13 lakh insurance agenst call it quits, having license but not doing business

Of 37 lakh valid life insurance agency licenses in India, only 24 lakh agents are active, says IRDA. More than 13 lakh agents (35% of total valid agency licenses) in India have left distribution of life insurance policies, shows Insurance Information Bureau of India’s (IIB) report. IIB has been set up by IRDA to compile and analyze the data.        Experts attribute this decline to recruitment of non-serious individuals and reduction in commission structure. 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. He stressed the need of recruiting committed agents who want to opt for distribution as a full time profession. “For last three years, agent commissions have fallen drastically due to regulatory constraints which has made many agents to discontinue their distribution business,” says Subrat Mohanty, Head Distribution, Bajaj Allainz Life Insurance. He expects that dropouts of agents will persist since new products come with a reduced commission structure and higher transparency. On the flip side, only serious players will continue with the new model thereby reducing mis-selling and ensuring better quality service, he added. According to the study, the number of agents increased in certain states like UP, Bihar, West Bengal and Chhattisgarh which had proportionately less agency penetration. Further, it shows that top 50 districts account for close to a third of life insurance agency licenses in the country. These districts have 26% of the total insurance offices. In addition, the penetration of insurance agents in these districts is more than 7 agents per thousand population whereas bottom 120 districts have an average penetration of less than 1 agent per thousand population. Agency penetration is defined as the number of valid life insurance agency licenses per thousand population. Penetration of agents-Of 611 districts, Chandigarh, Goa and Delhi have recorded highest agency penetration while Meghalaya, Bihar and Lakshadweep witnessed least penetration. On under-penetration of agency in small districts, IRDA has said, “While appetite for insurance could be relatively low among the low-income segments, thereby causing under-penetration of agency, it is true that the poorer states/districts could also suffer from additional disadvantages such as non-availability of qualified agent-candidates in these locations, problems of access requiring the candidates to travel very far for agency training and tests, low ticket sizes and agency recruitment costs and viability issues for life insurers.” Also, the study shows that there are many districts in the country with population well above a lakh but having no life insurer’s office. “Many private insurers usually not prefer to open branches in small cities and districts since they chase  bigger ticket sizes,” said Mathpal. Mohanty said that it’s not viable for insurance companies to carry out branch operations in small cities due to higher recruitment and operational costs. Mohanty, however, said that FM has recently allowed insurance companies to open branches in small districts having population of upto 10,000 without prior approval of IRDA. This move is expected to boost penetration of life insurance industry in such areas, he added.

vinay mohanty