NEW DELHI: Congress MP Manickam Tagore has written to Finance Minister Nirmala Sitharaman, raising concerns over recent changes in LIC policies, asserting that the amendments are "deeply troubling" and have the potential to adversely impact the livelihood of approximately 14 lakh LIC agents and millions of policyholders.
In his letter to Sitharaman, Tagore said the government has set an ambitious target of insuring the entire population of India by 2047, with the overarching goal of providing financial security, especially in rural and economically disadvantaged areas. However, recent policy changes and decisions by LIC are making it increasingly difficult for agents to promote and sell life insurance policies effectively, thereby hampering this noble mission.
"I am writing to express the concerns of LIC agents and policyholders following the recent changes in Life Insurance Corporation (LIC) policies, which came into effect on October 1, 2024," the MP from Virudhunagar said.
These amendments are deeply troubling and have the potential to adversely impact the livelihood of approximately 14 lakh LIC agents and the millions of policyholders who rely on LIC for affordable life insurance, Tagore said in his letter dated November 5.
Outlining the concerns, he noted that LIC's primary objective has always been to extend life insurance coverage to rural areas and economically weaker sections of society. Contrary to this mission, LIC has recently increased the minimum sum assured to Rs 2 lakh and raised premium rates across the board.
"This will have a disproportionately negative impact on rural, lower, and middle-income groups, who may no longer be able to afford insurance policies at these higher premiums," he said.
Tagore further pointed out that the rate of commission for LIC agents was fixed according to the Insurance Act of 1938. Despite multiple requests from agents and the insurance industry, there has been no increase in commission rates, even though the IRDAI allowed for increases through gazette notifications in 2013, 2017, and 2020, he said. However, LIC has failed to implement these increases, continuing with the same commission structure until September 30, 2024, Tagore pointed out.
The new policies introduced from October 1, 2024, further reduce commissions, which directly impacts the livelihoods of millions of agents, he added.
He further noted that LIC's premium rates are already among the highest in the industry, and the introduction of new policies with even higher premiums makes it nearly impossible for agents to sell policies, especially to the middle and lower-income populations. With these steep premium increases, agents find it extremely challenging to meet sales targets and provide affordable coverage to policyholders, he said.
The Congress leader also flagged the issue of reduced bonuses and benefits. He said LIC has reduced the entry age for popular policies to 50 years, a regressive move that will directly impact agents' ability to procure new business, as many potential policyholders will now fall outside the eligibility criteria for the plans they once had access to.
He further criticized the introduction of the "clawback commission" policy by LIC, calling it highly objectionable. Under this clause, agents are held responsible for the surrender of policies and are required to repay the commission they earned. "This is unfair, as the commission is an integral part of the premium, and agents should not be penalized for policyholders' decisions to surrender policies, which may be influenced by various external factors beyond the agents' control," he said.
"In light of these developments, I request your urgent intervention to review the changes implemented on October 1, 2024. I urge you to reconsider the policies that adversely affect both agents and policyholders and take corrective action to ensure that LIC can continue to fulfill its mandate of providing accessible and affordable life insurance to all sections of society," the Congress leader said.
"I am confident that, with your support, the concerns of LIC agents and policyholders will be addressed promptly and justly," Tagore said in his letter to Sitharaman.