Cover Story
Share of Direct Selling in Life Insurance Business (% of premium)
Individual
Life Insurer
Agents
Corporate
Agents
Micro
Common
Direct
Web
Brokers
Insurance service
IMF
selling
aggregators
(MI) agents centres
Banks Others*
Online Total
individual
new
business
Private
sector 30.09 53.5 3.01 2.98 9.11 0.01 0.005 0.14 0.04 1.13 100
LIC# 95.99 2.39 1.00 0.04 1.33 0.03 0.00 0.00 0.00 0.12 100
Industry
Total 68.79 23.48 1.3 1.25 4.54 0.02 0.002 0.06 0.02 0.54 100
*Any entity other than banks but licensed as a corporate agent. # Does not include its overseas new business premium; Source: IRDAI
Note: 1) New business premium includes first year premium and single premium. 2) The leads obtained through referral arrangements have been included in the respective channels
claim industry experts and digital
participants. Those who cater to
the retail customers will need to
build serious scale if they need to
have a large number of investors
as clients to remain viable. A big
shift in consumer behaviour will
be when Millennials cross 30
years of age. Most intermediaries
and fund houses believe that
the adoption of direct plans will
sharply go up at this time because
this generation prefers to cut out
human intervention. In order to
stay relevant, they will have to
offer more value to customers.
Vineet Arora
MD & CEO, Aegon Life
The direct mode ensures
full transparency
and control for the
policyholders. As
insurers, we get to do
more customer-oriented
research, understand
them better and offer
more relevant solutions
suited to their needs
56
Bajaj of Clearfunds, a platform that
only hawks direct plans of mutual
funds, says: “Once you realise that
buying a regular fund means that
you end up paying a regular part
of your earnings each year to your
distributor, you will immediately
look for an alternative—direct plans
of the same mutual fund scheme. A
large number of HNIs and almost
all corporates already understand
that direct funds mean more money
for them rather than their bankers,
brokers and wealth managers. We
see the shift to direct plans taking
place just like the adoption rate of
Exchange Traded Funds (ETFs)
in the US—slowly at first, then all
at once!”
Regulation is also seeking to
split advisory from distribution.
Recently, SEBI released a
consultation paper that
proposes a clear demarcation
between investment advisory
and distribution of investment
products. The objective is to
“prevent the conflict of interest
between ‘advising’ of investment
products and ‘selling’ of investment
products by the same entity or
person,” the note said. If these
proposals materialise and are
implemented in spirit, it will
ensure peace of mind for retail
investors, who otherwise assume
that distributors’ recommendations
are guided by their commissions,
Outlook Money February 2018 www.outlookmoney.com
and not need-based analysis.
“While SEBI’s proposed move is
aimed at eliminating the potential
conflict of interest between the
advisory and distribution roles
played by the same or related
entities, it could have far reaching
implications on how the market
for mutual funds and the related
ecosystem are structured,” says
Sai Venkateshwaran, partner and
head, accounting advisory services,
KPMG in India. He reckons that
if implemented, the proposal will
force many players to alter their
business models. “Some of the
larger distributors might continue
with the distribution business as
compared to advisory services,
as there may be relatively lower
number of fee-paying clients.
Entities that decide to continue or
enter into advisory services will see
a shift towards fee-charging model,
to compensate for the loss of trail
commissions earned on distribution
of the products,” he adds. However,
the fee-based model hasn’t evolved
and the market is yet to mature. “As
a result of these changes, there may
also be a shift of investors towards
direct funds as compared to regular
funds,” says Venkateshwaran.
Intermediaries will have to
make a choice between being
an investment advisor and a
mutual fund distributor before
March 31, 2019. What’s more,