New Delhi: Congress MP Manickam Tagore has written to Finance Minister Nirmala Sitharaman over concerns regarding recent changes in LIC policies, asserting 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 the LIC are making it increasingly difficult for agents to promote and sell life insurance policies effectively, thus directly 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.
I have raised concerns to Hon’ble Finance Minister regarding recent policy changes by LIC, which negatively impact millions of agents and policyholders, especially in rural and low-income communities. Urgent intervention is needed to protect their livelihoods and ensure 1/2 pic.twitter.com/Y8h0ItICLq
— Manickam Tagore .B🇮🇳மாணிக்கம் தாகூர்.ப (@manickamtagore) November 11, 2024
Outlining the concerns, he said the LIC's primary objective has always been to extend life insurance coverage to the rural areas and economically weaker sections of society. Contrary to this mission, the LIC has recently increased the minimum sum assured to Rs 2 lakh and has raised premium rates across the board, he said.
"This will have a disproportionately negative impact on the 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 as per 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, the LIC has failed to implement these increases, continuing with the same commission structure until September 30, 2024, Tagore pointed out. The new policies introduced on October 1, 2024, further reduce the commission, which directly impacts the livelihoods of millions of agents, he said.
He further said LIC's premium rates are already among the highest in the industry and the introduction of new policies with even higher premium rates makes it nearly impossible for agents to sell policies, especially to the middle and lower-income population.
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.
The LIC has reduced the entry age for popular policies to 50 years, which is a regressive move and will have a direct impact on the ability of agents to procure new business, as many potential policyholders will now fall outside the eligibility criteria for the plans they once had access to, Tagore said.
He further said in the letter that the introduction of the "clawback commission" policy by the LIC is highly objectionable. Under this clause, agents are held responsible for the surrender of policies and are required to repay the commission they earned, he said.
"This is unfair, as the commission is an integral part of the premium, and agents should not be penalised 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 fulfil 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.
