Bank-promoted life insurance companies to expand agent base, finding no alternative to attract new business.
Bank-promoted life insurance companies are diversifying into the agency route, as the bancassurance model has turned out to be not as effective as envisaged, especially for unit-linked plans.
Amid changing regulations, where the Insurance Regulatory and Development Authority (Irda) has expressed concern on mis-selling of products and called for higher protection of policy holders, these insurers are finding it difficult to push insurance products through executives in the bank branches.
New private life insurance companies such as Star Union Dai-ichi, IDBI Federal Life and IndiaFirst Life are planning to double agent base over the next 12 months to broad-base outreach and tap more customers.
“The bancassurance channel is the most cost-effective for selling insurance products. Though this channel is effective to build up initial capacities, in the long run, agency distribution is a must to generate new business,” said an industry expert.
According to industry estimates, more than 50 per cent of the industry's business comes through the agency channel. bancassurance accounts for nearly 25-30 per cent of the business, while corporate agents, brokers and direct marketing accounts for around 20 per cent of the premiums collected.
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Bank of India (BoI) and Union Bank of India-promoted Star Union Dai-ichi is recruiting 5,000 agents across 20 centres in the country to diversify its distribution channel.
“We need alternate channels outside the bancassurance route, so we are planning to build a very strong agency network. We have already started this on a pilot basis in Bihar and Assam. Over the next one year, we will recruit 5,000 agents across the country,” said K Sahay, MD&CEO Star Union Dai-ichi Life.
“Since the product mix is changing in favour of the traditional plans, we require the agency route to push those products. Also, the changing norms calls for better advising, best achieved through agents,” he added.
| CHANGING NUMBERS | |||
| Companies | No. of agents (currently) | No. of agents by March 2012 | No. of branches** |
| IDBI Federal Life | 9,000 | 18,000 | 1,542 |
| Star Union Dai-ichi | NA | 5,000 | 6,352 |
| IndiaFirst Life | 1,000 | 5,000 | 4,966 |
| ** Number of branches include branches of promoter banks Source: Banks | |||
Similarly, IDBI Bank and Federal Bank-promoted IDBI Federal Life will double its agent base to 18,000 over the next year. IndiaFirst Life, promoted by Bank of Baroda and Andhra Bank, is set to increase the number of agents to 5,000-8,000 from 1,000 in the next 12-18 months. “Bancassurance is effective for selling simple products. When it comes to pushing complex unit-linked products, the agency route is the most effective channel,” said G V Nageswara Rao, MD & CEO IDBI Federal Life.
“The move to increase the number of agents is in line with our strategy to develop a multi-channel distribution system. Bancassurance has its own advantages, but the agency route is most efficient when it comes to reaching people in rural areas,” said P Nandagopal, MD & CEO, IndiaFirst Life.
Players such as SBI Life, ICICI Prudential, HDFC Standard Life, which had a backing of large banks to start with, had slowly built up a strong agency route to sustain the growth in premiums. For instance, SBI Life, the largest private life insurer in the country, has nearly 80,000 agents and agency channel accounts for 37 per cent of the business. For ICICI Prudential, 50 per cent of the premiums collected comes through the agency route and it has 100,000 agents.
Agency distribution channel accounts for 33 per cent of the new business for HDFC Standard Life and the total number of agents stood at 1,49,000 as on December 2010.
Reliance Life, which does not have the backing of any bank, has the largest agency network comprising more than 200,000 agents and more than 90 per cent of its business comes from agency channel.