Insurance I Session 11

Insurance Intermediaries: Distribution Channels Traditional and Alternate Channels Agents, Brokers, Corporate Agents, Bancassurance, Telemarketing, Internet Marketing, Mall assurance and Direct Sales Channel

Distribution: The key factor in the business of Insurance

Low awareness level in the society about insurance A tendency to avoid or postpone the purchase of insurance Insurance is sold, hardly bought

Distribution: The Key Differentiator

One of the major challenges faced by the insurers: Using the right distribution channel to reach the customer
Companies grappling with the right channel mix

Role played by distributors in insurance markets is critical:

Like in any other country the world over, insurance in India has to be sold

Distributors are the touch points with the ultimate customer

Distribution: The Key Differentiator

Insurance distributors make the difference in

terms of:
Quality of advice for choice of product Post-sale servicing of policy

Renewal Nomination Assignment

Settlement of claims

DISTRIBUTION OF INSURANCE During the LIC/GIC- raaj

Distribution was largely confined to a Single Channel
Tied Agents

Provisions in Insurance Act, 1938 relating to issues such as:

Licensing procedure Ceiling on commission Privilege of agents Code of conduct

With the notification of IRDA Act, 1999 and the opening up of the sector

Specification of minimum educational qualification

Mandatory prelicensing training and examination

Issue of licence by IRDA

Elaborate regulation prescribing code of conduct for intermediaries

Regulations allowing corporate agents, brokers etc.

Change in the complexion of insurance distribution in the country

Improvement in the quality of the intermediaries

Created awareness about insurance in smaller towns and remote villages

Increase in the business volume, insurance penetration and density

Quality

Awareness

Growth

Focus on Multiple Distribution Channels

Indian market - a conglomeration of multiple markets Apart from geographical spread, the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs Each of the segments within this conglomeration requires a different approach

AGENT
Primary distribution channel in India
80% of the individual business procured by tied agents

The most successful of these agents are hardly of the elite variety of salesman The neighborhood do gooders -- postman, schoolteacher and the shopkeeper -- who know the people and are themselves known in the community

AGENT

(continued)

Gender - another relevant feature in the rural context Women to whom the customers can relate nurses, gram sevikas Can target the female segment of the population more effectively Separate strategies for the rural segment example: Max New York Life gram sahayaks

BROKERS
Recognized by regulations as intermediaries
Professionals with technical expertise Act on behalf of clients to arrange insurance at best possible terms Represents several insurers Remunerated in the form of brokerage Operate in urban markets for the high-end and corporate/group segment

CORPORATE AGENTS
Outcome of the liberalization era Banks, Corporate entities, Partnership firms, Cooperative societies, NGOs, NBFCs licensed by IRDA In contact with a large number of persons during their normal business activities Offer bulk business The major contributor: Bancassurance

Bancassurance
The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and outdated systems The newer banks are constrained by lack of reach due to limited no. of branches Major lines of business - term insurance, and non-life products like Property, Motor and Homeowners comprehensive insurance etc. Low cost of distribution less training/ supervision

Bancassurance Models
Referral model

Corporate agency model

Joint venture model

Some Innovative Distribution Channels

Tele marketing

Internet marketing

Mall assurance

Direct sales

CHANNEL-WISE BUSINESS(2008-09)
CHANNEL-WISE SHARE (% ) OF INDIVIDUAL NEW BUSINESS
100 80 60 40 20 0 79.57

9.69
Bancassura nce Agents

4.86
Corp. Agents

1.11
Brokers

4.76
Direct

CHANNEL-WISE SHARE(%) OF GROUP NEW BUSINESS (2008-09)

100 80 60 40 20 0 86.53 8.96
Agents

3.28
Bancassur ance

0.75
Corporate Agents

0.48
Brokers Direct

CHANNEL-WISE LIFE BUSINESS (2008-09) Private & Public Insurers

Channels of Distribution / Year Individual Agents FY 09 FY 08 Corporate Agents (Banks) FY 09 FY 08 Corporate Agents (Others) 19.19 18.2 1.56 1.15 8.41 7.28 47.44 53.46 76.9 82.68 65.45 72.17 Private Insurers Public Insurer (LIC) Total

FY 09
FY 08 Brokers FY 09 FY 08

9.54
9.92 1.96 1.61 21.87 16.81

0.55
0.27 0.37 0.05 20.63 15.85

4.04
3.74 0.99 0.61 21.11 16.2

Direct Selling
FY 09 FY 08