Life insurance companies has terminated over 36 lakh agents and hired around 26 lakh agents over the past four years. This marks a net decline of 10 lakh agents for the industry.
Agency is the main channel for distribution in the life insurance industry. The fall in the total number of agents is a big challenge to the industry.
The life insurance industry has seen a decline in new business premium collection for the past three years, particularly in the Unit-Linked Insurance Plan (ULIP) segment.
After rampant mis-selling in 2010, the Insurance Regulatory and Development Authority (IRDA) revamped ULIP norms by increasing the lock-in period and cutting commissions on their sale for agents from average of 15% of the premium collected to 5-6%. This led to a massive dip in ULIP sales and a shift in focus to traditional insurance products.
In 2011, the IRDA introduced a new, tougher syllabus and examination pattern for those seeking to get an agency license. This resulted in big drop in the number of agents clearing the exam.
The IRDA identified the cut-off percentage of 50% as one of the major reasons for the fall in the number of agents. Subsequently, 35% was made the minimum pass mark.
Earlier only 40% of the agents appearing were able to clear the exam but after the reduction in the minimum pass percentage, over 80% have been able to pass.
vinay mohanty
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