IRDA may allow agents to sell products of more than one company similar to opening bancassurance to two insurers. Will it help agents increase remuneration or confuse customers and undermine the intension of the change? Will it increase mis-selling?
Insurance Regulatory and Development Authority (IRDA) plans to allow agents to sell products of more than one insurance company just as they are considering opening bancassurance to allow selling insurance products of two companies. There are arguments from both sides, but private insurers will stand to benefit more than LIC.
An official from the Life Insurance Corp of India (LIC) said, “Customer buys LIC product due to trust in the company. If agents sell insurance products of more than one company, they will be seen as mere individual and no longer carry the goodwill of LIC. The customer will get suspicious and not make buying decision. Even if 2% of the agents indulge in mis-selling to earn higher commission, it will ruin the whole system. As such, insurance is push product in India and takes lot of efforts by the agents to make a sale.”
Private insurers on the other hand have lot to gain as they may be able to tap into the huge pool of about 13.5 lakh agents of LIC. Their interest will mainly be the big agents of LIC who can drive volumes and help penetration. There has been steep decrease in the number of agents in life insurance business and opening of tied agency will only help private insurers. According to Life Insurance Council, “The number of agents came down from 3 million in 2009-10 to 2.65 million in 2010-11.”
Amitabh Chaudhry, managing director and chief executive, HDFC Life, said, “I know the regulator has brought this up in a recent interaction with media. However, I think it is a bit early to comment without getting to know more about this. On the face of it, such a move will help agents to offer more choice, which is good for the customer. It might also help bring agents back to the industry since the completion of a licensing process will enable them to get two licenses which is a positive for the agent”.
“We have seen almost three lakh agents have gone out of the pool in the last year since the economics of life insurance business doesn't enable them to go out and connect with customers, provide right financial advise and service the customer over the long term. The small and mid-sized agents who were instrumental in spreading life insurance across the country are not willing to get into the industry. Will allowing agents to sell products of two life insurance companies redress that? Also, will we have safeguards against unintended consequences of such a move like agents churning the customer portfolio between two insurers? I don't think we can answer these till we have a more detailed proposal from the regulator. If it does manage these issues, I am sure the industry and the agents will welcome it,” Mr Chaudhry added.
The bigger question is whether IRDA will really open the tied agency model? According to a life insurance agent, “IRDA talked about it when it came in existence. Due to opposition from LIC they (IRDA) put it off for 10 years. Over 90% of LIC agents work part-time and allowing them to sell other insurer products will help in increasing their remuneration. Ultimately, the choice should be left to customer and agent. Today, agent cannot talk about products from other insurance company and hence cannot offer best insurance to a customer. Moreover, if brokers are allowed to sell all insurance company products, why not agents?”
“General insurance agent association had in the past recommended to IRDA about allowing agents to sell mediclaim and other general insurance products from more than one insurance company. IRDA argument in the past for not allowing was about insurance company spending on agent training. At that time they were thinking of opening of tied agents if they had completed certain number of years in the business,” said another agent who sells general insurance products.
Life and general insurance agents also sell other financial products like mutual funds and there may be no real need for them to be tied to one insurance company. In UK the tied agency model has vanished. Are there any local circumstances that prevent from India to adopt the same?
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i have personally facted this problem when i was buying insurance. it was a huge hassel to contact multiple agents and then compare their offferings. each agent would talk down the other companies product.
After new rules of ULIP came into existence the premium collection,number new policies,activisation etc has come down drastically.The average earning per agent has also reduced.New recruitment of Agents is also down because average earning per agent has reduced to Rs.3000/- per month from Rs.5000/- per month after new ULIP guidlines.
Tied-Agency made sense when there was no other distribution channel except agency channel.Presently all Life Insurance companies have muliple distribution channel like Banks,Brokers,Business Associate and so on.Furthermore most of the life insurance companies are also selling Term & ULIP plan on ONLINE platform also.
If an agent is allowed is sell products of more than one life insurance company the customer will have meaningful choice .
So it is a WIN-WIN situation for Insurance Companies,Agents & Customers
In the beginning IRDA should allow Agents to sell products of TWO companies without further delay.
more competition with other agents.
a) It will allow agent to sell the best product available in the industry and earn rather than telling mine is better as he can't sell other.
b) In turn the real competition will take place as the co's would have to make the better product available to his agent otherwise he will sell others.
c) The new rule would allow new breed of full time agents as they can earn good amount becoming full time insurance agents.
d) It's truly in favor of clients as they can expect the best product from their existing agent and not wandering here and there in search of best product.
So IRDA should allow all agents to sell products of all insurance companies (life and general) and offer the best product in the market.
e) If a agent can't compare the products of different co's then how an ordinary customer can choose the best . He is always trapped by the best sales person not by the best product.