Selling Insurance Products in India: The Commission versus Fee Debate

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : MKTG240 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Marketing of Financial Products / Marketing Environment / Sales Force Management
Case Length : 19 Pages
Period : 2008-2009
Pub Date : 2010
Teaching Note : Not Available
Organization : -
Industry : Insurance Industry
Countries : India

Abstract:

The case discusses the commission versus fee debate related to the compensation structure of insurance agents in India. Though the issue was a long standing one, it sparked a fresh debate when the Swarup Committee on Investor Awareness and Protection in 2009 proposed scrapping of the agents' commission by 2011 stating that such a decision was necessary to protect the interests of investors. The case discusses whether a fee-based model as suggested by the committee would be viable in the Indian insurance market or whether such a step was a premature one. The case points out the implications the reform may have on the Indian insurance sector and presents the views of regulators, investors, and agents on introducing a fee-based model for agents in the insurance sector.

Marketing Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

While the industry and insurance agents strongly opposed the move, investors and some regulatory bodies supported the change.

The case concludes by analyzing whether the government's decision to continue with the commission-based system in the interest of insurance industry and financial intermediaries overlooked the investor's viewpoint.

Issues:

Understand the issues and challenges in selling financial products such as insurance.

Understand the compensation structure of the insurance agents in India and analyze the ramifications of the Swarup Commission recommendations.

Analyze the advantages and disadvantages of a fee-based model as against the commission-based model.

Evaluate the need for a change in the remuneration structure of a financial intermediary in Indian insurance sector.

Contents:

  Page No.
Introduction 1
Background Note 3
The Proposal 6
Implications 8
The Debate Rages On... 9
Looking Ahead 12
Exhibits 13

Keywords:

Marketing Financial products, Selling Financial Products, Compensation, Commissioned-based model, Fee-based model, Incentives, Investor awareness and protection, Mis-Selling, Insurance Penetration, Entry and exit loads, Insurance sector reforms, Swarup Committee, Insurance regulator, Indian insurance industry, Financial Well-Being Board of India (FINWEB), LIC

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