No, I am not looking for an agent..just writing an article on the changing scenario…
The life insurance business is one of the MOST lucrative in the financial services industry – MORE profitable than banking. Look at big fortunes made in this industry – it has helped companies fund very large successful companies. In India for example if LIC were run on better commercial lines, it would have had a networth higher by Rs. 100,000 crores to say the least . Obviously all this money should belong to the policy holder / shareholder. To kill the conflict between the policy holder and the shareholder the UK (and the US) had the concept of a ‘Mutual’ company – where they created a huge (if not all) overlap between the policy holder and the shareholder. Vanguard had this concept in mutual fund also. Standard Life (Hdfc’s partner – whose name has been dropped) is also a Mutual company which is in the business of life insurance and mutual funds.
However in India the life insurance companies are not making too much money (they will eventually say in 2020) -but let us see who is selling life insurance.
1. When the life insurance business started in 2000 (i mean in the private sector) the agency sales force was contributing say 80% of the business, and the bank sales team was contributing about 20%.
2. Today the role is reversed – but for some jugglery by a couple of big players (creating salaried agents, LOL) banks are selling about 80% of the life insurance business.
3. Commissions which ranged from 2% (single premium) to 90% (Subra they refused to touch our products below this figure!!) in the early part of the business has drastically come down to 2% to 20%. I believe there are other methods of paying commissions – but that is another post, right?
4. The serious agency force is selling term insurance, because the inexpensive ulips are no longer in existence. And the least expensive ulip is also comparing unfavorably vis a vis a mutual fund scheme like Hdfc top 200 or Franklin India Blue Chip.
5. Banks are selling life insurance very very aggressively because of their own companies. However if open architecture is announced (let us assume one bank can sell products of 10 companies for example) …it will become even more aggressive, commissions will increase..and it will be fun!!
6. The agency force is shrinking in quality and booming in quantity.
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