Distribution Conundrum of Bank Originated Life Insurance Firms in India: The Compelling Case of SBI Life and HDFC Life

Abstract

An evolving phenomenon, the life insurance distribution is poised for further disruptions in the future. Technological advances  - in the way life insurance is sold, both as a facilitator to the traditional channels as well through online – have meant that the distribution mixes of companies sport a look that is very different from the recent past. A slew of regulations have further spiced up the distribution landscape and the result is an uncertain future. The underlying statement is that “no one size fits all” and the companies are more or less moving towards a multi-distribution regime in the hope of arriving at that elusive optimum distribution mix. Further, the company ownership structures involving life insurance firms promoted by a public / private bank and, non-bank promoted firms have added to the intrigue. It is in the backdrop of the aforesaid, that this paper brings to the fore a never before highlighted conundrum, that of same source originated (read: a bank) companies having distribution mechanisms as diverse as chalk and cheese. To this end, the paper analyses the  distribution mixes of two such representatives, SBI Life (leading public bank originated company) and HDFC Life (leading private bank originated company) for the last five  years and analyzes the distribution  trends and the anomalies within and between  the set ups. In addition to providing insights into strategic decision making, the paper offers inputs to the practitioners.An evolving phenomenon, the life insurance distribution is poised for further disruptions in the future. Technological advances  - in the way life insurance is sold, both as a facilitator to the traditional channels as well through online – have meant that the distribution mixes of companies sport a look that is very different from the recent past. A slew of regulations have further spiced up the distribution landscape and the result is an uncertain future. The underlying statement is that “no one size fits all” and the companies are more or less moving towards a multi-distribution regime in the hope of arriving at that elusive optimum distribution mix. Further, the company ownership structures involving life insurance firms promoted by a public / private bank and, non-bank promoted firms have added to the intrigue. It is in the backdrop of the aforesaid, that this paper brings to the fore a never before highlighted conundrum, that of same source originated (read: a bank) companies having distribution mechanisms as diverse as chalk and cheese. To this end, the paper analyses the  distribution mixes of two such representatives, SBI Life (leading public bank originated company) and HDFC Life (leading private bank originated company) for the last five  years and analyzes the distribution  trends and the anomalies within and between  the set ups. In addition to providing insights into strategic decision making, the paper offers inputs to the practitioners.