The Role of Distribution Channels

in Life Insurance Business

An Indian Perspective
Presentation Outlook
 Introduction
 Levels of Distribution Channels
 Major Distribution Channels
 Conclusion
Introduction
 Insurance as a service sector
 Penetration of the insurance sector in India has gone up from
1.02% to 4% of GDP (14.2% $)
 Growth contributing factors
 Introduction of new products and services
 Channels of Distribution
 Penetration of companies into uncovered markets
Levels of Distribution Channels
 Zero level Channel
 One level Channel
 Two level Channel
 Three level Channel
Major Distribution Channels
 Tied Agents
 Corporate Agents
 Direct Business
 Referrals
 Brokers
Tied Agents
 Traditional primary source of insurance distribution channel
 Working on commission basis
 Trust
Bancassurance
 Selling through banks
 Banks club their insurance products with banking products
Third Party
 Selling through companies other than insurers and banks
Referrals
 A written agreement is formed between the insurer and the bank
 Bank provides infrastructure and other facilities to the insurer.
 Referral fee
Brokers
 Fill the void in terms of providing for specific needs of a
client, by assessing the risk on behalf of the client.
 Advice on the mitigation of the specified risk
 Bring together the insured and insurer
 Identifying the optimal insurance policy structure
 Carry out the preparatory work contract.
Direct Business
 Less individual business
New business underwritten through various
intermediaries

Ratio in Percentage

Year I.A Ban Otrs Brks Rfls DS Total

2004 95.32 1.30 0.86 0.05 0.84 1.63 100

2005 88.65 4.61 2.21 0.35 1.60 2.58 100

2006 85.67 6.38 3.15 0.31 2.32 2.17 100

2007 88.62 5.46 2.96 0.54 2.04 0.38 100

2008 83.75 7.97 4.36 0.60 2.95 3.33 100

Compiled from the annual reports of IRDA & calculations by authors using trend analysis
Conclusion
 Impact of profitability
 Bancassurance – emerging distribution channel