Indian life insurers may close down nearly 1,000 branches as digital sales platforms gain in prominence due to movement restrictions from the COVID-19 pandemic. There are currently 11,600 life insurance branches across the country.
According to a report by Moneycontrol.com, life insurers are working on several fronts to counter the impact of COVID-19 pandemic. These include selling insurance products through their website, bank websites as well as through video calls with customers. Face-to-face sales have not yet resumed in most parts of the country, causing sales volume to dip.
As of March 2020, there was a 32.2% decrease year-on-year (YoY) in new life insurance premium to $3.39bn. In April 2020, first-year premium collections declined 32.6% YoY to $897m.
With business seeing a dip every month, insurers are looking to conserve cash for business purposes. Branch walk-ins are close to zero and despite this, monthly rental costs are being incurred. Saving on costs by reducing branch presence is one part of the cost saving strategy by the insurers.
The Moneycontrol report quoting sources in the industry said, “Branches in close proximity to large cities with internet connectivity are likely to be the first victims.”
“Digital has seen a wider presence across the country, especially in metro cities. Hence the idea is to leverage this strength rather than investing into branch real estate,” said the chief distribution officer of a private life insurance company.
Currently, banks and agents are the two largest distribution channels for life insurance companies. Online sales constitute less than 10% of the total premium collected.
The Moneycontrol report quoting industry insiders says that job losses would be inevitable in the long term. The life insurance industry currently employs 300,000 people as direct employees who work on a full-time basis with the 24 Indian life insurance companies.