Life insurers' agent headcount falls by over 2 lakh in 2012

Amid stiffer regulatory norms and tough business environment, life insurance firms trimmed agent workforce by over two lakh last year, and their pay-roll headcount also declined by 1,600 people.

Life insurers have also cut down on branches. From over 11,100 branches in 2011, the total number of branches fell to 10,300 by 2012-end, as cost pressures hit the branch expansion and existing non-performing offices were shut.

There are about two dozen players in the Indian life insurance market, where competition has intensified and some significant regulatory changes have also taken place in the recent past.

According to the latest data available with the industry body Life Insurance Council, total number of agents fell to 21.63 lakh as on December 31, from 23.78 lakh in 2011.
During the same period, the number of direct employees on the payrolls of life insurers fell from 247,550 to 245,993.

However, the decline in the number of agents and direct employees was smaller in 2012, compared to 2011 when the total headcount had fallen by 3.3 lakh persons.
The agents have traditionally been a major distribution channel for life insurers, contributing the maximum to individual business premium collections.

However, their share has consistently fallen in the recent years, leading to most private sector insurers trimming down their agent workforce in the past couple of years, industry experts say.

The industry has also seen its new business growth falling significantly in the recent past, particularly in the unit-linked product (ULIP) segment. Mostly driven by the agents, this business used to be a focus area of growth for the private sector until recently.

However, some recent regulatory changes have led to the insurers shifting their focus away from ULIPs to traditional insurance products.

"Since then, life insurers – especially the older established players – have significantly reduced agent capacity. However, overall capacity reduction has been slower than the sharp contraction in the market," Barclays Capital said in a report on life insurance sector.

Though cost pressures on the industry have now ebbed, companies are still going slow on expansion as well as infrastructure investments, a senior executive of a mid-sized insurer said.

According a survey by McKinsey, agents in India appear to spend time unproductively, with 66 per cent of that spent in non-selling activities and over 50 per cent of total agents failing to meet minimum standards.