The Rwandan Social Security Office indicates that at the end of 2021, 85.4% of the population were insured under the community health insurance scheme commonly called ?mutuelle de sante [1]. However the private Life insurance in Rwanda has registered a very low market penetration rate.  According to Ntukamazina [1]. The private Life insurance in Rwanda has registered a very low market penetration rate   while other classes of insurance products have been doing relatively well. The research evidence suggests that there is a poor design of products.’’

The insurance business is negatively affected by the poor savings culture aggravated by low disposable income levels among the population. Many distribution channels are still unexploited, and the life insurance contracts are not easy to understand because they are generally designed in a user-unfriendly manner. In terms of use of technology, the life insurance business has lagged behind. In order to respond the aforementioned problems, in 2017  life insurance companies have started to use insurance agents as channel to reach to clients.  Due to the change in customer’s behavior life insurance industry started growing as other classes of insurance. These channels aim to help insurers directly reach their target customers, bypassing traditional intermediary channels. Initially these channels were used to provide only product- or policy related information and to advertise, however insurers now leverage these channels to directly communicate with customers and sell suitable insurance products.  Regardless the importance of agent’s distribution channel on financial performance of life insurance companies. This topic remains explored in academic, this research aims to assess impact of distribution agents on the financial performance of selected life insurance companies in Rwanda. The study addresses the following question’’ what is the effect of agent’s distribution networks on financial performance of Rwandan life insurance companies?

The general objective of the study is to assess the impact of distribution Agents on financial performance of life insurance companies in Rwanda. The Specific objectives are as follows;

1. To assess the financial performance of Rwandan Life insurance companies.
2. To assess the distribution channels used by life insurance companies in Rwanda.

• To find out the relationship between distribution agents and financial performance of life insurance companies in Rwanda.

Dickson, Nwakaego & jane [1]. Conducted a study and found that the branch network, electronic banking and multiple distributions were used by the banks. Marketing strategies being employed by the banks were aggressive marketing, mass marketing and value marketing, the study further found that the adopted distribution channel strategies have a significant effect on the performance of the banks. It was recommended among other things that; commercial banks should adopt those marketing distribution strategies that ensure the performance of the bank is improved and do away with those which adds costs so that the banks can compete effectively with the others and that they should embrace the concept whole heartedly by adopting electronic banking as already the battle for the banks is technology usage which should be one which offers customers more features. Lan Thi Hoang (2021), conducted research entitled Research on the development of distribution channels and the strategy will help businesses develop competitiveness in the market. The analysis results show that strategy factors have a positive effect on firm performance, and distribution channel also has a positive impact on firm performance. This result also indicates that distribution channels activity as an intermediary between strategy and firm performance. Conclusion: The study also gives some policy implications on strategy and distribution channels to improve firm performance [3].

Anthony Achaia, 2018, the study investigated the relationship between differentiation strategy and performance of Sameer Africa Ltd located in Nairobi, Kenya. Informed by the study this paper discusses the extent to which channel differentiation strategy adopted by Sameer Africa (K) Limited influenced the company’s performance. The study employed a correlational research design.  The study targeted 112 employees of Sameer Africa (K) Limited comprising of senior management, HODs and junior staff and 90 dealers based in Nairobi. A sample of 134 respondents was selected by use of stratified and simple random sampling techniques. Primary data was collected through self-administered questionnaires [4]. The quantitative data was analyzed using descriptive statistics in the form of tables and inferential statistics in the form of Pearson correlation and regression analysis with significance level of 0.05 to test the hypothesis. From the findings of the study, majority of the respondents believed that Sameer Africa (K) Ltd could achieve competitive advantage through channel differentiation. This suggest that an increase in channel differentiation strategy such as use of market trends to determine most appropriate channel strategy, use of different channels with the aim of minimizing cost of distribution, selling some of the products and services through intermediary and complementary firms and applying different distribution channels .So as to satisfy unique customer needs would result in an increase in performance through market share, revenue, sales and customer satisfaction [2].

According to a study by Feyen, Lester, and Rocha (2019), what are the driving forces behind the development of the insurance industry? Insurance companies and industry players are looking to increase market share of existing and new products through promotional activities such as branding, advertising, marketing and offering discounts to customers. I was implementing a penetration strategy. Many companies say that introducing their products and services to potential and actual customers is their biggest growth.  The presence of traditional branch networks and intermediaries helped reduce insurance penetration due to the lengthy bureaucracy involved in the entire insurance process [5].

Ngoima (2018) investigated the role of insurance brokers in increasing insurance penetration in Kenya. The role of insurance intermediaries, including market maker, agent conversion, participation cost reduction, and service delivery, is determined by the coefficient of determination (R2), and demonstrated strong agreement with a research population of 45 insurers. 0.7338. According to the findings, the above-mentioned role of insurance agents accounts for 73.38% of insurance companies' market penetration in Kenya. As a result, even in today's modern culture, the traditional employment of insurance agents and brokers can make a significant impact in facilitating insurance firms' market penetration [6].

Chen and Chang (2020) have a paper published in Taiwan's Journal of Sales Channel Strategy and Efficiency in the Life Insurance Industry. Many Taiwanese life insurance businesses have had to adjust and implement new marketing techniques as a result of legislative changes affecting the insurance industry. The study looked at 24 Taiwanese life insurance companies from 1997 to 2006, as well as changes in their marketing methods and how these affected market penetrations. The study evaluated efficiency scores before and after new and existing marketing and distribution channel tactics were implemented. The results suggest that direct channel strategies outperform non-direct or other channel strategies in terms of efficiency and productivity change. As such, the direct sales channel strategy fared much better than other sales channels. The study recommends using direct sales channel strategy while marketing the insurance company products’ although other technologically enhanced channels shouldn’t be ignored [7].

The research employed panel data, sometimes referred to as longitudinal data, is data that contains observations about different cross sections across time. The target population of the study is 48 employees of three life insurance companies in of Rwanda who deals day to day with management of the companies.

The sample of respondents is forty-eight (48) composed by chief executives’ officers, chief finance officers, chief commercial officers, Branch managers or team leaders and Sale managers or regional coordinators as shown in table below [8].

                                                                        Table 1: Insurance Institutions and Number of Respondents.

Source: Primary data, 2023.

To identify the effect of distribution agents on financial performance of life insurance industry in Rwanda, the following mathematical model was used: 

 Model 1           Y_t=B0+B1x_1it+B2x_1it+e  Whereby:  Y: Profitability, B0: Constant,  B1-B2: Coefficient estimates, X1 : Number of agents  ,X2 : commision fee , e : error term ,t: time ,i: observation.

This research includes data on Rwanda life insurance for the period 2012 to 2021 which is 9 years’ financial period. The time frame includes the data on life insurance’ performance after the implementation of distribution agents networks that is geared towards the improvement of their finance performance.

This research aims to obtain the information from the reports provided by the selected life insurance companies. The researcher analyzed collected data from the secondary source, and information is expected to be used only academically and information provided be well maintained. The researcher verified the validity and reliability of the research design after making their choice. Validity and reliability in research design, according to Kothari (2000), refer to the requirement to make sure that the concepts employed in the study measure what they are actually intended to measure and that this measurement is consistent and stable [9].

The Jarque-Bera test statistics for the LNAGENTS, LNASSETS, LNEQUITY, LNPOLICIES data are 1.12421, 0.57756, 21.7899 and 1.05566, respectively. To test for normality of the data for each of the variables using the Jarque-Bera test, we will use the 1%, 5% and 10% levels of significance and the following hypotheses: Null hypothesis (H₀): The data are normally distributed . Alternative hypothesis (H₁): The data are not normally distributed. The probability values for Jarque-Bera are greter than 1% for all the variables. Hence, statistically, for all the variables, we are not able to reject the null hypothesis at 1% level of significance and accept the alternative hypothesis. Therefore, the data for all the variables are normally distributed [10].

The results show the gender distribution of life insurance workers in Rwanda. The data show that 52.1% majority of respondents are female, while 47.1% of all respondents are male. This means that the information provided by respondents is gender-neutral and takes into account all genders [11].

According to the research findings, the education level of the respondents is shown in the table above: 8.3% have a diploma, 56.3% have graduated from college with a degree, and 35.4% have a postgraduate degree, indicating that the majority of the respondents had attended university [12]. 

The Feedback from consultations showed that 8.3% of respondents had less than one year working experience in life insurance business, while 43.8% had one to three years of work experience. 35% of all respondents have her 4-6 years of working experience and 12% have more than 7 years of working experience in the life insurance sector. As a result, we found that the majority of our employees have sufficient work experience in life insurance business. The study provided accurate information about the research question and objectives [13,14].

Distribution Channels Used By Life Insurance Companies in Rwanda

The results show respondents' opinions on the various methods used by life insurers. According to the survey,  12.5% ??of the total number of respondents said they primarily use direct methods to reach customers. Direct sales are channels  whereby  insurance companies sell their products without intermediaries. 56.3% of all respondents said they sell their products through agency' intermediary channels. 20.8% of respondents use digital-based platforms to sell their products, while 10.4% of all respondents use both methods. This means that in Rwanda ,life insurers use mostly  Agents as  distribution channel of their products [15].

Determinants Of Distribution Methods In Life Insurance Company

Based on the research findings , 16.7% of the total respondents revealed that the distribution methods depends highly on company’s characteristics ‘’ the new company prefer to use intermediaries as a way to promote their brand , while 18.6% of the total respondents revealed that the company distribution’ dependents on market characteristics  the market characteristics includes  size of the market, buying habits of customer etc…, 35.4% revealed that the distribution channel depend

ent mostly on product characteristics,’’ when you compare motor  insurance compagnies and life insurance company in Rwanda, they operate differently , motor insurance does not  tend to put too much emphasize on marketing   because of its  mandatory nature whereby  the Rwandan national police imposes fines when driving without motor insurance cover [16]. 29.2% of the total respondent

reveled that life insurance distribution channel depends on competitors characteristics [17].

Benefits of Insurance Distribution Agents’ Networks

According to the survey, most respondents (33.3%) revealed that distribution agency reduces overhead. “Fixed costs have decreased since we started using agents, 29.2% of respondents said it is less costly to hire agents than   full company’s employees. 6.3% are happy that their company's reputation has improved because of their reseller experience and community connections [18].

Financial Performance of Life Insurance Compagnies

Gross Written Premium (GWP) — the total premium (direct and assumed) written by an insurer before deductions for reinsurance and ceding commissions [19].

Table 2: Gross Written Premium.

Source: Research findings, 2023.

The above graph presents gross written premium of selected life insurance companies before and after establishing of effective distribution agency.  Gross Written Premium (GWP) means the total premium (direct and assumed) written by an insurer before deductions of reinsurance cessions and commissions, research findings indicate that before the implementation of effective  agent as distribution  channel the mean score was 6,429 8million, from

2017-2021. the gross written income increased from 6,429,800 million to 16,506 million. The figure indicates that the minimum

Gross written premium in 2012- 2016 period was 4.115 million, while the minimum gross written income after applying the effective distribution agency model is 11,633 million. This indicate that the premium   of Rwandan life insurance increased significantly from 2017-2021[20].

Net Income

Net income refers to the money you may have available after taxes and deductions are taken out of your paycheck. For a business, net income is the money that's left over after paying operating expenses, administrative costs, cost of goods sold, taxes, insurance and any other business expenses [21].

Table 3: Net income.

Source: Research Findings, 2023.

Graph above presents the net profit of selected life insurance companies from 2012- 2016 before the implementation of effective agency distribution channel and after the implementation of the effective agency distribution channel.  According to the results the net profit of selected life insurance before was (145.2 million) on the other hand the results indicate that after introduction of agency as distribution channel the net profit increased to reach 1,264.6 million.  This implies that before life insurance companies were operating in losses [22].

Total Assets

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet. They're classified as current, fixed, financial, and intangible [23].   

Table 4: Total Assets.

Source: Research findings, 2023.

The table above present total assets of Rwandan life insurance companies, the first low column indicate that the life insurance’ assets from 2012-2016 (before life insurance established effective distribution agency) , while the second column present assets from 2017-2021 (after they established distribution agency model. Based on the research findings the yearly mean total assets of life insurance companies were 33,853.8 million in 2012-2016, the research findings indicate that the life insurance assets increased significantly from 33,853.8 million to 54,912 million in 2017-2021 period [24].

Total Equity

Total equity is one of the two main sources of long-term capital for a company, the other being long-term debt. Because total equity is the difference between a company's total assets and its total liabilities, it represents (very roughly) the break-up value of the company [25].

Table 5: Total equity.

Source: Research findings, 2023.

The above graph assesses and compare the total equity of life insurance companies from 2012-2016 and 2017-2021. According to the research findings, the total equity of selected companies’ annual total equity was 9077.4 million Rwandan francs, from 2017-2021 periods the total equity increased to 10572.8 million.  This indicates that equity grew significantly in 2017-2021 period.

Table 6: Number of policies or contracts sold per year.

Source: Researcher, 2023.

The above table present the number of written policies  by life insurance company in Rwanda from 2012-20121, the above table is divided into 2 columns, the situation before introduction of agent’s distribution at large and situation after introduction of distribution agents as channel. The number of written contracts were 34829.2, the number of policies contract increased to 113085.4 after the implementation of the contract on average.

Figure1: Distribution Agents Networks.

The table above presents the evolution of life insurance distribution Agents in selected insurance companies. According to the research, the number of distribution agents increased whereby in the 2012 the number of life insurance agents were below 100 whereas in 2021 the number of agents was estimated at above 480.  This is implying that the number of distribution agents has been increasing and influencing positively the growth of selected life insurance companies.

Effects of Distribution Agents Networks on Financial Performance

According to the t-test statistics of the premium income of the respondents before implementing the  sales agent networks strategy and after starting to implement the agent model there is possible scores indicates that there is a statistical mean difference between the two samples. The average difference between situations is -2.31. Based on the results, we can conclude that there is a statistical difference between the means of the two samples at a significance value of 0.00. The use of agents in sales has significantly increased premium income for Rwandan insurers.

The results show respondents' views on their company's financial situation before and after using agents to sell products. Based on our findings, the average score between samples (before and after) is -2.31 score. The degrees of freedom (DF) are 47 and the significance level (Sig.) is 0.00. This indicates a significant increase in life insurance assets immediately after the introduction of the agency model. The Sanlam vie’s Chief Finance officer, said that their agents are paid on commissions following their performance, he confirmed that this strategy reduces monthly salary commitments and results in increased working capital [26]. Further savings are possible, and it doesn't put under pressure on the monthly payments.

The findings present respondents views on their companies’ assets situation before and after they started to implement distribution agency strategy. Based on the research results the mean score between sample (before and after) is -2.31 score. Degree freedom (DF) is 47 whereas the level of significant (Sig. is 0.00 this indicates that life insurance assets increased significantly right after they have started to implement the distribution agency strategy [27].

The findings presents respondent’ views on their companies’ overall net profit earning situation before and after they started to implement effective distribution agency model. Based on the research results the mean score between sample (before and after) is -2.31 score. Degree freedom (DF) is 47 whereas the level of significant (Sig. is 0.00 this implies that   life insurance net income increased significantly after they have started to implement the agency as distribution channel [28].

The mean values of Premium, policies, equity, assets and agents are   11468060, 73957.3, 617291617, 44382597.1 and 269.1 agents respectively on average, life insurance premium collected  were 11,468,060 while the average number of distribution agents was 269 the stated standard deviation for Premium, policies, equity, assets and agents    are 6,327,580., 45590., 1,919,661,554, 13,336,669., 488 by comparing mean and standard there is a huge difference among them, this implies that the data varies widely around their mean which is not good for regression analysis.  The skewness are around zero which is good for the characteristics of regression, the negative skewness indicates residuals are being distributed equally on the right and left tail of the distribution curve [29].

 The jarcque bera for the residuals are 0.728887, 0.6624, 1.155664, 0.821613, 0.74199 are greater than significant value of 0.05, this implies that data are normally distributed. From the above table heteroscedasticity problems were detected, in order to get rid of heteroscedasticity the data were transformed in log form. Using the logarithm of one or more variables improves the fit of the model by transforming the distribution of the features to a more normally-shaped bell curve.

Figure 2:.Data after there were transformed into log form.

The above regression aim to establish the relationship between research variables (dependent and independent variables) in order to establish relationship among research variables the ordinary least was used for modelling. The bivariate equation applied is summarize as follows:

yi = α+βxi +ε , whereby Y was denotes at dependent variable ,  α: constant , xi : regressor , e : error term.  For the first equation: yi = α+βxi +ε... Log premium= α+ log agents +error term, according to the research findings, results indicates that there is significant positive coefficient of 0.826. This implies that the increment   by 1% in number of distribution agents in life insurance compagnies resulted in an increase of premium of life insurance companies.  R- square of 0.95 ~ 95% indicates that independent variables explain dependent variables by 95%. The constant of 11.6% it implies that with the intervention of agents, the   insurance compagnies will grow by 11.6% financially.

The second equation: yi = α+βxi +ε ……….. Log assets = α+ log agents +error term, according to the research findings, results indicates that there is significant positive coefficient of 0.42. This implies that the increment   by 1% in number of distribution agents in life insurance compagnies resulted in an increase of total assets by 42% of life insurance companies.  R- square of 0.95 ~ 95% indicates that independent variables explain dependent variables by 95%.

The 3^rd equation: yi = α+βxi +ε ……….. Log assets = α+ log agents +error term, according to the research findings, results indicate that there is significant negative coefficient of 1.5. This implies that the increment   by 1% in number of distribution agents in life insurance compagnies resulted in a decrease by 1.5%   of equity of life insurance companies.  R- square of 0.31 ~ 31% indicates that independent variables explain dependent variables by 31%. Which is low explanatory power. This indicates that total equity are explained by other factors that are beyond agents [30].

This study aims to assess the impact of distribution agents to the financial performance of life insurance companies; the results demonstrated that Agents had a major impact on the financial success of Rwandan life insurance enterprises. Agents must be regarded as the most important segment of life insurance industry .The research revealed that without them the life insurance business could not grow to achieve the performance we are seeing today. They are mediator between buyer (customer) and seller (Insurer) whose role is to scan the market, matching the   requirements of parties involved and thereby helping their clients to understand the life insurance product and its benefits.

As far as expenses is concerned, Distribution agents remuneration is performance based meaning that they receive a commission from the company on sales executed  , their remuneration is not a fixed cost for the company , if the commissions go up it means that the business grows as well.

The research findings indicated that prior to the establishment of effective distribution agency, the life insurance companies in Rwanda experienced a very low growth which resulted in insufficient premium and new policies leading to losses as companies were struggling to cover their fixed cost.  The research findings demonstrated that the sales have picked up when the number of agents increased leading to the conclusion that the distribution agency channel is the most appropriate distribution model for life insurance business. The adoption of agency as distribution channel model has improved the overall finance performance of life insurance industry in Rwanda [31].

The distribution of life insurance can be done through a variety of channels as regulated by National Bank of Rwanda. These channels include insurance intermediaries, such as agents and brokers, and insurance companies that sell directly to consumers, but based on the research findings, the study recommends that the life insurance companies should focus on most appropriate distribution strategies. The study recommends life insurance companies to put many efforts in distribution agency strategy as an approach that help them to increase the awareness and reach to customers with less expense as Agents are remunerated based on the performance.

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