The Dormant Branch: Rebuilding an Agency Unit in a Tier-2 City
Meridian Life's Kanpur branch carries 118 coded agents. Only 47 have submitted a case in the past twelve months, and 18 of those submitted exactly one. The branch recruited 41 agents last year; 26 have already lapsed, and the 71 policies those lapsed agents had sold now sit in the orphan pool with no servicing owner. Annual branch operating cost, including two development officers, is ₹1.42 crore against first-year premium of ₹3.9 crore, so the branch's cost per case is ₹78,000 against a company average of ₹41,000. Thirteenth-month persistency at Kanpur is 58% against 76% company-wide. The branch manager wants to recruit 60 more agents next quarter and raise first-year commission by five percentage points 'to attract serious people'. The zonal head has one quarter to show improvement before Kanpur is considered for merger into Lucknow. One development officer retires in four months.
1. Decompose the ₹78,000 cost per case. Which two or three numbers best explain the gap to the ₹41,000 average, and what should the zonal head track weekly?
Read the worked answer
Derive the volume first. ₹1.42 crore ÷ ₹78,000 ≈ 182 cases a year. Spread over 47 active agents that is 3.9 cases per active agent per year - the real gap. If the same 47 agents produced a normal 6 cases each (282 cases), cost per case would fall to about ₹50,300 without a rupee of extra recruitment.
Three numbers explain the gap:
- Activation rate 47/118 = 39.8%. Roughly 71 coded agents consume licensing, training and development-officer time while producing nothing. Licensing alone rarely costs much per head, but the supervision does - and each inactive agent also drives the branch's cost per case up by inflating the denominator.
- Cases per active agent = 3.9. Selling one policy then stopping (18 agents) means prospecting has not been converted into a repeatable activity. This is a skills and activity-management problem, not a headcount problem.
- Recruitment yield = 15/41 = 36.6%. 63% attrition within a year means every recruitment drive creates a fresh orphan pool.
The manager's commission proposal actively worsens the ratio: 5 points on ₹3.9 crore is about ₹19.5 lakh, or roughly ₹10,700 per case. Paying more for the same 182 cases moves cost per case towards ₹89,000.
Weekly tracking: active agent count, cases per active agent, 90-day activation of recent recruits, 13th-month persistency, number of orphan policies contacted, and cost per case. Lead indicator is activity; lag indicator is cost per case.
2. The manager proposes 60 new hires plus a 5-point commission increase. Evaluate the proposal and set out an alternative plan for the quarter using the resources actually available.
Read the worked answer
Evaluate the proposal honestly. At the observed recruitment yield, 60 hires produce roughly 22 survivors, who at branch-average productivity add about 86 cases. Meanwhile the branch carries recruitment, training and the ₹19.5 lakh commission load on existing business. Cost per case rises before it falls, and it does so in the same quarter the zonal head is measuring - a bad trade.
Alternative: activate before you recruit.
- Triage the 118 into A/B/C. A = 12 agents with 6+ cases: protect them, give joint calls and priority leads. B = 35 agents with 1–5 cases: the actual growth pool, worth 2–3 extra cases each if given product-specific coaching on a single high-persistency product. C = 71 non-producers: decide 'reactivate or release' within 45 days; releasing them cleans the roster, the commission base and the orphan risk.
- Rebuild servicing first. Assign the 71 orphan policies to the branch service desk and to two reliable B agents as renewal-only owners. Renewals are cheap premium and they lift persistency in the same financial year.
- Recruit narrowly, not broadly. 15–20 hires from proven sources - client referrals from A agents, ex-bank relationship managers - and replace the blanket commission hike with a 12-month activation allowance that vests only if the recruit writes 4 cases and stays licensed.
- Cover the retiring development officer now, or the A agents lose their joint-call support exactly when it matters.
Quarter targets: 240 cases, cost per case at or below ₹62,000, 13th-month persistency 65%, and a clean roster decision on all 71 non-producers.
3. What servicing and conduct risk sits behind the 71 orphan policies, and what would you do in the first 30 days?
Read the worked answer
The risk is not the missing agent - it is the insurer's unserviced liability. Orphan policies are still the insurer's contracts. If nobody owns them, renewal notices go astray, lapses rise, and complaints surface years later as 'the company never contacted me'. Persistency for the whole branch already sits at 58%, and renewals are the cheapest premium the branch can book.
First 30 days:
- Build the register. Map every orphan policy to policy number, product, premium mode, next due date, contactability and claim history. Flag anything sold by agents whose conduct was already questioned.
- Contact and confirm. A structured calling drive - not a renewal reminder only, but a servicing call confirming nominee, bank mandate and contact details. Do this before the next due date, not after.
- Assign ownership. Give each policy a named servicing owner (branch desk plus renewal-only agent) and make the renewal commission follow genuine servicing, with the objective transparent to the customer.
- Fix the cause. The orphan pool exists because recruitment runs ahead of retention. Add an exit check: no agent release without a handover list of live policies.
- Report. Put the register, contact rate and renewal conversion in front of the zonal head weekly; that is the evidence base for keeping the branch open.