The private sector life insurer said although the number of policies sold through agency and bancassurance channels are almost same currently, business through the bank route is expected to outstrip that of the agency-based distribution channel in the next two years.
Though our agency channel is growing, the bancassurance channel is growing much faster now, SBI Life Insurance managing director and CEO Atanu Sen told FE.
The insurance company, a joint venture between SBI and BNP Paribas Cardif, had a strong agency model from the beginning and garnered as much as 65% of its retail business from agency channel two year ago. Going forward, if you see in the next two years, it will be the other way around, bancassurance would be 60-65% and agency would be 30-35%, though with a much larger overall base, Sen noted.
According to him, the company is planning to leverage the wide network of the countrys largest lender SBI and its associate banks as selling insurance products through this route is cost effective than the agency model. Today what is happening that the bankassurance channel is gaining traction because SBI and associate banks have nearly 20,000 branches and the potential is huge. We have not been leveraged that to the full extent, he explained.
Agency-based distribution channel for selling products is much costlier for insurance companies due to the cost of training agents as well as infrastructure cost. Moreover, retail agency is much more difficult area to grow because of the attrition of agents.Interestingly, under the new Irda guidelines, an agents commission from the sale of policies will dwindle and they are likely to suffer due to lower commissions from January 1, 2014. Sen said the agents would face a challenge because of this.
SBI Life, however, said it does not foresee any difficulty in doing business in the new regime as it has already got approval for all the products that it wanted to bring in. It has already launched some of the products and would aggressively push other products from January 1.
The company is cutting down its group insurance business to focus more on retail business.
Although the life insurers decision to gradually bring down group business to shed major risks associated with it has already impacted revenue collection, the company said it will go ahead with the plan to boost its bottom line for a healthy growth.
The insurer garnered R622 crore net profit in FY13 and is confident of crossing its profit target of R750 crore for FY14.