subject: Indian Postal Department To Now Distribute Insurance Products [print this page] Indian Postal Department To Now Distribute Insurance Products
The Indian Postal department has received permission from IRDA to be now able to sell insurance policies. This has the potential to explode the potential touch points which insurance companies have with the customers in the far flung regions of the country.
The India Insurance industry operated in a tightly regulated when it comes to those who can sell insurance or even solicit insurance products. With this move, more than 1.6 lakh post offices would not be able to see insurance policies. To make the matters easier for insurance companies, each circle of the postal department can be a separate entity which can enter into partnerships with different insurance companies. Each circle has been allowed to tie-up with 2 life insurance companies, 2 general insurance companies, 1 stand-alone health insurance company and 1 agricultural insurance company.
Insurance companies are constantly on the look-out for more distribution networks, which forms the basis of their expansion plans. Insurance companies in India have found penetration into rural India to be a challenge with high setup, recruitment and training costs sometimes becoming prohibitive. This channel will come as a big boost to the efforts of the insurance companies in expanding their network. The postal department cannot share any of the data available with itself with the insurance company for furthering this tie-up though.
So far insurance companies have used the Bancassurance channel (tie ups with Banks) to grow their business in addition to their own network of branches and offices. Since the number of banks is limited, and 1 bank is allowed to enter into partnership with only 1 life insurance and 1 general insurance company, a lot of players had hit a dead end. This should come as a big relief.
Challenges still remain the use of post office for distribution of different products has met with varying degrees of success. Not all postal department employees take to selling different products and this coupled with the fact that insurance is not a simple product can be a challenge. Proper incentivising can solve some part of the problem, but the insurance companies would need to innovate to come out with simpler products which are easier to understand and hence easier to sell.
The postal department too would see this as an additional source of much needed revenue.
It is a good move and we would need to wait and see the success of the private life insurance companies in effectively using this channel. LIC might find it a tad easier.
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