TRAINING OF LIFEINSURANCE AGENTS - THE RETAILERS

By

Aadhirai.G*,N.Panchanatham**,R.Murugan***

*Research Scholar, Mother Theresa Women’s University Kodaikanal, NO.12,3rd cross, street,
Rajiv Gandhi Nagar, New Saram, Pondicherry-13. Mobile:9486908016 , E-
Mail:aadhiraig@yahoo.com

** Professor and HOD, Department of Business Administration, Annamalai University,

Chidambaram. Mobile:9443338107, E-Mail:npanchanatham@yahoo.com

***Development Officer, LIC of India, Branch-II, Anna Salai, Pondicherry-1.

Mobile:9443491122,E-Mail:aakash01@sify.com

METAMORPHOSIS IN RECRUITMENT AND TRAINING OF LIFE INSURANCE AGENTS-THE

RETAILERS. Aadhirai.G , N.panchanatham, R.Murugan

Retailing is the sale of goods or merchandise to the consumer’s personal use. In other words ,
the retailer is the last link in the producer-consumer chain. In Life insurance,
the insurance policies are sold to the consumer by the Agents, who may be seen as the
“retailer”. Life Insurance penetration in India has been steadily growing from less than 1% in
1990-91 to 3% in 2006-07, LIC of India being the dominant player with over 74% market share in
2006-07.Primarily insurance is retail in nature, each policy being sold to the individual customer.
This paper is an attempt in tracing the changes in the Life insurance industry’s Agents
recruitment and trainingpractices, the emphasis being especially on LIC of India which is in
existence for more than five decades. The secondary Data- the Manuals of LIC and the IRDA
guidelines have been the basis of this study. The outcome of the study identifies that besides
standardizing agents’ recruitment process, the evolution in the training process has helped the
emergence of an elite group of “Investment Consultants” in the industry. Introduction: Retailer is
the one who is involved in selling products or services to consumers for their personal and/or
family use. Retailers are the final link between the producer and the consumer. In
Life Insurance industry, the products are designed and introduced by the actuarial department
and the top management. Then they are marketed throughInsurance Agents, who work under
the guidance and leadership of Development officers. The development officers are the
employees of the corporation and responsible for the recruitment of the agents. But the Agents
who work under the Development Officers are not the employees but the representatives of
the Insurancecompany. Life insurance is retail in nature, the agents selling
each insurance policy directly to the individual consumer. Apparently, the life insurance agents
shall be called as the ‘Retailer of Insurance’ or the ‘InsuranceRetailer’.

Objectives: This paper is an attempt to trace the evolution witnessed in the

Life Insurance industry, through decades of its existence in India, the emphasis on the
recruitment and training procedures during the different phases. It would help us to understand
the gradual transformation, we notice among today’s life insuranceretailers. The retailer has
certainly developed from a petty non-shop retailer of insurance to a professional retailer
of insurance . The paper throws special light on the recruitment and training procedures before
and after opening the life insurance industry to private operators. Methodology: The secondary
data like the sales manual of the organization and the review of relevant literature formed the
basis of this paper. The researchers’ personal experience in the field and interaction with the field
force of the industry has aided the explorative study of the current recruitment training processes
and also those prevalent before privatization. Hisrorical Background Of Life Insurance Industry:
‘Growth of life insurance in India’, in the book ‘Applications of Life Assurance’(edition 2000) very
vividly brings out the historical back ground of Life Insurance industry. The year 1818, saw the
advent of Life Insurance Business in India, with the establishment of ‘Oriental
Life InsuranceCompany ’ in Calcutta. This company was mainly formed to provide help to the
widows of the Europeans. Later, due to the persuation of one of its Directors, Sri. Babu Muttyal
Seal, Indians were also insured by the company but were considered as sub-standard lives and
charged an extra premium of 15% to 20%. Due to the pioneering efforts of reformers and social
workers like Raja Ram Mohan Roy, Dwarakanath Tagore, Ramatam Lahiri, Rustomji Cowasji and
others, Indians entered Life Insurance Business. The first Indian Insurance Company “Bombay
Life Assurance Society”, started its business in 1870, insuring Indian lives at standard rates. With
the encouragement of many eminent political figures like Mahatma Gandhi and Pandit Nehru,
many Indians enteredinsurance business. There were about 44 companies in 1914 which grew
into 195 companies in 1940 and around 245 in 1956.

With the mushrooming of many Insurance companies, the competition became very heavy. To
sustain in the trade, some companies started indulging in malpractices and a number of
companies went into liquidation. It was then that the Government of India nationalized the
life insurance industry by merging around 245 companies and formed the
LIFE INSURANCE CORPORATION OF INDIA, which started functioning from 1.9.1956.
Governing Body: Until nationalization of life insurance industry no clear or common norms were
followed in agents’ recruitment and training. Upon nationalization in 1956, all existing agents
were absorbed byLIC of India and they were governed by the Life Insurance Corporation Act
1956. Later in 1972, the recruitment norms were regularized and since then, the agency force has
been governed by the LIC OF INDIA (Agents) Rules 1972, until the year 2000. On the advent of
economic liberalization, the 45 years monopoly in the IndianInsurance by LIC of India has come
to an end. Once, the insurance sector was thrown open to private operators as well, there arose
the need for a common controlling body. IRDA, the Insurance Regulatory and Development
Authority is the apex body of all insurance companies. Presently, the agency force of
allinsurance companies are governed by the IRDA (Licensing of Insurance Agents) Regulations
2000, with effect from 19-07-2000, and the LIC of India (Agents) Rules 1972 no longer holds the
field. The autonomy enjoyed byLIC in formulating its own agents’ recruitment
and training process was wiped off with the advent of IRDA as the common watchdog of LIC and
15 other private insurance companies which are in the market. Types of Agents Recruited:
Before nationalization, there were ‘Agents’, ‘Special Agents’, ‘Chief Agents’ and so on. The chief
agents seemed to be employing people who were later absorbed as employees of LIC of India.
These agents continued to serve the LIC. Collection of premium, remitting it to the LIC and
issuing the pucca receipt to the policy holders was considered as the main role of these agents.
They were more of an intermediary tool in premium collection rather than marketing avenues.

After nationalization, the LIC was appointing the following types of agents: • • • generally
appointed agents(usually known as just “Agents” – non-stipendary) Rural Career Agents(called
as RCA’s – stipendary for the first 3 yrs) Urban Career Agents(called as UCA’s –stipendary for th
first 3 yrs).

In this paper, the authors consider all agents as retailers, since only occasionally they sell
Group Insurancepolicies. Under the IRDA Regulations 2000, there are only two types of agents
recruited, who can typically be grouped as retailers and wholesalers • • Agents of general
category(usually known as just ‘agents’) Bancassurance or corporate agents

Here again, the agents who sell individual policies may also sell Group Insurance policies,
wherein their role is that of an wholesaler. The LIC’s penetration in the rural market was possible
through distinct agents to cover different groups of customers like rural, semi-urban, urban etc.
But after privatization of the insurance sector, the LIC of India is forced to standardize all its
agents recruitment. Therefore even the recruitment of UCA’s ( Urban Career Agents) for its
Career Agents Branches has been stopped since 2005. Eligibility Conditions For Agents
Recruitment: “There was no specific eligibility condition- educational or otherwise for agency
recruitment. Nor was there any conditions stipulating the minimum business performance” says
Sri.Thiyagarajan, who was an employee of the erstwhile Prithvi Insurance Company and later
also served LIC of India after nationalization. From 1972, there were specific eligibility norms laid
out. As per the LIC of India (Agents) Rules 1972, the eligibility conditions vary according to the
type of agents. THE AGENTS: 1. Should have completed 18 yrs of age and no limit on the
maximum age.

2. Should have passed X STD, if they reside in a town with over 1 lakh population or should have
passed VIII STD, if from a town with less than 1 lakh population. However, the Divisional
Manager of LIC was empowered with the discretion to waive the educational qualification if he
was convinced that the candidate has a flair for marketing. • THE RCA’s (RURAL CAREER
AGENTS):

1. Should have completed 21 yrs of age and not more than 35 yrs of age. 2. Should have passed
X STD. 3. Should hail form a rural area. • THE UCA’s (URBAN CAREER AGENTS):

1. Should have completed 22 yrs of age and not more than 35 yrs of age. 2. He/she should be a
graduate , if hailing from a city with more than 5 lac population. 3. Should have passed XII STD, if
they reside in a city with less than 5 lakh population. After privatization, the eligibility norms laid
down by IRDA are as follows: 1. The minimum age should be 18 yrs and no limit on maximum
age. 2. The education qualification is XII STD in urban areas and X STD if hailing from rural areas
with population less than 5000 , where more than 75% are engaged in agriculture. With a view to
standardize the agents, the qualifying conditions for recruitment were also standardized. As a
consequence, LIC could not be flexible in relaxing the eligibility conditions of agents recruited.
The lack of discretion enjoyed so far, indeed cause a stifling condition for LIC of India. It was
earlier able to market its product effectively by recruiting people with popularity and influence from
a village background as its agents (retailer) even if he did not fulfill the minimum educational
qualification. Recruitment Process:

We could not find literature throwing light on the recruitment processes before nationalization and
during the early periods of nationalization. But according to Sri.Thiyagarajan, retd. employee
of LIC , the Development Officers who were then known as field officers, were identifying agents
and the Branch Manager was appointing agents by issuing licence for 1 year, the fee for licence
varied from Rs.15 to Rs.25 for different type of agents- whether Agents, Special Agents or Chief
Agents. The LIC Agents Rules (1972) was more specific about the recruitment process. Other
than UCA’s all the agents are almost always identified by the Development Officers of LIC. The
prospective candidate is convinced into taking up agency. Then the candidate is interviewed by
the Branch Manager and usually is accepted without much hassle. The candidate then pays
Rs.15/- to obtain licence to act as an agent. The licence is immediately issued and the agent can
procure business from the very first day. These agents undergo training and test after the
appointment. The Urban Career Agents, on the other hand are usually recruited in batches by
the LIC management through newspaper advertisements. The 3 –tier system of Manager-
Development Officer-Agent, prevalent in other agency recruitment is not found in UCA
recruitment. The Branch Manager is directly responsible for recruiting and training agents. As
per the IRDA Regulations 2000, except Bancassurance and other Corporate agents, all agents
are identified by the Development Officers. The candidate then undergoes a training for 100
hours1, of which 10 hrs consists of hands-on training in branch office functions and 5 hrs of
field training imparted by the appointing Development Officer. This training is conducted by the
Agents’ Training Centre (ATC) and Divisional Training Centre (DTC) of LIC. The candidate then
has to pay as examination fee, Rs.525/- to the Insurance Institute of India and Rs.150/- to LIC of
India as processing fee and appears for the pre-recruitment test conducted by
the InsuranceInstitute of India. Once the candidate clears the pre-recruitment test, by scoring a
minimum of 50% marks, the candidate has to appear for an interview conducted by the Marketing
Manager of LIC. The candidate should score a minimum
1

The 100 hrs training has now been reduced to 50 hrs from Nov 2007 onwards.

of 60% in the interview to become eligible to receive the licence. The licence to act as
an insurance agent is issued by the IRDA on payment of Rs.250/. The erstwhile simplicity of
agents recruitment procedure is now replaced by a methodical but time consuming and
elaborate procedure laid down by the IRDA. Now it takes around 2 months for an applicant to get
his licence and start procuring business. It is also noted, that the expense involved in obtaining
Agent’s licence has increased manifold. Training Process: During the pre-privatisation period,
the training and test followed appointment of the agent. The training was usually informal with
the Development Officer being around the agent to educate about the products and train them in
marketing skills. This training extends over a long period of time like the guru-shikshya method
of teaching. The Development Officer would accompany the agent whenever he meets a
prospective client , to sell policies. Theagent would by observation, gradually learn to approach
the customer, canvass for business, get various requirements for policy completion and post-
sales service like loan processing, revival of lapsed policies, or maturity or death claim servicing.
The calculation of premium payable for a specified sum insured and age under a specified policy
formed a very important and major aspect of training. The UCA’s were given full- time trainingon
various aspects of insurance products, premium calculation and Branch Office functional
procedures for 45 days, by the Branch Manager. An exam was also conducted at the end of
the training to assess the candidates familiarity with insurance concepts. The post privatization
era is witnessing a significant transformation in the training process. The pre-
recruitment training familiarizes the candidate with Insuranceterminology, Insurance concepts
and Insurance products. The hands-on training conducted by the Branch Manager trains in the
working of the Branch Office especially in scrutiny of proposals, underwriting lives, policy
servicing and front-end operations.

The field-training is imparted by the Development Officer, covering sales behavior,

demonstrative sales calls, learning how to solve customer servicing problems, surveys about
customer needs and requirements etc. This is very much the practical on-the-job training. Also
all the agents appointed after 19.07.2000 are required to attend 25 hours of training, at the time
of licence renewal,on completion of every 3 yrs, to update themselves about the products and
market trends. Further, during the course of the agency, the agents are trained by LIC on various
occasions by engaging private trainers/motivators. Besides the formal pre-
recruitment training given by the sponsoring insurance RNIS college- Ritu Nanda companies,
the agents get themselves groomed through various private trainers To name a few,
insurance Services(run by Ms. Ritu Nanda, the country’s No.1 LIC agent GOPAST-(run by Sri
Gopinath,Retd. CEO,). LIC Academy OfSriLankan Operations). Insurance Marketing And
Agency Management(run by Sri K.Chandrasekar, Rtd. Former No.1 Development Officer of LIC
P.S.Natarajan, a retired employee of) LIC, Madurai Division, an avid trainer of insurance
LUGILife Underwriters Guild of India(by Sri.P.Srinivasan,president of LUGI)products.

Outcome And Discussion: These institutions/trainers train the agents on many areas such as
marketing skills, communication skills, personality development, self-confidence development etc.
The agents of LIC are emerging as full–fledged insurance professionals from the pestering
agents of the bygone days. The emergence of professionalism is primarily due to
the training initiatives taken up by the LIC to equip its agents with skill set to compete in the post
privatized insurance market. The

secondary but significant factor in catalyzing the professionalism is the technological

advancement owing to which, there are so many insurance softwares to aid
the insurance retailer. In today’s training of insuranceagents, the emphasis on premium
calculation has shifted towards professionalism in marketing. The use of computers and lap-tops
as tools for selling has required the agents to transform themselves into techno-savvy retailers.
The agents are now more confident in approaching clients of all social strata, which is evident in
their sales performance. The agents are now finding life insurance agency as a financially and
socially rewarding career option. With the steady increase in Life insurance business, the agents
also enjoy increased income by commission. With the public gaining better awareness
about insurance need, the stigma attached toinsurance retailers has transformed into respect
for the efficient ‘Investment Consultant’. Thus the metamorphosis in agents’ recruitment
and training process in life insurance industry has been positively significant over a very long
period of time. We may confidently expect that in future, training will assume a major role in the
making of the insurance retailer. REFERENCES: *Applications of Life Assurance (Published
by Insurance Institute .of India,2000) *The Life Insurance Corporation Act, 1938 *The LIC Act,
1956, (Universal-Law publishng co. Pvt. Ltd, 2008) *The Sales Manual, LIC of India *History
of Insurance in India, InsuranceRegulatory and Development Authority. *Annual Report 2006-
07, Insurance Regulatory and Development Authority. *CII IBEF Insurance Industry Report
(2007), available from
www.ibef.org/industry/insurance_industry.aspx