IRDA eases norms to reduce agent attrition

The sharp fall in the number of life insurance agents has forced the insurance regulator to revise its guidelines on minimum percentage of policies that agents have to renew to maintain a licence.

In view of high attrition, the Insurance Regulatory and Development Authority (IRDA) has decided to remove minimum persistency criteria (the minimum number of policies sold by agents that have to be renewed), leaving it to the board of each life insurer to have their own norms on persistency, the insurance regulator said. In 2011, the IRDA had put in place a minimum persistency rate of at least 50 per cent.

Interestingly, last year the IRDA had also waived off the condition of fresh training for agents whose licences had lapsed. So far, 6,188 agents holding lapsed licences have got their licences renewed and 29,252 are in the process of renewing their lapsed licences.

Also, in a bid to attract more agents into the life insurance industry, the regulator reduced the cut-off percentage in the pre-recruitment examination from 50 per cent to 35 per cent.

During 2012-13, the life insurance industry saw a 10 per cent drop in the number of individual agents. The number declined from 23.58 lakh as on March 31, 2012, to 21.22 lakh as on March 31, 2013.

While the agency force of private life insurers declined 12 per cent (to 9.49 lakh), LIC’s fell 8 per cent (to 11.72 lakh). In 2011-12, the private life insurers and LIC had 10.80 lakh and 12.78 lakh agents, respectively. Agent churn in the industry has been rising since unit-linked insurance plans were revamped and commission payouts trimmed in 2010.

Today, agents earn less than 15 per cent commission from the first year premium on ULIPs. Earlier, it was as high as 40 per cent.

Insurers feel that with new product regulations coming into force for all life insurance products from January this year, agents have to work much harder to sell the same number of policies as they used to earlier.

TR Ramachandran, CEO and MD, Aviva Life Insurance, said as most of the agents in the industry work part-time, the revamped life insurance products are new to the agents and training them to sell these products is not an easy task.

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