METAMORPHOSIS IN RECRUITMENT AND TRAINING

OF LIFE INSURANCE 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

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 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 training practices,
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 through
Insurance 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 Insurance company. 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 ‘Insurance Retailer’.

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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 insurance retailers. 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 Insurance Company ’ 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 entered insurance
business. There were about 44 companies in 1914 which grew into 195 companies in
1940 and around 245 in 1956.

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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 by LIC 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 Indian
Insurance 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 all insurance 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 by LIC 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.

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 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 Insurance policies.
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.

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 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:

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 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
Insurance Institute 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

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

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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. The agent 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 training on 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
Insurance terminology, 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.

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 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 companies, the agents get themselves groomed through various private
trainers To name a few,
 RNIS college- Ritu Nanda insurance Services(run by Ms. Ritu
Nanda, the country’s No.1 LIC agent).
 GOPAST-(run by Sri Gopinath,Retd. CEO, LIC SriLankan
Operations).
 Academy Of 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 products.
 LUGI- Life Underwriters Guild of India(by
Sri.P.Srinivasan,president of LUGI)

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

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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 insurance agents, 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 to insurance 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, Insurance Regulatory 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

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