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Journalism of Courage
When life insurers recruit agents, ‘persistence’ is the sole mantra that they want them to chant. ‘An agent who tires of chasing clients is from that moment a dead investment for his company’, according to a veteran who trains advisors in a private life insurance company. However, in the life insurance business, ‘persistency’ connotes the underpinning of its survival in the long term—an uninterrupted flow of premium income through policy renewals: and that is what new players are fretting about now.
For, many agents are unable to withstand the pressures of selling insurance against stiff competition from the teeming cadres of monolith Life Insurance Corporation (LIC)—a million-strong and growing. Others simply lose interest because they are anyway employed full-time elsewhere. Or the lucre offered to recruitment managers by rival insurers proves too much temptation, and they take along the agents they had helped bring on board.
The result is a major dent on the bottomline of private companies. With some new players into their second or third year of operations, campaigns are now divided between generating new business and ensuring premium income from renewal of policies. Companies like MetLife India, Allianz Bajaj, Aviva and Max New York Life are closely monitoring payment of even monthly, quarterly and half-yearly premium installments. Some have even launched drives to prop up renewals.
So far, the regulator has been collating figures of new business mopped up by companies, but this could change. Asked whether the Insurance Regulatory and Development Authority (IRDA) was examining renewal and lapsation rates, member T.K. Banerjee explained that private players needed more time to settle down. However, he admitted that with liberalisation of insurance into its third year, it was time to address this aspect too.
Finance ministry officials agree that lapsation levels, if unchecked, could assume alarming proportions. ‘‘We shall have to examine this issue’’, they added. Interestingly, first-year lapsation in public sector LIC has been a comfortable 15 per cent or so, but nearly 30 per cent over longer periods.
Industry circles aver that a lot of policies are bought ‘under pressure’—to oblige those connected with highly-placed functionaries; to bail out a friend/relative newly licensed as agent; to legalise exchange of financial favours or ‘kickbacks’ in the form of commission, etc. Such policy-holders invariably do not renew their policies. However, a few players are asking agents whose clients do not renew policies to pay back their commissions—or leave.
At times, agents crossing over poach customers, too, when the premium forgone in the previous policy is relatively low or can be made good through rebating. A senior LIC official pointed out that considerable new business could be coming from poached policies, so the first premium income and new policies figures could be misleading. Since IRDA is not peering over their shoulders yet, companies have preferred to keep silent. But, as OM Kotak vice-president (marketing) Ashutosh Bishnoi put it, ‘‘to keep all of us honest, IRDA should not only ask for lapsed policy/agent data but also publish it alongside the new business numbers… It is indeed a reality that the lapse rates are higher than what anyone expected.’’
