Response to IRDA's Exposure Draft

Dear Friends,

As we all know, IRDA has placed a material called Exposure Draft which also deals with agency conditions.  IRDA has called for opinions from the stakeholders.  LIC Development Officer Mr.T.S.Rajan from Karur, Tamil Nadu (Thanjavur Division, South Zone) has sent his response.  We publish here his response in full.  We also register our thanks on behalf of all LICians for his sincere effort.

-Arivukkadal

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Dear Sir,

This is in response to the ‘Exposure Draft’ dated 16.07.2010 posted in IRDA website requesting to submit our comments to ypriyab@irda.gov.in on or before 31.07.2010. 

Without prejudice, let me represent the view points of marketing men like me, in the context of your thought to provide for a framework that would stipulate certain minimum requirements for agents, in terms of performance. 

Tied-up Individual Agents:

Of all the channels of distribution, this is the only channel which is time-tested, devoted to the Insurer and the policyholder and works as agent for both. The other alternate channels namely- corporate agents, brokers, bancassurance, online etc, primarily are self-centred with their eyes on profit.

These alternate channels never visit the customer at his doorstep nor do they know the need and insurability of the life proposed. 

Whereas, the Tied-up Individual Agent makes umpteen calls prospecting his clients and succeeds after continuous perseverance. This process continues throughout the term of the policy and throughout the agency career. The business thus procured involves expense of time & money and the success rate of the prospecting calls are less in the initial stages. 

Thus, there can be no comparison with alternate channels as the modus operandi and the service aspects besides remuneration & expenses are totally incomparable. 

Thus while fixing any condition, the statistics that pertains to the Tied-up Individual Agents alone should be the parameter and not of the whole industry.

Since the advent of private insurers lot of changes have taken place in the industry and the market has drifted from

•        Insurance Agents to Investment Consultants
•        Urban centric
•        High Net worth Individuals & Single Premium
•        Switching Funds & Recycling of existing business

In this melee, the small time rural & semi-urban Tied-up Individual Agents are at a loss to understand as to how to get tuned.

Speculative ULIPS should not have been offered in the basket of Life Insurance products. While Insurers, IRDA and even professionals do not assure the returns, the client expects his maturity value and year-wise return from his agent and holds him responsible.

Another problem since the introduction of ULIPS, has been the customers have the choice of foreclosing at a profit or to minimize the incurring losses. Either way, the individual agent does not have a role for such discontinuance.

These individual agents - majority of them- matrics and rural based have been very successful in spreading the brand equity and insurance awareness. 

They are mostly part-time because the increasing difficulties due to competitions resulting in drifting priorities of customers make their renewal & first commissions unsure.

Majority of our agents are doing their insurance business by virtue of their good conduct, good rapport and credibility towards the Insurer and customers. 

They are from very humble background in the low-middle income group with insurance commission to supplement their income to meet their basic needs.

They have been associating with the general public and the Insurer for a long time with their identity in the society as an Insurance Agent.

Their customer base includes the majority of the public in any area who are workers with minimal wages, agricultural laborers, semi-skilled/unskilled workers, workers in unorganized sectors.

These customers can only contribute in hundreds towards their premium. 

With this client base in his hold, these agents cannot bring in lakhs of premium.

To speak premium in lakhs and providing hi-tech training towards that target would only result in the golden duck dying.

The insurance industry thrives today and is made attractive to private players only because of the tireless and selfless services rendered by this community of genuine agents.

Industry has grown today. It should not leave this segment to pathetic conditions designed in the boardrooms with impractical statistics which do not reflect the reality.

The tied-up individual agents and the millions of their policy holders and prospects need an emotive and helping hand with realistic possibilities. 

Minimum business stipulation has to be there. Let it be on the number of lives alone and not on premiums as premiums depend on the environment in which he works and the background of the agent.

Imposing ‘Disincentive for lapsation in the form of commission claw back’ is punishing twice as the agent is already going to lose his renewal commission if a policy is lapsed and the commission is already structured in such a way to take care that an agent devotes his time & services for renewal premium collections.

Thus, we request you to drop the proposal changing the structure of minimum business stipulations and commission payments and leave it to the Insurers which were hitherto in their domain.

Terminations for want of huge new business and reinstatement or reappointment with the same or other insurer with just license in force would only make a mockery of such imaginative proposals.

Changes are to be made.

The Bancassurance arm of alternate channels is just a referral market. The business procured by the individual branches with no IRDA licensed agent in the branch is allowed to continue.

Brokers and Corporate agents procuring new business through multi-level marketing are well known.

We are really appreciative of the role of IRDA in black listing such corporate agents and issuing a diktat to bancassurance set-up.

These forward steps only give us a hope that IRDA takes decisions only after analyzing the ground level realities.

We are sure that the opinions espoused in this mail would also be analyzed and a favourable decision would be taken to safeguard the interest of not only the policy holders but also the tied up individual agents who have been the bread & butter for the Insurer and vice-versa.

Thanks & Regards,

T S Rajan

Place: Karur

Date: 29.07.2010

PDF version sent by him can be downloaded here.