Brokers pip agents as top non-life cover distributors

Mumbai: Brokers are playing a bigger role in the distribution of non-life insurance in India, with their share of premiums doubling to over 35% from 17% over the last 10 years. Individual and corporate agents have seen their share of premiums shrink in the same period.

The biggest driver of this shift has been motor insurance. Over the years, most auto companies have floated their own insurance broking firms, which enables their dealers to sell insurance policies of multiple companies. Earlier, dealers had corporate agencies.

Online distributors like Policybazaar and Coverfox too have obtained insurance broking licences. With the 2020 amendment of insurance rules, foreign investors are allowed to hold 100% in insurance distribution, resulting in significant investment.

The increase in brokers’ share has implications for the non-life industry in light of the insurance regulator lifting the caps on commissions. Insurers also have lesser control over the distribution as brokers are not affiliated with any company unlike corporate agents. Insurers say that this is a sign of maturing of the industry and will lead to more awareness.

According to recent Irdai data, individual agents, who brought in 36% of the premium a decade ago, now bring just 22%. Individual agents have retained this share because of third-party motor premium and health insurance. Brokers and other institutional distributors focus on comprehensive or ‘own damage’ cover, which brings in most of the premium, and do not sell standalone third-party covers. If vehicle owners want to buy only the mandatory third-party cover, which is usually the case in old vehicles, they have to turn to individual agents.

In health, individual agents account for 31% of the premium, while overall agents (which includes banks and corporate agents) bring in nearly half the premium. Insurers say that individual health insurance buyers prefer to go through agents, as they expect some hand-holding during claims.

At the wholesale end, companies use brokers to buy specialised covers and get help in claim settlement. In some specialised covers, brokers help insurers in drafting policy wording.

There are 562 active insurance brokers, of which 464 are direct brokers, 63 composite (insurance and reinsurance) and five reinsurance brokers. Of the 14.5 lakh recognised point of sales persons, 6.6 lakh are with insurance brokers.


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