After the mutual fund industry, it’s time for the insurance sector to tighten its distribution business.If recent statements by the insurance regulatory chief and the largest hirer of agents in the life insurance industry are any indication, the part-time life insurance agents may soon be flushed out of the market.
During his visit to Mumbai, J Hari Narayan, chairman of Insurance Regulatory and Development Authority (Irda), said, “We have a large agency force. We are looking at whether there should be a different type of a licensing structure so that the distribution is taken up seriously and will the number of full-time agents increase.”
On hiring of agents during the year, T S Vijayan, chairman of Life Insurance Corporation of India, said, “We are looking forward to more employment this year. We believe instead of appointing part-time agents, it will be worthy to employ more professionals… We wouldn’t mind funding in order to train them.”
It’s noteworthy that a majority of the 28 lakh agents selling life insurance in India work part-time.
In an earlier instance in 2009, Hari Narayan had said that in a five-year span, of the agents who enter, about 80% drop out. He said the present entry bar that allows 10-12th pass candidates to become agents would be raised.
“You will have to raise the entry point and as a result of that the total number of people will be reduced. But the reach also will be affected and we have to balance the two so that the reach is not impacted.”
And, the ground work to raise the bar for agents has already started.
Irda has put up a proposal through an Exposure draft on Persistency of Agents, which states among other things, “The agency licence for agents with a persistency ratio of less than 50% will not be renewed. The minimum number of policies sold by an agent should be 20 per annum and the minimum first year premium income should be Rs150,000. In case the agent does not meet one of these criteria, the agent should achieve proportionately more in the other one to make up for the shortfall.”
Persistency, says Irda, is the percentage of business retained without lapsing or being surrendered. The draft says, “The profile of the agents may not be up to the required standards...Many of the agents take up insurance policy distribution as an auxiliary occupation and lack in professionalism. This is also one of the factors adding to the reduced persistency.”
Also, when asked about the impact of the new unit-linked insurance plans guidelines on remuneration of agents, life insurance senior officials say unanimously that agents
will have to match the reduced commissions with higher volumes.
But selling more means more dedicated time, and with regular office work the agents just won’t be able to manage.
The industry is already slashing the headcount of agents even though the agents are part-time agents and not on the company rolls.
According to Life Insurance Council data, the industry has cut down its agency strength between June 30, 2009 and June 30, 2010, by 44,857 to 28.62 lakh. In addition, 184 branches have been reduced across the industry in the period.
When asked about the slashing of agents, the chief of a leading life insurance company said, “Renewal commissions have to be given even if an agent is not on the rolls and hence the need to cut down on costs as we are rationalising other costs.”
Not just agents, the overall hiring in the insurance space, too, has reduced. Hiring activity in the insurance sector fell 58% in September 2010 over a year ago, according to a study by naukri.com, the online jobs portal.
Hitesh Oberoi, CEO and MD, Info Edge, the company that owns naukri.com, said, “The dip in the insurance sector was anticipated as insurance firms have been looking for ways to reduce headcount, post Irda regulations.”
This move comes after the mutual fund industry body, Association of Mutual Funds in India (Amfi), mandated higher enrolling and security standards for mutual fund distributors coupled by a hike in fee to get a selling registration number. This, Amfi has said, will make sure distribution business is taken up seriously.
courtesy : dnaindia
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