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The dwindling number of insurance agents might soon see an upside with insurance companies being allowed to appoint them without having to approach the regulator. The Insurance Laws (Amendment) Ordinance also makes it clear that agents cannot sell similar-looking products of two companies (for example, a health product of a standalone health insurer and general insurer). This will lead to the appointment of more.
“The insurance sector would be able to appoint agents according to individual needs. Since compensation structures might also be revised, this will attract people to take agency as a permanent job and not part-time work,” said the head of an agency at a private life insurance firm.
As of January, the life insurance sector had 2.1 million individual agents compared with 2.18 million in April 2014, according to data from the Life Insurance Council. Between April 2014 and January 2015, there were 503,130 additions. Deletions during the period stood at 583,009.
The Insurance Regulatory and Development Authority of India (Irdai) had recently issued a set of proposals for appointment of agents, under which it asked insurers to check whether prospective agents had ever been black-listed.
According to the draft, no individual shall act as an agent for more than one life insurer, one general insurer, one health insurer and one of each of other mono-line insurers.
The ordinance, which has suggested structural changes in the way the sector functions, has omitted Section 40A of the earlier Insurance Act, which talks about commission to insurance agents. Irdai is currently working on a revised commission structure. Under Section 40A, no insurance agent would get a commission exceeding seven and a half per cent of the first year's premium, and two per cent of each renewal premium payable on the policy, where the latter grants a deferred annuity in consideration or more than one premium.
It is estimated that about 500,000 agents have exited the industry in the past four years. This is primarily due to the commission-based salary structures and limited opportunities for career enhancement or progression.
To deal with this issue, two years ago, Irdai had reduced the pass percentage in agent recruitment examination from 50 per cent to 35 per cent.
Insurers are also making additional efforts to ensure longevity of agents. The various measures taken by them to retain agents include better career development opportunities and additional training to impart domain knowledge, apart from better incentives and other perks.
In its recent annual report, Irdai said even though there was a net increase in the number of individual agents, such high attrition could adversely affect life insurers’ business, policy persistency and public perception of the agency channel as a stable career.
According to the annual report, the number of insurance agents has increased 3.1 per cent after a steady decline since FY11. As of March 31, 2014, India has 2.18 million insurance agents, up from 2.12 million on March 31, 2013. Private insurers recorded an increase of 4.5 per cent and Life Insurance Corporation of India two per cent in the numbers of their agents.
