking agents to leave if they fail to meet targets. Targets for agents are set on the basis of the number of policies sold and premium earned.
In 2010-11, over 10 lakh agents vacated the space as the business turned less alluring due to the cap on charges on unit-linked insurance plans, which were selling like hot cake. Now, agents earn 5% to 7% commission on Ulips as against 12% to 18% before the changes were introduced.
The total premium collected by the industry has decreased by 3% to Rs 1,80,240 crore from Rs 1,86,396 crore. New business income fell 17% to Rs 71,953 crore from Rs 86,698 crore mainly due to absence of pension products. As per provisional data, the total new premium collected under the individual pension category was RS 1,008 crore in the December 2011 quarter as against Rs 18,417 crore in the same period of the previous fiscal year.
