Banks more profitable than agents for insurers

Banks as corporate agents of life insurance companies are more profitable and generate three times more business compared with individual agents.

 

Through banks, life insurance companies collected Rs 11,062.63 crore, which accounts for 13.30 per cent of the total new business premium collected by insurance companies during 2010-11.

Life insurers have sold more than 19 lakh insurance policies through the bancassurance channel (banks selling insurance policies). This is, however, only 4.03 per cent of the total number of policies sold by the insurance companies, as per the annual report released by the Insurance Regulatory and Development Authority (Irda).

Individual agents managed to collect Rs 65,665.52 crore, which is 78.95 per cent of total new business premium, by selling 86.44 per cent of the total insurance policies.

“Typically, policies sold by banks are single premium insurance policies that are savings-oriented products. Since banks have a huge client base who maintain a chunk of their savings as bank deposits, these deposits are diverted to insurance plans,” said Gorakhnath Agarwal, chief actuary at Future Generali India Life Insurance.

Single premium policies are those where the insured needs to pay the premium for the first year of the policy and the policy provides him life coverage for the next few years depending on the insurance product chosen. Also, the insured gains certain maturity benefits during the policy tenure or at the end of the tenure.

Other distribution channels, such as corporate agents, have contributed around 6.21 per cent of insurance policy sales and account for around 3.56 per cent of total premium collection. Insurance companies have sold around 2.26 per cent of policies directly, through which they collected 2.42 per cent of the total premium.

“Generally, the average premium collected by a bank is around Rs 52,000, while the average premium collected by an individual agent is Rs 21,000- Rs 24,000,” said A S Narayanan, chief distribution officer at Bajaj Allianz Life Insurance.

As per the present guidelines, banks are allowed to sell one life, one non-life and one health insurance company product through their branches. However, Irda is working on new regulations to relax norms for bancassurance. It recently issued draft guidelines that have proposed zonal tie-ups for bancassurance, allowing insurance companies to tie up with more than one bank for selling its insurance products.