Distribution Channels: Vital link in the economics of Insurance

R. Krishnamurthy

MD, SBI Life

FICCI Conference

Sept. 25’ 02.

Role of Distribution Channels in Value Creation in insurance companies

Distribution accounts for the largest element in insurers’ costs and impact the profitability.Distribution capabilities strongly influence product design in insurance.Distribution channels have a direct impact on the insurers’ market image.Integrity of distribution channel is the key concern of the regulatory mechanism.

Opening up India’s insurance sector: Key influences on Distribution channels

Emergence of alternative channels such as Bancassurance and Corporate Agents is reshaping the insurance industry.Insurance penetration levels will rise sharply with multi distribution channel.Widespread recognition of the need for qualified, trained sales force to serve the increasingly discerning insurance buyers.Emergence of online and offline insurance education and training initiatives is changing the range and quality of insurance services.

Opening up India’s insurance sector: Key influences on Distribution channels

Emergence of new channels will have positive impact on rebating and such undesirable practices in the industry.Widening choice of distribution channels will eventually drive down the premium level.

Evolution of alternate Distribution channels in India: Areas of supportive official measures

Need to encourage and nurture new channels such as Bancassurance to utilise the existing infrastructure to optimum extent.Policy measures should encourage insurers to take full responsibility for training and skill building.Encouraging self-regulation.Strengthening the consumer grievance redressal mechanism.

Importance of Distribution Channels

In Sum: We need more alternative channels in India to sharply increase penetration levels.Emergence of new channels is in the interest of consumers.Widening and strengthening the channels will help the insurance industry to become more competitive and healthy.