Private insurers are shutting their branch offices in small towns due to lack of profits from these areas, leaving the state-run Life Insurance Corporation to bear much of the burden of financial inclusion.
According to the latest annual report by the Insurance Regulatory and Development Authority, LIC opened 1,313 offices during 2013-14 while private insurers closed down 732 offices and opened 166, taking the net reduction in offices of private insurers to 566 during the fiscal.
Of the total 11,032 total offices of life insurance firms in the country, LIC has 79.6% of its branches in small towns while its private peers have 57.95%.
Insurance companies have been closing down unviable offices and turning much of their fixed cost into variable cost as they struggle to generate reasonable returns even after a decade of op erations. A slew of changes introduced in 2010 on life insurance policies, including a cap on commission paid to agents, have adversely affected the sector.
Private insurers had closed down 1,097 branches in the previous year to cut costs.
Instead of expanding their footprint -which calls for capital to set up new branches and investment in training of staff -life insurance companies are investing in technology to reach out to prospective customers and enable smoother issuance of policies.
The industry had seen growth of 9.43% in premium income in 201314, largely due to LIC’s performance while the private sector saw a 1.35% decline in premium income during the period.
Life insurance industry had re . 7,588 crore ported a total profit of ` during 2013-14. Six insurance companies in the private sector paid dividend to their shareholders during the year.
According to the report, the number of life insurance agents increased to 21.88 lakh during the fiscal from 21.22 lakh in 2012-13.
Amid hopes of economic revival, most industry leaders expect 10-15% growth in life insurance in the current fiscal.
Source: The Economic Time
Date : 13-01-2015