Insurance firm plans to bypass agents

Chennai, Oct 18 : In the distributor-driven Indian insurance market, Aegon Religare Life Insurance plans to toy with direct sales as part of its strategy to break even in three years.

On an experimental basis, the company - a joint venture between the Religare group (44 percent stake), Bennett Coleman and Co. (30 percent), and the Netherlands-headquartered Aegon (26 percent) - intends to open four direct sales branches.

"These branches will be located in Lucknow, Pune, Hyderabad and Bangalore. Depending on the success, we would later scale it up," Aegon Religare's chief executive Rajiv Jamkhedkar told IANS.

The branch employees will sell directly to customers who walk in and will be given sales incentives in addition to their salaries.

Jamkhedkar said if the strategy proved successful, it would bring down the company's outgo, as the employee incentives will be lower than the agency commission - around 40 percent of the first year's premium.

Additionally, he said, policyholders would directly interact with a company employee, and that "the entire buying process will be superior".

While the company does not have any tailor-made policy for this channel, there is a possibility of a different unit linked insurance policy (Ulip) with lower policy charges.

Presently, life insurers appropriate sizeable percentage of the premium towards various costs and only the balance is available for investment under Ulip.

Jamkhedkar said Aegon Religare plans to develop a 1,500-member employee sales force in three years, with the direct sales force team comprising around 250 people in the first year.

In addition, plans are also on to implement direct marketing - selling through mails, over phone, the internet and other direct sales platforms.

"We will first have to design products that are easily understandable by prospective customers and are also easily underwritten by the company," he said.

These are normally low-ticket high-volume business that would provide the company the needed stability as insurance is business of large numbers.

Meanwhile, Aegon Religare plans to enroll around 5,000 agents and open 49 branches -including the four direct sales outlets - during the first year of operations.

"In four years we will have around 250 branches and around 25,000 agents across the country," Jamkhedkar said.

In an industry where the majority of players are yet to show any signs of breaking even, Jamkhedkar said Aegon Religare's target was three years.

"The mandate to our branch managers is that their units should break even in three years."

He said the company was consciously staying away from group insurance segment, arguing it did not offer sufficient margins.

Jamkhedkar admitted there would be a marked slowdown in the Ulip sales owing to the meltdown, but added Aegon Religare's focus was on having a 30:70 mix of traditional and unit-linked policies.