Public sector insurance giants reluctant to use brokers'' help

Venkatachari Jagannathan
17 June 2003

Chennai: The opening up of the insurance sector has resulted in a major change in the way insurance products are distributed. The sector, earlier purely driven by individual agents, now sees the entry of banks, brokers and corporate agents as intermediaries. All the life insurers in India (including Life Insurance Corporation of India, or LIC) are actively signing up deals with new intermediaries.

But a similar situation is not seen in the non-life insurance sector. While private insurers have embraced the new intermediaries, the four public sector giants are averse towards using brokers, as outgoing commissions will increase business procurement costs manifold. However, these insurers have signed several bancassurance deals.

Speaking at the seminar 'Insurance: The Happening Sector,' organised by the Madras Management Association (MMA) and Industrial Economist, United India Insurance Company chairman and managing director V Jagannathan queried the efficacy of brokers when the premium rates for 75 per cent of the insurance products are fixed by the Tariff Advisory Committee (TAC).

What might be of interest to the four government non-life insurers and the LIC is the postal department's experience in selling postal life insurance. According to Dr U Srinivasa Raghavan, chief postmaster general, Tamil Nadu circle, the department comes next only to LIC in the life sector and is far ahead of all private life insurers put together.

"We do not have any insurance intermediaries. It is only a select number of our employees who sell life policies. Further, our target market is restricted to government and public sector employees and only in the rural areas can we market to the general public," he said.

The four government insurers cut their own legs by sending home nearly 35 per cent of their marketing force through a voluntary retirement scheme (VRS) some time back. The companies are now planning to reduce administrative staff through a similar scheme. Instead they can convert part of their administrative cadre to the marketing so that their knowledge and experience is not wasted. Earlier New India Assurance Company did the same and reaped good results.