LIC, the giant in the insurance industry, has relied heavily on its agency force to market its plans for quite a long time. With the opening up of the insurance industry in 1999, the Insurance Regulatory and Development Authority (IRDA) allowed insurance companies to utilize alternative distributive channels such as corporate agents, brokers, referrals, etc. The LIC has tied up with 31 banks and 100 brokers in order to improve its business. But the contribution of the newly emerged channels to the total new business of LIC is just 1.21% only in 2004-05. An attempt is made to assess the contribution of different distribution channels to the overall new business performance of the LIC.

In today's market, most producers do not sell their goods directly to the final consumer. This is because direct distribution is so costly and it is beyond the reach of marketers. Hence, marketers use different distribution channels to display, sell or deliver the physical product or service to the buyers or users. They include distributors, wholesalers, retailers and agents. Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. A distribution system is a key external resource. The growth and development of organizations to a large extent depends upon effective and efficient distribution system due to the fact that distribution creates time value, place value and utility value to goods and services.

Organizations have many alternatives for reaching a market. They can sell directly to the buyers or use one, two or three-level channels. There are basically four consumer marketing channels such as zero level channel; one-level channel; two-level channel and three-level channel. A zero level channel also known as direct-marketing channel consists of a manufacturer selling directly to the final customer while a one-level channel contains one selling intermediary such as a retailer. On the other hand, in a two-level channel, there are two intermediaries. In consumer market, the two-level channel is widely prevalent. A three-level channel contains three intermediaries. Channels normally describe a forward movement of products/services from source to user.

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