Life Insurance Corporation (LIC) agents are expressing concerns over recent commission adjustments and new cash value regulations, which they say could impact their earnings. Under the new structure, LIC has reduced the first year’s commission from 35% to 28%, according to reports.

The changes follow new surrender value norms issued by the Insurance Regulatory and Development Authority of India (IRDAI), which came into effect from October 1, aimed at improving payments to policyholders who retire early.

“With the new surrender rules coming into effect from October 1, we expect an overall margin to be affected,” Prashant Tripathy, MD and CEO of Max Life Insurance told Business Today.

In a letter to Siddhartha Mohanty, MD and CEO of LIC, the All India Life Insurance Agent Federation of India expressed its displeasure, arguing that the restructuring had effectively reduced its total commission. The letter criticizes the division of agents between “high producers” and “low producers,” calling instead for uniform commission rates. “Instead of increasing commission rates as per IRDAI guidelines, the management is reducing them. We strongly oppose this and demand a fair and uniform commission for all agents,” the federation’s statement said.

However, Mohanty clarified in a statement to The New Indian Express that the overall commission structure had not been reduced but realigned. “The total commission an agent received before October 1 remains unchanged. Charging a reduced commission is incorrect. Under the new structure, agents will continue to earn what they used to earn before,” Mohanty explained.

Adding to the concerns is LIC’s proposal to introduce a clawback clause. This clause would allow LIC to recover an agent’s commission if a policyholder surrenders the policy soon after the first premium. Agents are strongly opposed to this clause, assimilating it to regulatory provisions which could lead to dismissal if certain standards are not respected. “The clawback clause is draconian. We oppose it and ask management to drop it,” the letter said, warning of a potential national strike if the clause is not removed. A letter addressed to Mohanty also said: “We wish to express our displeasure that we were not consulted before restructuring the commission and clawback clause.”

However, Tripathy says one of the main goals for insurers following these changes is to improve persistence, which measures the number of policyholders who continue their policies over time. He said: “Max Life is working to increase its 13th month persistence rate from around 87-88% to 95%. Achieving higher persistence will not only help insurers manage the impact on margins, but will also ensure that customers continue to benefit from long-term insurance. temporary insurance coverage.

The new special surrender value norms of the IRDAI guidelines mean that policyholders who exit prematurely after paying only the first year’s premium will get a small compensation, unlike the previous norm where early exit meant losing the entire of the premium. LIC’s cost control measures, which include adjustments to agent commissions, appear aimed at balancing the financial implications of these changes on its margins.

Officers, however, say these adjustments unfairly place the burden of costs on them, impacting their lives. The federation’s letter ends with a strong message urging the LIC to reconsider its decision, highlighting the risk of widespread protests if its concerns remain unaddressed.