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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  1. Nice post Subra Sir
    We still have a huge num. of underinsured/notinsured people and also considerable number of people who have bought 1 new ULIP every tax year.

  2. Its the state of the nation!!…Last 2 weeks, i have struggled to open a new locker in a bank, went to 7 different banks in my locality (PSU/Indian Private) and all want me to buy their bank’s insurance product with a premium of atleast a lakh p.a. + fd. try telling them RBI regulations – whats that?
    Ironically, i work in internal audit division of one of india’s banks.

    am sure subra must be ROTFL….


  3. Let me enlighten you with the below three incident examples:

    1. Friend goes to bank X to open a savings account. Bank manager asks him to purchase a endowment plan (from the same bank’s insurance subsidery).
    2. Another friend applied for home loan with bank Y (nationalized bank). At the time of final loan approval, bank manager literally asks poor guys to buy 85K yearly insurance plan (endowment) for approving the loan.
    3. I approach the same bank Y for locker facility. I’m told i will have to purchase insurance policy and do FD worth 1L. With this i’ll have instant locker. Else I’ll have to be in queue.
    4. Now, I approach bank Z for locker facility. I’m told to open a priority banking account with 3L minimum balance. I mean WTH?

    All of these are literal blackmailing incidents. I will not shy away from naming the banks and managers, but you will have to ask for it.

  4. we do it all the time! if the clients do not complain in writing EVEN TO OUR OWN BANK leave alone to RBI why should we worry? Yes if they do complain to RBI ….we may worry..but if they do not know the procedure ….more power to them sir!!

  5. Here you go…

    1. SBI is bank X. Manager: Mr. Narayan. Putenahalli branch, Bangalore.
    2. Corporation Bank is Bank Y. Bank Manager : Mr. Narayan. Bannergatta Road, Bangalore branch.
    3. HDFC is bank Z. Manager name: Mr. Patil. Delmia Signal branch, Bangalore.

  6. @Pooja:
    This is not a written/documented conversation. So the difficulty is proving that you are being asked/blackmailed by the bank manager.
    So how do you report mis-selling incidents to RBI? Do you have a way out?

  7. I need to correct my self in above comment:

    SBI is bank X. Manager: Mrs Veena. Putenahalli branch, Bangalore.

  8. I heard banks earn very less with locker facilities when we compare the rents they pay for the area they leased for lockers. So lockers are just an instruments to attract other types of business to that branch. Like some 5L FD for a big locker etc

  9. this locker mess is simply due to the fact that rbi has cornered this area & we don’t have choices besides banks.
    it would be best if the entire locker industry is made open to all – just like mobile with an effective regulator. then market will understand the real price for this facility & banks will price it accordingly (or offer it as freebie with strings attached).

  10. @ rajiv ahuja – whoever sells ULIPs, beware.

    Heard a sales pitch couple of days back – SBI smart performer – pay 50k for 5 years – receive 10 lacs after the 7th year! Didn’t bother to calculate IRR.

  11. Hi, thanks for sharing the valuable information, your blog gives insights on life insurance and term insurance. I am also looking to buy term insurance and I’m quite impressed with the offerings of Bharti Axa, especially with the discount factor for non smokers. Looking forward to researching a bit on the term insurance and then buying it online itself.

  12. Hi

    I’m a housewife with sufficient investments in mutual funds. My relationship manager from HSBC is insisting “for mY own good” that I buy the insurance called Canara HSBC smart secure plan. What is his incentive ? Why is he pushing me so much ?

    Please enlighten me .

    Mrs Iyer

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