Distribution problems in private bank led life insurance firms: A contrasting scenario in the Indian context

Abstract

Life insurance distribution in India is at an inflection point. Whilst life insurance as a phenomenon continues to be an enigma at best, it is its distribution aspect which seems to have taken the cake. Companies are grappling with the problem of designing an appropriate distribution channel mix. At a time when an industry-wise (private companies sans LIC) marked shift could be seen in favour of bancassurance over agency as a channel of choice, it is interesting that upon deeper analysis an intriguing phenomenon over the last five years has occurred, wherein two leading private bank led life insurance firms, namely HDFC Life and ICICI Prudential - both having the support of big banks (HDFC bank & ICICI bank); one being a non bank-promoted entity (HDFC Life), the other a bank-promoted one (ICICI Prudential) - are selling more through bancassurance - in line with the industry trends - but are either dismal in agency numbers or are at least preserving them or at times, are ahead of the industry agency numbers, even when the common refrain is to go the bancassurance way. In fact, ICICI Prudential is overshooting the industry bancassurance trend and HDFC more or less equals it. The last five years have unfolded marked variations in distribution for both these companies, manifestations of which are different. Equally confounding is the fact that with the direct channel (read online) - showing tremendous potential and growth - poised to make further disruptions, the resultant is an uncertain distribution landscape with no clear pattern in sight. Should these companies dispense with the agency channel? Or should they preserve agency? Or should they look to the direct / online channel. How do they strike a balance when disruptions are bound to happen further? This paper attempts to delineate the distribution patterns of these similar bank led companies and the implications thereof of such patterns.