Falling remuneration has aggravated the problem further leading to a termination of above 8 lakh life insurance agents. According to the Insurance Regulatory and Development Authority (IRDA) Annual Report 2012-13, the total number of agents appointed by life insurance companies was 5.65 lakh, while the number of agents terminated was 8.01 lakh.
The report pointed said that there was a 10.01% decrease in the number of individual agents with the numbers declining from 23.58 lakh as on March 31, 2012 to 21.22 lakh as on March 31, 2013.
Mr. T. R. Ramachandran, MD, Aviva Life Insurance, said, “For several years, insurance agents were used to selling ULIPs. After the ULIP regulations were introduced in 2010, insurers shifted to selling traditional insurance policies. But, a large number of agents could not adjust to the new reality.”
Every insurance firm has a minimum target for new business premium, renewal premium and activation criteria to classify an agent as ‘active’. In case an agent is unable to bring in the required business, Mr. T. R. Ramachandran is terminated by the insurer.
“I expect a reversal in this (high attrition & termination of agents) trend in 2014 if there are no vast sea changes in the regulations. The industry also needs to look at the independent financial advisor (IFA) model present in countries like the United Kingdom and Singapore where agents work for the customer and not the insurer. Also, several agents pursue life insurance as a part time career & also sell other financial products such as deposits, public provident fund (PPF), NSE, etc,” added Mr. Ramachandran.
Insurers said that falling commission rates with the new product regulations is also a key reason for agents not finding the career path attractive. “If they were selling 3 policies earlier, now they have to sell 6 policies to make up for the remuneration because commission rates have been cut,” said an official of a private insurer.
The scenario (agent termination) was worse for private insurers as compared to the state-owned Life Insurance Corporation (LIC). While private insurers appointed 2.83 lakh agents, 4.14 lakh agents were terminated. On the other hand, in case of LIC, 3.87 lakh agents were terminated, while it appointed 2.81 lakh agents.
“Such high attrition may adversely affect the life insurers business, policy persistency & public perception of the agency channel as a stable career. It is, therefore, in the interest of all the stakeholders to work on reducing the turnover of the agents & build a stable and growing agency force,” said the regulator IRDA.
According to the report, while the private life insurers recorded a decrease of 12.11% in the number of agents, LIC showed a decrease 8.23%. LIC had on its roles, a higher number of individual agents than all private life insurers put together.
At the end of the year, while the number of agents with LIC stood at about 11.72 lakh, the corresponding number for private sector insurers was 9.49 lakh. The corresponding previous year numbers were 12.78 lakh and 10.80 lakh, respectively.
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