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Monday, June 18, 2007

Distribution channels in India for Life Insurance

Insurance policy sales in India take salesmanship.  India's growing markets require that products like life insurance must be sold.  People will buy a banking service or account, but they must be sold on the need for life insurance.  That requires established companies in India like SBI Life, and it requires sales people on the ground getting the job done.

There was a time in America when door to door salesmen were more prevalent.  People had to be sold on items before they would buy.  They often didn't have the exposure to as much advertising as they due today, they didn't have as much hands on experience with new products from pots and pans to washing machines.

Similar trends are helping to build out a heavy weight economy in Inida.  Many people in India still need to be introduced and closed on certain products.  The products will not sell themselves without a person on the ground building a relationship backed by a trusted company. 

In India, penetration is very low, making distribution channels important, says Roy. India’s insurance penetration (gross premium as a percentage of gross domestic product) was 2.53% in 2005, against a global average of 4.34% the same year.

The distribution channels’ importance also puts them in a position to influence customer choice. “Most people do not understand insurance; what they understand is what is conveyed by distributors,”says Rahul Aggarwal, director, Optima Risk Management Services Ltd, which carries out broking in both life and non-life products.

Source: Distribution channels driving the insurance business in India - livemint