Life Insurance Marketing in India (B): The Changing Distribution Norms

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HDFC Standard Life decided to rely on individual consultants and corporate agents for distributing its products. According to company sources, individual consultants were expected to play a key role in the sales process. The company therefore invested 20 man-months in developing training programs for consultants. The company also trained its consultants through institutions approved by IRDA. In addition, HDFC Standard Life tied up with corporate agents all over country. It had already tied up with HDFC and some other banks to distribute its products. To increase its coverage in rural areas, HDFC Standard Life held talks with NGOs that were involved with HDFC's housing schemes in rural areas. Birla Sun Life announced the appointment of Village Extension Workers (VEWs) who would help create awareness about insurance in villages. Generally, these VEWs were from social improvement projects promoted by the Aditya Birla Group of companies. Each VEW was put in charge of a cluster of 10-15 villages. Many other major private insurers were laying emphasis on the recruitment and development of quality agents to enhance their brand image in the market and attract customers. LIC ran an advertisement campaign that featured one of its most successful agents to highlight its belief in the individual agent system.

Meanwhile, the Government of India opened up yet another avenue for distributing insurance products in August 2002: brokers. Foreign brokerage firms were also allowed, but only through a tie-up with an Indian partner and a 26% cap on equity. IRDA planned to finalize regulations by September 2002 and issue licenses to four categories of brokers - direct general insurance broker, direct life insurance broker, reinsurance broker, composite broker, and insurance consultant.

What Lies Ahead

After the decision to allow brokerage firms was announced, many Indian and foreign firms expressed their interest in entering the Indian insurance market. HSBC Bank announced its intention to set up an insurance brokerage firm in India. The Tatas also planned to enter the insurance brokerage business, focusing on both corporate and retail clients (reportedly through a strategic partnership with the Hong Kong based Jardine Matheson group). As marketing, distribution and technical superiority were expected to be the decisive factors for success in the Indian insurance sector in the future, the new players seemed to have a good chance. With the growing popularity of new distribution channels in the Indian insurance market, Private insurers hoped to effectively leverage the strengths of the new distribution channels. The above belief was strengthened by the emergence of another new channel - the Internet. According to reports, in 2001, around 12% of the insurance products were sold through the Internet, and this figure was expected to grow as Internet penetration increased. Because of increasing competition in a crowded market, private insurers were trying to leverage every possible medium. According to analysts, in the not-too-distant future, even departmental stores, ATMs, Internet kiosks and supermarkets would be selling insurance.

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