Mass exodus of agents hits life insurance business hard

The slashing of agents’ commission in selling unit-linked insurance policies (Ulips) is costing the life insurance companies dear, with agents leaving the business in droves, resulting in a fall in business.

According to information available with the Insurance Regulatory and Development Authority (Irda), at least 10.45 lakh agents left the business in the financial year 2010-11, against 7 lakh who joined, resulting in a 35 per cent fall, compared with the beginning of the financial year.

“Many insurance consultants, across the industry, are leaving the business, because it is not seen as a lucrative business any more. For a large insurer like us without a banking promoter, the agency channel is a significant contributor to business growth. This is an issue of concern to us,” says Rituraj Bhattacharjee, head of market management, Bajaj Allianz Life Insurance.

The commission for insurance agents for selling Ulips has been slashed from 15 per cent earlier to just about 5-6 per cent now. Ulips account for the biggest chunk of business for life insurance companies and a fall in the business adversely impacts growth of the companies.

In fact, the first year premium for the life insurance industry almost halved to Rs 15,406 crore during the April-July, 2011 period, compared with Rs 24,914 crore in the corresponding period in the previous year.

According to a life insurance agent, who did not wish to be identified, the Secunderabad branch of a leading private insurer was the top branch in the country with each of the 10 agents clocking over Rs 3.5 crore per month in business. Over the past six-eight months, they have not been able to cross even Rs 1.5 crore.

“Churning and attrition among agents is a regular feature. The churn is higher among private companies. However, with commissions being slashed, we have been finding it difficult to recruit new agents,” says the spokesperson of Life Insurance Corporation of India (LIC), the market leader in the business.

It is not just the fall in commission and lower revenues that have prompted agents to leave, but also the lacklustre performance of Ulips that they have sold to customers.

“Both insurance companies and agents have been misselling Ulips to customers by asking them to pay premium for three years and then see their money double in the fourth year. Now, when stock markets have fallen and customers see their investments dwindle, agents are not in a position to face their customers and just want to leave the business,” says an agent with a leading life insurer on conditions of anonymity.