MSMEs in Business Services – Insurance, Agency
In this post we will cover aspects of insurance and in particular, Agency business in India
Insurance is a very regulated and highly compliance focussed business and has been growing rapidly over the last two decades since the opening of the insurance industry in 2001. As per the IRDAI, Insurance Regulatory and Development Authority of India (IRDAI), (visit https://irdai.gov.in/) as of 2022, there were 34 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country, with the insurance sector growing at a speedy rate of 15-20% and with banking services, insurance services add about 7% to the country’s GDP. In India Life, General and Health Insurance are very clearly specified fields of insurance activity and while some entities have a presence in all three segments, the given nature of the business demands expertise and understanding of the market
The top 4 Life Insurers in 2024 as per their March premiums (taken on First Year Premiums) were LIC (www.licindia.in), HDFC Life (www.hdfclife.com), SBI Life (www.sbilife.co.in) and ICICI Prudential Life Insurance (www.iciciprulife.com) whose combined premiums were above 80% of the industry. LIC had a whopping 60% market share for March business.
Interestingly other than LIC, all others have the backing of their banking association (HDFC Life with HDFC Bank), ICICI Prudential with ICICI Bank, and SBI Life with SBI Bank. LIC too operates with almost all PSU banks other than SBI of course becuse Insurance and Mutual Funds play a significant role in adding to the bottom line of Non Interest Fee Income. Insurance pays hefty commissions of upto 200% of the first year premiums over the lifetime of the policy
Lets take a closer look at MSME presence in this sector. Life Insurance is sold through intermediaries (a medium for exchange between the company and the customer). Individual Agents (appointed by the company to represent them), Corporate Agents (a body corporate which represents them) and Brokers (an organisation which can represent any Insurer to the customer, and therefore in reality represents the customer). Banks by their very nature are therefore Corporate agents until they can be allowed to represent all Insurers
An agent is the smallest form of MSME in this industry and can represent upto one Insurer of Life, General and Health (composite agent) if s/he so desires or be satisfied with representation of any one also. There are an estimated 2.2 million agents in India at any given point in time of which LIC and the PSUs take up majority of the ‘feet on street’. However the private players claim to have higher productive agents because of their better skill training and hierarchy structure which raises the level of the agent for increased support and associated benefits from the organisation. LIC however by virtue of its vintage and Brand has a larger number of high achieving agents (total premiums collected in an year) which qualifies them to be part of the prestigious Million Dollar Round Table (MDRT). In 2023 LIC reportedly had over 10630 such MDRT agents and their highest commission earning agent from Pune took home a whopping 5.22 Crores in Commission Income. Now that is a handsome earning by any standards across any industry. IN fact their top Nine One Crore Plus earning agents barring three did not come from major metros. They came from smaller towns such as Meerut, Nagpur, Pune, Vizag, Shimla and Jodhpur, clearly indicating that it is not just about a market opportunity but rather a will to get to the top.
Women take an interesting space in this business and Tata AIA (www.tataaia.com) claims to have created a record of sorts when they had the highest number of Women MDRTs in 2023. as per the company, ‘Tata AIA ranked No. 9 globally* and No. 1 in India for the most number (936) of qualified Women MDRT Advisors. The company broke into the Top 10 in the world on this front for the first time.’ Now, this is indeed a significant break through as women have tremendous potential to breach the ‘Mans world’ of insurance agency and not only create a significant income opportunity but also grow pride of place in the family
If Agents wish to serve a larger piece of the customer need, then as a composite agent they can serve Life, Health and General Businesses. General Business typically focusses on Auto, Accidental, Health and Corporate covers (protecting assets of an organisation). Health Insurers offer very unique policies related to managing Health related expenses. Agents of these Insurers get the benefits of commission income for each year whereas Life Insurance agents only get first year commission and a smaller renewal commission during the lifetime of the customer engagement with a policy. With Increasing Health and Auto covers (latter mandated by law) the scope and reach of general insurance is increasing day by day.
To know more and become interested in knowing about how successful insurance agents work, email us at contact@nat-cons.com