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Life Insurance Channel Management Benchmarking Study 2012

Mumbai, India - 31 January 2013 - The average premium per policy of a life insurance policy has decreased by nearly 8 percent in FY12 over last year according to Life Insurance Channel Management Benchmarking Study 2012 carried out by Deloitte India. The study was conducted in order to identify key trends, challenges and implications for Indian Life insurers in the area of Channel Management and included 9 Indian private Life insurers as participants.

Insurers with higher vintage (over 8 years of existence) managed to retain the ticket size of regular premium policies at around Rs. 32,000 in FY12, similar to that of last year. The younger insurers observed a decline in average ticket size of regular premium policies by nearly 16 percent from around Rs. 34,500 in FY11 to about Rs. 29,000 in FY12.

Older insurers, along with their more experienced channel partners have been able to respond to changes in regulations, especially related to ULIPs, better than the younger insurers by refining their product portfolio more swiftly. Younger players are relatively more reliant on captive channels and customer base, making it difficult to alter focus on customer segments and channels”, says Sachin Sondhi, Senior Director, Deloitte India.

Bancassurance among all channels continues to procure the highest ticket size business followed by Broking and Direct channels. Whereas ticket size for Bancassurance channel decreased by about 7%, policy procured by Direct & Broker channels, which have lesser reliance on ULIP products, witnessed an increase in ticket size over the last three years. Direct channel witnessed the highest increase of 20% in ticket size at Rs 27,400 in FY12 as against Rs 22,900 in FY10.

Among the mix of products offered by insurers, 54 percent of the products sold by respondents were Ulips followed by 45 percent Non-Ulip (participating and non-participating) and ~1% pure term products suggesting the gradual shift away from ULIP products. Agency and bancassurance channels sold greater than 46% and 62% Ulip products respectively. Whereas, majority of policies sourced from Brokers were Non-Ulip (participating and non-participating) products. 14 percent of the product portfolio of the Direct channel consisted of Term products, greater than any other distribution channel.

Geographically, the top five cities ((Mumbai, New Delhi, Kolkata, Chennai and Bangalore) contributed to nearly 34% of the total business of the surveyed insurance companies. However, insurance companies with higher vintage had greater penetration beyond larger cities compared to the others. The study shows that while Bancassurance channel provides the insurers with the highest penetration in bigger cities, Agency channel have a larger play in smaller cities.

As far as Bancassurance partnership goes, even though PSU banks have higher branch network, share of Bancaassurance business for from PSU Banks was almost equal to that of Private Banks as older players largely have private banks as their Banca partners while new insurance companies have PSU banks as their partners.

Banks, especially the PSU banks, which have better branch network in smaller cities compared to insurers, are yet to fully leverage their branch network for distributing insurance. Banks have an opportunity to play larger role in increasing insurance penetration in smaller towns” adds Sachin Sondhi, Senior Director, Deloitte in India.

The report also throws light on the fact that newer players are better leveraging the internet channel. Nearly, a quarter of the direct business for new players was driven by Internet channel.

The study suggests that agents between 40 to 50 years of age are more productive than younger ones in terms of sourcing policies with higher average premium per policy. While the younger companies had higher % active agents than the older ones across all agent age groups, the older insurers had higher APE (average premium sold) per active agent than newer players.

According to the study, the average attrition rate for Agency Manager is greater (at 54%) than that of Bancassurance Managers (at 32%). Amongst the Channel Staff compensation parameters, “Sales Achieved” and “Persistency of policies sold” followed by “Team Attrition levels” are the most often considered parameters to evaluate incentives to channel management staff across all levels of staff. More number of newer players use diverse parameters like “Process discipline” & “Fraud / Customer Complain cases” compared to the older ones in evaluating incentives for channel staff.

As insurers gradually shift focus towards more traditional products and ticket sizes stabilize, players will need to find innovative combinations of channels, products and customer segments to achieve growth. Players will need to better integrate their strategies and operations with Bancassurance partners to increase penetration in smaller cities. Insurers will need to significantly improve Agency lifecycle management practices in terms of recruiting right agents and providing appropriate career support to achieve high productivity levels and reduce channel management costs.

Notes to the editor

In this press release “Deloitte India” refers to Deloitte Touche Tohmatsu India Private Limited.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK Private Company Limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.  Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

This press release has been given by Deloitte ToucheTohmastu India Private Limited

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