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Insurance agents in India lack the necessary skills to give the right advice to clients, according to a report by KPMG and Bengal National Chamber of Commerce and Industry. The report, Insurance Industry — Road Ahead, said insurers should take the initiatives to revamp the agency channel to become cost-effective and identify alternative networks that complement the existing channels.
It says inefficient agent recruitment process leads to high attrition among agency managers and agents. “Some agents lack the skill to provide sound financial advice and, accordingly, there is a lot of mis-selling in this channel. The overall stickiness of this sales force needs to be increased to ensure a more sustainable model,” the report noted.
The internet is an important area of growth for insurers, according to the report. It estimated that by 2020, the internet will constitute 15-20 per cent of gross direct premium in personal line products, denting the criticality and bargaining power of other channels. The report says using the mobile banking platform to offer insurance solutions is a cost-effective method to tap a large market.
Economic growth, socio-economic drivers, greater market penetration, rising prices of underlying assets, and increase in healthcare costs would significantly drive the growth of general insurance sector in the medium to long term, the report said. It added the growth might be supported by a focus on profitability by public and private sector insurers, resulting in lower propensity for price wars. The report added the general insurance sector was expected to grow at a compounded annual rate of 16 per cent from Rs 57,964 crore in FY12 to approximately Rs 194,000 crore by FY20.
The report also raised concerns about low penetration of micro-insurance and said that micro-insurance (life, disability and health) coverage of the economically-disadvantaged sections of Indian society is dismally low. “It will remain so, until the regulators and insurers bring in policy changes and go beyond the traditional distribution models,” it said.
In terms of bancassurance, it said that banks have started facing a conflict of interest with insurance products substituting banking products such as term deposits.
It showed the insurers have not been able to successfully mine the bank customer database for sale of new business, especially of public sector banks that are still on the anvil of technology transformation.
“While these initiatives would enable long-term industry growth, the role of the regulator in providing an enabling environment to achieve profitable growth in the near to medium term cannot be undermined,” said the report.
