Rapid growth in new business requires agents to be trained and made productive irrespective of growth in the online or digital marketing.
When the insurance market was liberalised 19 years ago, one of the several benefits visualised was expansion of the market and creation of huge employment opportunities. The opportunities have contracted instead of expanding. By 2000, when LIC was the only player in the life insurance sector there were 1,17,000 people under full employment and 13 lakh as members of its very strong sales force .
Agents and commission
With 23 more companies today the number of employees in the sector should have been at least 5 lakh and the number of insurance advisors, the intermediaries or the agents should have been at least 50 lakh to cater to the growing market. As per IRDAI, the number of agents as on March 31, 2018 was 20,82,667 out of this 11,48,811 were with LIC. All these agents together with corporate agents earned new business commission of Rs 14,043 crore. Including renewal commission the total commission paid to agents by the life insurers was `25,353 crore.
In fact, 5.5% of the total premium collected by the insurers is spent in paying commission to the agents. This is an amount which is allocated directly out of the business generated by the companies and the outgo of `25,353 crore is not dependent upon any budget allocation, grant or subsidy by the government.
Insurance and jobs
Employment generation by rapidly expanding life insurance business in the country seems to be a very attractive proposition. It is really surprising why this wonderful strength of the industry does not attract the attention of the policymakers or the political leadership at the level of state or the Centre. Rapid growth in new business requires more number of agents to be trained and made productive irrespective of growth in online or digital marketing space.
The recent trend of most of the private companies concentrating only on bancassurance has made them complacent and they do not pay attention to development of the agency force. In view of the size of the market and the ever growing need of insurance products, the utility of agents cannot be undermined. To make agency an attractive profession, companies will have to take the responsibility of identifying young men and women with aptitude for sales activities and will have to spend time, money and energy in developing them into effective sales persons.
The focus of the management of the companies on single premium policy takes away the charm of receiving renewal commission in respect of policy sold in previous years as a continuous cash flow into the hands of the agent. The regular policy generally provides for 5% commission from the fourth year onwards to the agent. After four to five years of staying in this profession a consistently performing agent can expect `15,000-20,000 renewal commission every month over and above the new business commission that he would earn in respect of new sales every year. Availability of long-term plans with regular premium and provision for renewal commission every year is absolutely necessary to make agency an attractive career option.
Life insurance industry should also be considered a labour intensive industry and should be encouraged to create employment opportunities in rural areas as well as in small towns. The Centre should consider bringing the agency force under the umbrella of Shramyogi Pension Yojana and ESIS etc. It must view the life insurance agency as a major sector for employment generation.
The agency system must be revived and glamorised. The government may even incentivise insurers who rope in youngsters for joining the agency force. In the upcomimg Budget this idea may be considered. Ensuring enough longevity of agents recruited will enhance the charm of this profession and life insurance companies can prove to be employment generators of significance to the society.
The writer is former MD & CEO, Star Union Dai-ichi Life Insurance