The insurance regulator has clamped down on agents to check the rise in policy lapses.
After tightening the regulations for unit-linked insurance plans (Ulips), the insurance regulator has suggested certain performance criteria for agents.
Under the new norms, agents will be getting lower commission on Ulips sold from September this year. According to the regulator’s latest suggestions, the agents may have to part with the commission earned on sold policies if subscribers do not pay the renewal premiums in time.
Part of the first-year commission will be withheld and paid based on persistency in later years,” says the regulator. The agency license may also not be renewed if the average annual persistency ratio is less than 50 per cent.This means agents will have to be more prompt in providing after-sales services.
According to the performance parameters prescribed by the regulator, agents will have to sell a minimum of 20 life insurance policies and procure a minimum first-year premium of Rs 1,50,000 every year. This will prove to be a difficult task for agents.
At present, an agent has to sell 12 policies and procure Rs 1,00,000 as first-year premium to keep his/her license in force. Many people cannot even meet this target, which is why the industry is fraught with large-scale agent attrition leading to high growth in orphan and lapsed policies. The proposed measures by the regulator, will force many agents to quit the industry.
In an exposure draft on persistency of life insurance policies, the regulator noted that lapses for private insurers had increased steadily within the first five years of selling a policy.
The lapse rate was the highest for policies sold through brokers, followed by corporate agencies, tied agents and bancassurance. In the case of tied agents, the lapse rate after the first five years of policy sales is as high as 50 per cent.
To stop this high rate of policy lapses, the regulator is considering putting in place a regulatory framework for the performance of insurance agents.
