Shabbir Rangwala says, “A forgotten insurance policy saved my family. My father, Asghar Ali Rangwala (Kikabhai’s son), was present there when he received the insurance letter and told me that this was the moment he made such a statement. decided to join the sector, which saved the family. He sold insurance from 1942 onwards and later became an LIC agent. I followed him,” he said, noting that he was a member of the Life Insurance Corporation of India (LIC) in 1970. LIC) agent.
Rangwala, 72, wanted to become a lecturer, but knew there was more money to be made in the insurance sector through commissions. “When I started, I earned 270 as commission every month. An agent’s earnings can increase manifold with the right training and mentoring on how to meet the needs of the client.”
Though Rangwala, no longer an LIC agent, had joined the insurer’s rival ICICI Prudential three years ago as it offered “better prospects”. Like him, thousands of LIC agents have left India’s largest life insurer to join their rivals or pursue a career. other areas.
Indeed, in its draft Red Herring Prospectus (DRHP) for its Initial Public Offering (IPO), which opens today, LIC had cautioned: “If we fail to attract and retain agents, our Our ability to market and sell products and to provide our customers with the level of service we aim to provide may be adversely affected as the number of our agents significantly reduced by the ability to deliver our products. Efficiency may be reduced, which could have a significant adverse effect on our results. of operation.”
There are many reasons for the decline in LIC’s agent numbers. Firstly, the advent of online insurance providers and aggregators has negated the need for agents as everything is done online. Second, rivals have been wooing LIC agents, as was the case with Rangwala, by offering better compensation packages and incentives. Commissions seem to be another issue – LIC has been citing the Insurance Regulatory and Development Authority of India (IRDA) 2016 regulations limiting commission in its DRHPs saying they limited their ability to incentivize agents Is. Also, unlike earlier times, people entering the job market have many more career options and becoming an insurance agent is rarely at the top of the list.
Certainly, LIC’s 1.3 million agents (as of December 2021) are not an endangered species. In fact, they are by far the largest insurance sales force in the country, accounting for 55% of the total number of agents in the country. ICICI Prudential Life ranks second with 196,785 agents (8.5%).
Yet, for any insurance company, it is important to retain every agent as they are the thread connecting not only one customer but one’s family, neighbors and acquaintances over many generations.
In the era of cryptocurrency, LIC is also struggling with agent productivity. The DRHP said, “The average productivity of our individual agents in India fell from 18.11 policies sold per year in FY20 to 15.49 policies sold per year during FY21.”
While agents of its rivals make full use of technology to quickly capture customer details and close the sale, LIC is not so nimble.
commission issue
Top agents earn commissions in crores and surpass the salaries earned by most CXOs in India Inc. But not everyone is able to make it so far. Many agents get out of the way. Those who live, like Bharat Parekh, who has been an LIC agent since 1985 (when he was 18), make it big.
Today they have 45,000 policies, over 30 employees and pension schemes worth several crores. Parekh has been featured extensively in media reports, but refused to disclose the average commission income he and other top agents earn. However, he immediately notes this: “Agents need better commissions to get into this job, not just any ecommerce platform.”
LIC has acknowledged that there is a need to better train and encourage agents, noting that it is facing “high job dropouts”.
“The Insurance Regulatory and Development Authority of India (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016, enhances our ability to encourage our insurance intermediaries (e.g., individual agents, corporate agents, insurance brokers) in India limits… and insurance marketing firms) by imposing limits on the payment of commission or remuneration to such agents and intermediaries,” the IPO documents stated.
RHP notes, “We may need to increase commissions and other benefits to attract and retain sufficient agents, subject to the limits of commissions payable to our agents.” Mint spoke to several LIC agents who said that their commission depends on the type of policy they sell and can range between 2% to 25% depending on the premium and policy term.
The latest cap by the sector regulator states that if an insurance company is more than 12 years old, the first year commission is capped at 35%. For single-premium pension policies, the commission payable is limited to 2% of the premium. In case of regular premium pension policy, the maximum limit of commission payable in the first year is 7.5%; In subsequent years, the commission is capped at 2% of the premium. On non-life policies, the commission limit is 15%.
lack of training
Speaking to senior agents, Mint expressed concern that the new crop may not last long in the industry. He realized that agents do not get the necessary training and mentorship to make it in this industry.
Rangwala says, “LIC today needs better trained agents to compete among so many products. COVID has made the job of just one agent difficult as families want to keep more money on hand and avoid taking new policies. Shy that can make a dent.” their liquidity.
Gopinath Krishnaraj, a 46-year-old commerce graduate who has been selling insurance since 1997, adds his voice to the demand for better agent training. “Entry should also be made difficult; Not everyone can become an insurance agent. It needs marketing skills that not everyone has,” he laments.
At present, LIC agents must be at least 18 years old and pass standard X. They have to pass a test conducted by the insurance regulator, but senior agents say the bar is not high.
The low entry bar has become one of the main hurdles for LIC when it comes to selling insurance. Part-time professionals, home builders and even interns can work as agents.
A Mumbai-based agent, who did not wish to be named, said earlier generations of agents were better advised. Digital training, he says, is not the same as someone going out in the field with you.
“There are stories about how senior agents reprimanded juniors for not dressing smartly if they were not aware of the latest offerings and could not properly tap into the needs of the customers with their products. if they were, they would be taken to work. Today, it is all through the phone and the connect is missing,” said the LIC agent.
‘those were the days’
Parekh, an experienced LIC agent, has seen the insurance market mature in India. He says that the job of an agent has come a long way from maintaining ‘by khata’ (bookkeeping) to using analytics to learn more about the customer.
Parekh, who is now 55, joined LIC at the age of 18 as a part-timer as he had to support his family financially. They have around 100 books which include their customers’ birthdays, anniversaries, premium dates and policy claim timelines.
“I used to see obituary columns in newspapers every morning in Nagpur. I used to visit the victims’ families for the next few days, trying to understand if there were any insurance claims from which the family could benefit,” recalls Parekh, who has two offices, one in Fort, Mumbai and the other in Nagpur.
Getting in touch with him and understanding which policy is best suited for the client are the two most important factors to an agent’s success. “No one entertained us earlier. Insurance agents were considered a harbinger of death. Today, I have high net worth clients who call us from the hospital when there is a birth in the family so that I can prepare an insurance policy,” says Parekh.
He does not see the rise of digital insurers affecting the prospects of LIC agents. “It is a push and pull concept. You can buy car insurance online but for life insurance you will meet with an agent and find out the details that will affect your family. Car insurance is short-term and you can go wrong with it. and can renew it. Not when the terms are for two decades or more,” explains Parekh.
reward for patience
“I ask young people to give me five years before I see the impact on their careers. A private job will increase annually but the commission of an insurance agent starts increasing after a few years. That bet has to be made,” says a Kolkata-based LIC agent who has been in business for a decade. In five years, an agent can build a good book, earn commission from new business and renewal premiums. Each year With that, those earnings will increase.
“Also, after a few years of building a base, you won’t have a job from 9 a.m. to 5 p.m., but you can choose your client meetings and pace of work. How many firms will offer that,” he wonders. .
In an old LIC ad, Ritu Nanda, perhaps LIC’s best-known and biggest agent, echoes that sentiment. She urges the educated to become LIC agents. “Be your own boss; earn as much as you want; work the time you choose.” Rajan Nanda
Parekh also advises agents to be patient, as selling insurance with LIC is time-consuming and not a quick money settlement. “Both customers and agents need to be more patient. LIC is not instant,” he says.
LIC provides remuneration, retirement benefits, advances, group insurance, training support, as well as pre and after sales support services to its agents. The Kolkata-based agent underlines that the job comes with several benefits, most notably the stability of being associated with a 70-year-old government-backed firm. “There are convenient housing loans for agents, and festive advances that private companies will not give,” says the agent, who did not wish to be named.
“We didn’t have too many career options in our time. Today, there are many options, but if you look beyond the grueling hours, it is one of the best career choices one can make. Instead of selling insurance, one needs to look at the profession as a financial advisor,” says Krishnaraj.
But the “image” of a professional “financial advisor” is often lacking. Rangwala recalls that he was not allowed inside the homes of many customers. Tired of chasing the lead, he quit his job briefly in the 70s and joined a hotel at the front desk in Mumbai.
“I worked there for 9-10 months. I saw and realized that there is a ‘yes sir’ culture in the hospitality sector too, where the customer is treated with utmost respect. Then why should we bother in the insurance sector and join some other industry.”
Still, LIC has a tough job going forward.
Many like Parekh are confident that LIC can retain its loyal agents. “Covid made it difficult for agents to go to homes but now things are looking up. I am sure LIC will work to retain the agents. Once a LIC agent, always a LIC agent!”