LIC Agents Express Concerns Over Commission Reductions and Clawback Clause Following Policy Changes

LIC Commission Adjustments:

• Life Insurance Corporation (LIC) reduced first-year commission for agents from 35% to 28%.
• The reduction follows new surrender value regulations set by the Insurance Regulatory and Development Authority of India (IRDAI) effective from October 1.

Impact of New Surrender Value Norms:

• The new rules aim to enhance payouts to policyholders who exit early, impacting the whole life insurance industry, not just LIC.
• Prashant Tripathy, CEO of Max Life Insurance, said these changes would affect overall margins.

Agent Concerns:

• The All India Life Insurance Agent Federation of India wrote to LIC's MD & CEO, expressing dissatisfaction with commission cuts and changes to the surrender value norms.
• They oppose the division of agents into “high producers” and “low producers” and demand uniform commission rates.
• Agents also oppose the introduction of a clawback clause that would allow LIC to reclaim commissions if policies are surrendered soon after the first premium.

LIC’s Clarification:

• LIC clarified that the total commission for agents has not been reduced, but realigned. The perception of a reduction is incorrect.
• LIC maintains that agents will continue to earn the same total commission as before the changes.

Clawback Clause Concerns:

• The clawback clause, which allows LIC to reclaim commissions on early surrenders, has caused significant opposition from agents.
• Agents have warned of a potential nationwide strike if the clause is not removed.

Persistency Focus:

• Max Life Insurance's CEO stated that improving persistency (the rate at which policyholders continue their policies) is a key focus to manage the impact of these changes on margins.

Impact on Policyholders:

• Under the new surrender value norms, policyholders who exit after paying only the first premium will receive a smaller payout, rather than forfeiting the entire premium as per the old rule.

Agent Federation’s Demand:

• Agents argue that the commission reductions unfairly shift the cost burden onto them.
• They request LIC to reconsider these changes and warn of protests if their concerns are ignored.