Life Agent Becoming Obsolete

The ubiquitous insurance agent is getting rarer by the day. Thanks to the introduction of a stricter syllabus and a tough business environment, over 10 lakh life insurance agents have exited the industry over the past four years.

Speaking on the sidelines of a seminar on insurance here, V. Manickam, Seceratary-General of the Life Insurance Council, said that life insurance companies have terminated over 36 lakh agents and hired around 26 lakh agents over the past four years. This marks a net decline of 10 lakh agents for the industry.

 

“Agency is the main channel for distribution in the life insurance industry. The fall in the total number of agents is a big challenge to the industry,” said Manickam.

 

The industry has seen a decline in new business premium collection for the past three years, particularly in the unit-linked insurance product (ULIP) segment.

Revamped ULIP Norms

After rampant mis-selling in 2010, the Insurance Regulatory and Development Authority (IRDA) revamped ULIP norms by increasing the lock-in period and cutting commissions on their sale for agents from an average of 15 per cent of the premium collected to 5-6 per cent. This led to a massive dip in ULIP sales and a shift in focus to traditional insurance products.

 

In 2011, the IRDA also introduced a new, tougher syllabus and examination pattern for those seeking to get an agency licence. This resulted in a big drop in the number of agents clearing the exam. The regulator identified the cut-off percentage of 50 as one of the major reasons for the fall in the number of agents. Subsequently, 35 per cent was made the minimum pass mark.

 

“Earlier, only 40 per cent of the agents appearing were able to clear the exam but after the reduction in the minimum pass percentage, over 80 per cent have been able to pass. So, we expect more agents to step into the life insurance industry from hereon,” said S. Roy Chowdhury, Member (Life), IRDA.