Life Insurance is Sold not bought !
And this is what makes it a distribution game. Most Life Insurance companies have grown by focusing on expanding their distribution and sales set-ups. The key distribution channels that most Life Insurance companies have used are the following:
- Agency (agents) Channel – Agents have been the biggest driving force for the Life Insurance Industry. In most markets, agents are certified individuals who represent a specific issuer, in some they are allowed to pitch products from multiple companies.Since an agent usually prospects people within his/her own network, it allows an issuer to drastically increase its distribution reach. Add to this that the agent is paid a commission only upon a successful sale, and you would understand why this is usually a big channel. Since an agent talks to his set of clients and prospects regularly, its easier for him to build a relationship and convert the sale over a series of such interactions.
- Brokers or Broking Channel– Brokers are companies who can sell insurance products from multiple issuers. In case of India, these entities are issued a formal broking license by IRDA to source and underwrite the individual policies. Brokers are hence able to offer their end consumers a wider choice and a better overall relationship. Most brokers have business interests that go beyond Life Insurance and include products like Mutual Funds, Equity investments etc. Hence they become a one-stop shop for their big customer base.
- Corporate Agents Channel – Corporate agents are similar to individual agents except that these are companies and their representatives selling insurance products instead of individual agents. As per IRDA mandate, Corporate Agent license is issued to those organizations whose core business is NOT insurance sales. Again in the Indian scenario the corporate agent can only sell products from one issuer.
- Bancassurance Channel – Banks have a huge customer base and given the context, they usually are in a good position to recommend appropriate financial products to their clients. Life Insurance companies have also leveraged banks through what is called the Bancassurance channel. Here a bank chooses to associate itself with a Life Insurance player and trains its bankers, wealth managers etc to pitch the relevant products, thereby earning a good fee income.
- Direct Channels – With growing awareness of Life Insurance, very many customers prefer to transact either online or through phone/email channels. Though such customers have been far and few, there is a clear rise in contribution of Direct Channels for simple products like Term Plans. Many have infact launched dedicated Online Term Plans and in some cases Online ULIPs/ Traditional plans too.