Why LIC agents are strike and what are the 7 demands

LIC agents on strike over 7 demands – As of 1 October 2024, the Indian life insurance sector has seen a wave of regulatory changes, primarily driven by the Insurance Regulatory and Development Authority of India (IRDAI). LIC of India, the country’s largest life insurer, has implemented several modifications in line with these new norms. However, not all stakeholders are satisfied with the changes. Among the most affected are the LIC agents, the lifeblood of LIC sales force, comprising over 14 lakh insurance advisors across the country. These agents, represented by the All India Federation Union, have raised concerns about the changes and have decided to take a stand.

In what is shaping up to be a nationwide strike, LIC agents have submitted their demands to the LIC management. The strike, if it proceeds, will be one of the largest collective actions ever taken by insurance advisors in India. This article outlines the 7 major demands put forth by the LIC agents, explaining the rationale behind each and why the agents believe these changes are essential for their livelihood, the company’s future, and the well-being of their clients.

Also see: LIC Agents Protest Against Restructured Commission and Clawback Clause

1. Reduction of Premium Increments

The first demand on the agents’ list pertains to the recent premium increments that took effect on October 1, 2024. LIC agents are advocating for a reduction in these increased premiums. Their primary concern is affordability. In a market already struggling with rising inflation, the cost of life insurance coverage has become increasingly prohibitive for customers. Premiums have increased by ₹5,000 to ₹6,000 annually, pushing many potential clients away from purchasing insurance.

The agents argue that reducing the premium rates would make policies more affordable, attracting a larger customer base. This, in turn, would not only benefit the agents through increased policy sales but would also ensure that more people are insured, thus supporting LIC’s long-term sustainability. The agents’ focus is on affordability, which they believe should be central to LIC’s mission of providing insurance to all sections of society.

Also see: Why LIC agents are Strike and what are their Demands

2. Abolition of the Clawback Clause

Another contentious issue is the introduction of the clawback clause. This clause, if implemented, would allow LIC to reclaim the commission earned by an agent if a client surrenders their policy within five years of purchase. LIC agents are staunchly against this clause, arguing that it unfairly penalizes them for circumstances beyond their control.

Agents work hard to sell policies, but once the policy is sold, they have limited control over whether the client continues to pay premiums or decides to surrender the policy. The clawback clause, in the agents’ view, is punitive, as they would be forced to return the commission they have already earned, even though they fulfilled their part of the agreement by successfully selling the policy. For many agents, who rely on commissions for their livelihood, this clause represents a significant financial risk.

Also see: How LIC new partnerships will impact Insurance advisors

3. Reinstatement of the Old Commission Structure

One of the most significant grievances among LIC agents is the overhaul of the commission structure. The new commission structure, according to the agents, has reduced their earnings significantly, making it harder for them to sustain themselves. They are demanding the reinstatement of the old commission structure, which provided better compensation for their efforts.

In the old system, agents received a lump sum commission when they sold a policy, which served as both motivation and reward for their hard work. The new structure, which breaks the commission into smaller payments over a longer period, dilutes the impact of their efforts. For many agents, this change has resulted in decreased motivation and lower overall income. They argue that reinstating the old commission structure would incentivize agents to work harder and sell more policies, benefiting both LIC and the agents themselves.

Also see: LIC New Policy on Premium Refunds for Lapsed Policies in Moradabad

4. Increased Bonus for High-Value Insurance Policies

Another critical demand is the increase in the bonus rate for clients who purchase high-value insurance policies. Currently, the bonus paid out by LIC does not account for inflation, meaning that the real value of the bonus diminishes over time. LIC agents have criticized the existing bonus system, arguing that it needs to be updated to reflect inflation and offer more substantial returns to policyholders.

The agents suggest that the bonus rate should be linked to the insurance coverage amount. If a client purchases a larger policy, they should receive a higher bonus. This, they argue, would not only make LIC policies more attractive to clients but also help LIC stay competitive in a market where customers are increasingly looking for returns that outpace inflation.

Also see: LIC Jeevan Umang 745 vs LIC Jeevan Utsav 771

5. Reduction in Interest Rates on Policy Loans

One of the features that sets LIC apart from other insurance companies is its policy loan facility, which allows policyholders to take out loans against their policies. However, the interest rate on these loans, currently around 9%, is considered too high by both agents and clients. The agents are calling for a reduction in the interest rate to make this facility more accessible to policyholders.

A lower interest rate would encourage more clients to take out loans against their policies rather than surrendering them. This, in turn, would benefit LIC by increasing its interest income and ensuring that more policies remain in force. Additionally, by offering more affordable loans, LIC could attract new customers who are looking for insurance policies that offer financial flexibility in times of need.

6. Removal of GST on Policy Revival

One of the biggest challenges LIC agents face is convincing lapsed policyholders to revive their policies. Policy revival is a time-consuming process, often involving multiple conversations and negotiations with the client. Once a client agrees to revive their policy, they are often shocked to discover that they have to pay a significant amount of Goods and Services Tax (GST) on top of the revival premium.

Agents argue that the GST on policy revival acts as a deterrent for many clients, particularly those from lower-income backgrounds. Removing the GST, they claim, would make it easier to convince clients to revive their policies, leading to more active policies and fewer surrenders. This would not only benefit the agents, who earn commissions on revived policies, but also strengthen LIC’s portfolio by keeping more policies in force.

7. Removal of GST on New Policies

The final demand from the LIC agents is the removal of GST on new insurance policies. This issue has been the subject of much debate, even reaching the Parliament, where prominent politicians like Nitin Gadkari have advocated for its removal. The agents argue that the GST on new policies makes them less affordable for customers, especially in a price-sensitive market like India.

Insurance, in many cases, is a necessity rather than a luxury, and the agents believe that it should not be subject to a tax that adds an extra financial burden on policyholders. By removing the GST on new policies, LIC could make its products more affordable and accessible, particularly for lower and middle-income clients. This, in turn, would benefit both the clients and the agents, as more people would be able to purchase policies without worrying about the added cost of GST.

Conclusion

The 7 demands put forth by LIC agents are rooted in concerns about affordability, fairness, and the future of the insurance industry in India. By addressing these demands, LIC could strengthen its relationship with its agents and ensure that its products remain competitive in a rapidly evolving market. The agents, for their part, are hopeful that their voices will be heard and that LIC will make the necessary changes to support its advisors and customers alike.

Whether or not LIC decides to meet these demands, one thing is clear: the agents are determined to stand up for what they believe is right, and their collective action could have a significant impact on the future of LIC and the Indian insurance industry as a whole.

This article captures the essence of the demands put forth by LIC agents and highlights the broader implications for the insurance industry.

FAQs

Disclaimer: The views and opinions expressed in this article are based on publicly available information and the demands of LIC agents as reported. The article does not represent the official stance of LIC or any associated entities. Readers are encouraged to verify the details independently before forming any conclusions regarding the current situation or future developments.