India is moving fast to emerge as one of the strongest economies in the world by 2020. One of the fastest growing industries in the service sector is, insurance. With the entry of private players and foreign collaborations, the life insurance business in India has grown tremendously. The major contributing factors for this growth are the introduction of new products and channels of distribution as well as the penetration of private insurance companies in uncovered markets. This study aims at exploring the role of different distribution channels in the growth of the life insurance industry.

With the entry of private players and foreign collaborations, penetration of the insurance sector in India has gone up from 1.02% in 1999-00 to 4% of GDP in 2007-08. The life insurance business in India grew by 14.2% in terms of US dollars during the same period. The life insurance business, in terms of premium collection, has also doubled in the past five years. It is likely to grow by about 30% touching $60 bn in the coming four years. As per the annual report of the Insurance Regulatory and Development Authority (IRDA), introduction of new products and alternate delivery channels of distribution and penetration of private insurance companies into uncovered markets are the major contributing factors behind this growth. A comparative analysis, exploring the impact of alternate distribution channels adopted by the Life Insurance Corporation (LIC) as well as private insurers is conducted in this study.

Organizations use intermediaries to make their products readily available to the end-users i.e., their customers. This network of intermediaries is referred to as distribution channels. Mainly there are four levels of distribution channels.

Organizations with zero-level channel distribution directly sell their products to end-users through door-to-door selling, Internet, telemarketing, etc. In one-level channel, organizations sell their products through retailers. In two-level channel, product reaches to the end-users through wholesalers followed by retailers. Similarly, even in three-level channel, organizations sell their products through wholesalers. Wholesalers then sell it to retailers through agents and ultimately the product reaches the end-users through these retailers. The market leader of life insurance business in India, LIC sold its product through tied agents initially. But now both public as well as private players have come up with innovative distribution strategies.

Insurance Chronicle Magazine, Life Insurance Business in India, Foreign Collaborations, Terms of Pemium Collection, Insurance Regulatory and Development Authority, IRDA, Channels of Distribution, Private Insurance Companies, Door-to-door Selling, Internet, Telemarketing, Distribution Strategies, Tied Agents, Bancassurance, Direct Business, Referrals, Brokers, Insurance Agents, Corporate Agency Regulations