Forty-five-year-old P Chitra was convinced that selling insurance policies was the career for her when she signed up with a large insurer seven years ago. And for a while, it worked out well.
She managed commissions of about ₹10,000 a month selling policies to her neighbours and friends in Chennai. This helped pay household bills when her husband suffered an accident.
But, now, she laments that the job is not paying enough for the effort she puts in.
“It is very difficult to sell a policy these days. Understanding the new rules and new products is becoming a challenge. Even if one puts in hard work to bring in a customer, the commission is peanuts,” she says.
Chitra’s isn’t an exception.
According to the IRDA annual report, in 2012-13, eight lakh agents, a third of all the agents with the insurance industry, moved out. Yes, new agents continued to join. But even after accounting for new recruits, the industry lost 2.36 lakh agents last fiscal.
Agent churn in the industry has been rising ever since unit-linked insurance plans were revamped and the commission payouts trimmed in 2010. Today, agents make less than 15 per cent commission from the first year premium on ULIPs. Earlier, it was as high as 40 per cent.
With commissions plummeting, agents, many of whom are part-timers, say they are not making enough to stay in business.
Subrat Mohanty, Head of Sales (South and East), Bajaj Allianz Life Insurance, says: “The primary reason for many agents leaving the industry is the absence of a lucrative long-term career. The drastic reduction in commission, especially in ULIPs, has adversely impacted agents’ income.
“With sales not adequately remunerative, agents rarely make an effort to get new prospects or make the changes required to sustain in this challenging business.”
Complex products and regulatory changes are raising the bar for agents too.
While the bulk of insurance sales in earlier years used to involve traditional plans which offered fixed returns, today there is a milieu of market-linked products. Agents are obliged to explain all policy details and capture the client’s risk profile. Asish Vohra, Senior Director and Chief Distribution Officer at Max Life Insurance, explains: “A few years ago, product structures were such that even by spending two to three hours a day, agents could earn a fair amount of money. But now things have changed drastically.
“They need to keep themselves updated of changing regulations and the resultant change in product features. At the same time, they need to keep up to customer’s expectations on service.”
Orphaned customersWhen an agent leaves an insurance company, policyholders sometimes forget to pay renewal premiums.
The policy may lapse resulting in substantial losses. In some cases, the agent may try to take the client along with him, in which case he advises surrendering the policy. It is the investor who bears the hefty surrender charges.
Life insurance companies say they are actively tracking this trend and taking measures to retain customers.
Vineet Patni, Chief Distribution Officer of Bharti AXA Life Insurance, says, “We run specific programmes for ‘orphaned’ customers. We have dedicated ‘orphan’ Relationship Managers who handhold customers until they are assigned a new agent.
“There is a dedicated call centre for our ‘orphan’ customers, which they can contact in case of any query or concern.
“Besides this we have a self-service website where all our customers can log in and manage their own policy online.”
Maybe part-time agents like Chitra could do with some hand-holding too.