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Created by : Niranjan Meena, Actuary Manager, LIC  | 09 08 2009 07:33:45 +0000
Industry : InsuranceFunctional Area : Business Processes(Operations)
Activity:  2624 views;  last activity : 07 06 2010 20:18:09 +0000

Insurance companies are facing many problems with many lapsed policies as there were no employees who did the follow up as they had switched their jobs from one company to another, so to make fewer incidents of these lapsed policies the insurance regulator has made it tougher for agents to shift loyalties. With the new guidelines in place it ensures that all agents, corporate as well as banks continue to sell policies of the same insurance company for at least 3 years. As there is an increase in the number of orphan policies and there is no follow ups happening to these policies.

So what do you think guys, Are these guidelines from IRDA justified?

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Top Argument

According to me yes these guidelines are justifiable and there were increasing cases of orphan policies, these were the policies which were handled by those who changed their loyalties and there were no details regarding it so one couldn't keep up with that insurance holder and due to this there are many insurance lapses which has irked the IRDA, and this has made them create these guidelines and it is good that some action is taken in this regard, atleast they should provide the details regarding everything and the contacts before getting a NOC, and with these guidelines in place, now only people with genuine intention to work in the insurance industry will join and not anybody which was the case earlier.

By Niranjan Meena, Actuary Manager, LIC  09 08 2009 07:37:28 +0000
Top Argument

Everybody, in the debate, is talking of "Loyalty of Agents" not of employees. Why? Why only the Agents are expected to be loyal to a company? Whether others are?

Further, Mr. D.Swarup & Co. has recommended to abolish commission payable to the agents by the Insurers but left it to be charged (if the agents can dare) from the clients, in an envioronment where LICI agents/managers have have given free hand to the rebating for years together. If the model(of D. Swarup & Co.) is adopted in the  insurance industry, the Insurance Agents of today sholud be allowed to be the ADVISORS (professionals) and should not be branded as Agents of a particular company. If this happans, why to talk of the LOYALTY of the so called agents towards a particular insurer company? The Agents of today should be treated at par with other professionals and be allowed to advise their clients to purchase products best siuted to clients' requirement. They should not be expected to be loyal to one company but to their clients. They should be allowed to be the watchdogs for their clients' interest, which is more important than that of companies' interests. Then the responsibility of follow up should be with the insurer company and not the advisors(they are not the agents of the company but the advisors to the clients). Agents should not be held responsible for all the mess in the industry for the simple reason that they are the weakest goat in the chain and are unorganised. 

I, therefore, strongly oppose the move of IRDA in this regard.

By SURENDRA TEWARI, Freelancer, Guru FinAdvisors  11 01 2009 01:03:24 +0000

Shri Tewari ji , it seems you are not happy with a insurance company hence such a harsh reaction to my views

Agents are a face of Insurance companies and they sell products of companies to masses, it is therefore necessary to serve the customer and not keep hoping from one insurance comapny to anotehr just for sake of higher commision

I am talking about cases hwere agents have been selling insurance and then run away or disappear and then emege in another company, is this ethical accroding to you

Further Insurance employees are not only solving the issues of insured or clients they also have other areas to look after,  so will appreciaet of you read the Swarup committe report again with a +ve mind frame and not take it a personal attack



By Nikhil , Senior Manager, Insurance  | 07 19 2010 15:43:38 +0000

The current system of sale incentives encourages insurance agents to tailor advice in such a way that it promotes the interests of the life insurance industry rather than the insurance buyer.

The Swarup panel’s recommendations are designed to combat rampant mis-selling of financial products in India, a result of skewed incentives in the distribution chain for financial products. Mis-selling by India’s three million financial advisers can harm the interests of about 188 million investors.

Insurance Regulatory and Development Authority), has in its 2007-08 annual report termed “lapsation” of life insurance policies as a “major bane”. Lapsation happens when the policyholder prematurely stops paying premium for any reason, including being sold an unsuitable policy. In 2006-07, 8.6 million life insurance policies lapsed,

when financial incentives for agents are loaded on to a financial product and thus borne by the investor, for all practical purposes the agent functions as an adviser. Therefore, changing the incentive structure for agents strikes at the root of inappropriate financial advice.

The current system of sale incentives encourages insurance agents to tailor advice in such a way that it promotes the interests of the life insurance industry rather than the insurance buyer

Thsi is in interest of the insured and common mn who buys insurance, now a days many agenst sell ainsurnce and then post commission receipt just stop doing business with insurnce company and vaniosh, why has the insured to suffer for this, if he has been sold insurnce by agent then agent must service him till end of policy without cancelling the exisiting policy and taking hime to another insurance company

Agents have taken the insured for a ride and it serves them right to have a lock in period of minimum 3 years

I totally support D. Swarup, chairman of the Pension Fund Regulatory and Development Authority (PFRDA) recomendation

By Nikhil , Senior Manager, Insurance  | 03 20 2010 04:10:54 +0000

What is my thinking , right now the insurance company giving pressure to their employee

becoz the employee those who are working in sales they have target so to achive

that target they misguiding their agent to sell policy

By PRASANTA KUMAR DIKHIT, Sales Trainer, Reliance Life Insurance  | 02 05 2010 15:16:03 +0000

yes it is justified,in my view the number of orphan policy will decrease and the agent will

focus on renewal which is better for policy holder as well as insurance

company and also for agent .


By PRASANTA KUMAR DIKHIT, Sales Trainer, Reliance Life Insurance  | 02 05 2010 15:11:11 +0000

according to me it is right step taken by IRDA because it is the customer who are affected if agent from whom they have taken policy leaves the company and in return company's profitability will be affected because one unsatisfied customer will tell 20 people and one satisfied customer will tell 5 people.

By swati , MBA/PGDM student, amity school of insurance and acturial science  | 12 19 2009 09:00:10 +0000

This is true. When an employee shifts to another insurance company, agents also switch with the employee because most of the agents come from the personal touch of the employee and the agents do hand holding of the employee.

So this is why the policies lapse.

By Anil Agarwal, CMD  | 09 12 2009 08:10:58 +0000


The guidelines of IRDA is totally justified... There are 3 points i believe that justify it:

A. The insurance agents sell a lot of policies by misguiding the investors and then they change the company, so these investors are to be faced by the company and the image of the companies have been spoiled.

B. The insurance companies are keen in getting the advisors who are doing good business, in other ways pouching the agents, which will be restricted to certain extend.

C. What happens with the private insurance companies is that the one who comes to sell the policy lands up with other company at the time of renewal, the investor meets a new advisor at every renewals which does not give good signs to the investor, this will be improved and EOD the insurance companies will only benefit out of this decision.

I believe that this decision is very good for a health growth of the insurance industry in INDIA...

By Japan Shah, Founder & Managing Director, JMS ADVISORY SERVICES PRIVATE LIMITED  | 09 09 2009 18:51:12 +0000

Yes, absolutely right decision taken by IRDA, becoz in Insurance Industry Employee cant survive themself for longer time as it is a business of relation & networking. Insurance advisors use to switch companies for better monetary benifit & also for reward & incentives. Many Insurance Company attracting other compnay's employees providing extra benefits which may be monetary or non-monetary. But now good news for the Host Insurance Company for retaining their existing employee in the company & get more & more business through renewals & new business also. 

By prakashraj kumavat, MBA/PGDM student, Omegan School of Business (ICFAI Tripura)  | 09 09 2009 06:51:05 +0000

Yes, they are justified.When an employee switches company, the company not only looses an employee but also all the customer contacts with him. This is a great loss for the company.Also, the employee takes many benefit from the company for which the company had to spend a lot but now the second company is utilising its benefit. By this law, companies will get a lot of relief....

By Jithesh Ramesh, Actuary Manager, Tata Aig Insurance Solutions  | 09 08 2009 10:27:35 +0000

Ya, its true that agents must stick to the same company atleast for 3 years to avoid orphan renewals, but at the same time the duty of insurer also lies to make proper servicing to the agents. Make analysis why agents leaving the company only for monitoring gain or after sales services...right? Its always both way.. if agents not served properly definately business growth will be hampered and ultimate loss to the company and society. So take this note seriously..and allow agents to move to other company on merits.Because agency involves manpower and money of the insurer at the same time customer satisfaction also much important.



Dear Nikhil ji,

If the agents are the only responsible person for every activity related to the policyholders, than what for the other staff is appointed and paid for by the insurance companies. The fact remains that the agents must be relieved of the bondage with a particular company and should be allowed to act as an ADVISOR to the customers. The responsibility to satisfy and serve the policyholders should ly upon the permanent staff, like Managers and executives of the concerned company only. They can not be relieved of their actual responsibility. They are not paid simply for paying the mouse.

So far recommendations of D. Swaroop are concerned, he appears to be grossly frustrated person and the recommendations should be shown the way to dust bin.


By SURENDRA TEWARI, Freelancer, Guru FinAdvisors  | 03 20 2010 17:04:20 +0000

If servicing of policies is priority, then companies should map the orphaned policies to new agents or performing agents to ensure good service to customers. Also the managers who move to new companies take the agents along with them.

The attitude and policies of insurance companies seem to encourage lapses and agency terminations to reduce servicing costs at later years as these companies make all their profits in the first two years due to high ICR. IRDA should make the ICR deductions on a longer term which will only ensure better service to policy holders.

Why should new insurance companies service policies after 2-3 years when they had taken out entire profits in the first 2 years?

By Prasad PN, Zonal Sales Manager  | 02 08 2010 05:02:30 +0000


It appears that you have developed mis-leading notion on the basis of feed back received from responsible employees, like D.Os. and B.Ms. etc., in order to save their skin and you blindly relied upon those. You must be aware that Insurance company possesses and should have more details about its policy holder than an agent has. So why the insurer company is not responsible for its lapesed policies? Why simply the agents are responsible for the mess? True the agents are relied upon for servicing of policies mobilised by them but they are not all-in-all and solely responsible for the services. How the company can disown its responsibility of services to the policyholders? Is agency arrangement the only channel to serve the policyholders? How the policies are being allowed to lapse on this count? AND if the companies are not having details of policyholder, is it not the matter of concern? If so, how the company would deal with a claim in the absence of requisite details of a policy or policyholder? Certainly the company only is responsible and responsive to the policyholders. The policyholders have no contract with the agents of a company but with the authorised persons/ officers of a company under a valid agreement document like policy bond. Neither you nor IRDA appears having taken any cognigence to such questions and drawn unilateral conclusion. IRDA has erred on the basis of mis-leading feed backs like you. Agents donot have an organised body which may represent their side before IRDA or such other authority. I would like to listen something from you in this regard.

By SURENDRA TEWARI, Freelancer, Guru FinAdvisors  | 11 08 2009 23:04:33 +0000

IRDA should make its norms for agents strictly implemented in the first place. First it was 100 hours and now it stands reduced to 50 hours. But in reality many agency licenses have been issued with zero attendance and proxy exam passing. This is the main reason for misselling and policy lapsations.

By Prasad PN, Zonal Sales Manager  | 11 01 2009 16:57:45 +0000

When employees can switch companies why not agents? In many private insurance companies agents are orphaned and new sales managers are given targets to find new agents. Why not map existing agents and focus on new business rather than new agent force. In a private insurance company out of 600+ agents licensed in the last 5 years only 4 are active. Why this situation? Most of the agents join the company and took license to earn money but the way they are treated by the executives make then disinterested in the company and in such situations the agents should be permitted to switch companies. Given a choice most of the agents of private insurance companies will move over to LIC for stable sales team and good training provided.

By Prasad PN, Zonal Sales Manager  | 11 01 2009 16:51:47 +0000

If the reasons for not switching companies for advisors is increase in lapsed policies etc..Then it is not correct as IRDA putting up the blame entirely on Advisors whereas Insurance companies are let go off the hook.

The issue can be resolved by putting equal responsibility on both te parties i.e advisors & company.The insurance copanies can engage their staff in bringing new busiess for which lot of ground work & telephonic calls are done either through company's back office or through third party.They can invest part of time in following of why policies are lapsing.Some times bad designed insurance products,unjustifiable reasons for rejecting claims and so many other reasons which carries bad name for companies actually are responsible for which poor advisors has to pay bill for.

If this is the case employees are equally responsible and also should not be allowed to switch companies atleast for insurance companies will it be justifiable?

In fact there should be complete transparency and he should be allowed to work across companies and products and Advisor should be made responsible for product he sold.

By Shailesh Vadalkar, Business Analyst, Al Rostamani Pegel LLC  | 11 01 2009 08:45:53 +0000

You are appreciating the views of Mr. R. Rmakrishnan expressed in his article "RAW DEAL WITH INSURANCE AGENTS" on one hand and are supporting opposite move of IRDA, on the other. Your views appear instable. Which view of yours should be recognised as genuine?

By SURENDRA TEWARI, Freelancer, Guru FinAdvisors  | 11 01 2009 01:23:06 +0000

All the postings supporting "Yes" are from the employees of Insurance companies!!! The reasons being quoted are (i) servicing of orphan policies, (ii) Increased lapsation.

For the above two criteria, there are lots of reasons.... it is not just because of agent shifting loyalties....

1. There are many instances of agent not shifting loyalty, and yet he doesn't service the policies

2. The fundamental reason for orphan policies and lapsation is the misselling, that is again the result of mad rush for numbers and market share.

3. At the time of selling, how many insurers are keeping a long term view of lapsation and customer service?

4. It is a bitter fact that the agents are recruited just blindly, neither the insurance company nor the agent have convicition about the process.

5. What are the steps taken by the Insurer to see that the agent is aligned with the company. Many many agents are becoming 'orphan' within one year of their joining!!!

6. Agents primarily sell the policies in their known circle, and if they are guided, treated properly, and if a good future is assured for the agents, why they should shift loyalties, embarrasing himself in the eyes of all his policy holders?

7. For a person who is not salaried, so many people suggest restrictions on their career, what about huge employee turnover right from unit manager level to the country head level???

There are lots of similar factors one need to think of before restricting someone. I do agree that agent should continue with one company and serve the policy holders, but definitely not with these restrictions........ The insurers in the first place stop poaching of agents, and start focusing on creating a conducive environment for the agents to work......

After all, for many insurance companies, the majority of people continuing with the company are the agents and not the employees.......


By SHARATH CHANDAR REDDY, Business Development Manager - Insurance, I T C Ltd  | 09 17 2009 05:14:16 +0000
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