The Protest of LIC Agents Against Restructuring of Commission and ClawBack Clause – On 14th October 2024, a significant protest letter was issued by the All India Life Insurance Agents Federation of India (AILIAFI) to Shri Siddhartha Mohanty, CEO and Managing Director of the Life Insurance Corporation of India (LIC). This letter highlights the deep concerns and frustrations of 14 lakh LIC agents across the nation. The main points of contention are the restructuring of commissions and the introduction of the ClawBack Clause, both of which are seen as detrimental to the agents’ livelihoods and their pivotal role within LIC.
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The Role of LIC Agents: Pillars of the Corporation
LIC agents have long been viewed as the “pillars of the Corporation” and the “ambassadors” who drive LIC extensive operations. These agents act as the vital link between LIC and millions of policyholders, ensuring that the Corporation’s services reach even the most remote parts of India. However, recent changes proposed by LIC management have created widespread distress within the agent community.
The restructuring of commissions has been a key issue that has sparked this protest. Agents are now seeing a reduction in their commissions, which they believe is unjust considering their significant contributions to the Corporation’s success. The agents argue that instead of a reduction, they have been demanding an increase in their commission rates.
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The Impact of Commission Reduction
The reduction in commissions has caused sleepless nights for many agents, with some expressing that they never expected the management to introduce such anti-agent policies. The letter strongly emphasizes that agents across the country are feeling upset, disturbed, unhappy, and even angry with these changes.
The agents are particularly concerned about the first-year commission, which has been a significant part of their income. They demand that the first-year commission should remain at 25% plus a 40% bonus, and for subsequent years, the commission should be increased to 9%. This demand is based on the rationale that LIC has been offering staff discounts of 10% on premiums and has reportedly given even higher discounts of 15% for direct sales. This suggests that LIC can absorb the additional cost of increasing commissions, similar to how they bear the burden of providing discounts to staff and direct customers.
An example provided by the agents compares the commission structure for a 20-year policy, where an agent used to receive 135% commission over the entire term. In contrast, LIC offers a 200% discount to its staff and 300% discount in direct sales. This stark disparity between commissions and discounts further justifies the agents’ demand for an increase in their commission rates.
The ClawBack Clause: A Major Concern
Another critical issue raised in the letter is the introduction of the ClawBack Clause. The agents strongly oppose this clause, as they believe it will further diminish their earnings and stability. The ClawBack Clause, as understood, could lead to the recovery of commissions paid to agents if policies lapse or are surrendered within a specified time frame. Such a clause undermines the financial security of agents who already work on commission-based earnings and often deal with policy lapses beyond their control.
The agents are adamant that this clause should be withdrawn, as it imposes unfair financial burdens on them. They feel that the management is shifting the responsibility of policy retention entirely onto agents, without considering the external factors that lead to policy discontinuation.
A Call for Immediate Action
The letter reflects the urgency of the agents’ demands, stating that they expect a positive response within 15 days. If their demands are not met, they are prepared to initiate a nationwide agitation under the slogan “SADAK SE LEKAR SANSAD TAK” (From the Streets to Parliament). This movement may include peaceful demonstrations at LIC branches, a Non-Cooperation Movement, and possibly a Dharna (sit-in) outside LIC headquarters at Yogakshema in Mumbai.
Furthermore, the agents plan to escalate their protest to the national level by seeking the support of prominent figures like Anna Hazare, who is well-known for his activism against injustice. The Federation is also considering writing to all Central Ministers and Members of Parliament (MPs) to garner political support for their cause.
The letter references a similar protest that took place against the D. Swaroop Committee in the past, where around 50,000 agents participated in a Dharna before Parliament. This historical precedent demonstrates the agents’ willingness to mobilize and take collective action when they feel their rights and livelihoods are threatened.
The Stakes for LIC Agents
The stakes for LIC agents are incredibly high. The proposed commission restructuring and ClawBack Clause not only affect their current earnings but also pose a threat to their future financial stability. Many agents depend solely on their commissions to support their families, and any reduction in these earnings could have a devastating impact on their lives.
The agents argue that by keeping the commission structure unchanged, LIC can ensure that agents remain motivated and committed to their roles. They believe that increasing commissions will lead to better performance, as agents will have a stronger financial incentive to bring in new business and retain existing policyholders.
LIC Response: A Waiting Game
At the time of writing, LIC management has not yet responded to the protest letter. However, the agents are hopeful that their “genuine demands” will be accepted, allowing them to continue their work with renewed enthusiasm and commitment.
The agents also express their desire to “peacefully work hard” to keep LIC flag flying high. They recognize the importance of their role in the Corporation’s success and are committed to maintaining LIC reputation as one of the leading insurance providers in the country. However, this commitment can only be sustained if their concerns are addressed and they are provided with fair compensation for their efforts.
Conclusion
The protest by 14 lakh LIC agents against the restructuring of commissions and the ClawBack Clause is a clear indication of the growing discontent within the agent community. These agents have been the driving force behind LIC growth and success, and they deserve to be compensated fairly for their contributions.
The demands made in the protest letter are not unreasonable. In fact, they are rooted in logic and fairness, as demonstrated by the comparisons with LIC staff discounts and direct sales. By increasing commissions and withdrawing the ClawBack Clause, LIC can ensure that its agents remain motivated, secure, and dedicated to their roles.
The next few weeks will be crucial as agents wait for LIC response. If their demands are not met, the country may witness a large-scale agitation that could disrupt LIC operations and affect millions of policyholders. It is in LIC best interest to engage in constructive dialogue with the agents and work towards a resolution that benefits both the Corporation and its valued agents.
In the words of the agents themselves, they are ready to fight from “Sadak se lekar Sansad tak” if necessary. But they hope that such drastic measures will not be required and that LIC will take the necessary steps to address their grievances and restore their faith in the Corporation.
FAQs
What is the main reason behind LIC agents’ protest?
LIC agents are protesting against the restructuring of commissions and the introduction of the ClawBack Clause, which they believe unfairly reduces their earnings and negatively impacts their financial security.
What are the agents demanding in terms of commission changes?
The agents are demanding that the first-year commission remain at 25% plus a 40% bonus and that the commission for subsequent years be increased to 9% for the entire policy term.
What is the ClawBack Clause, and why are agents against it?
The ClawBack Clause allows LIC to recover commissions from agents if a policy lapses or is surrendered within a specified period. Agents oppose this clause because it could lead to financial losses that they cannot control.
What actions are agents planning if their demands are not met?
If their demands are not addressed within 15 days, the agents plan to initiate a nationwide agitation that could include peaceful demonstrations, non-cooperation movements, and possibly a Dharna outside LIC headquarters and Parliament.
How do agents justify their demand for an increase in commission?
Agents argue that LIC offers significant discounts of 10% to 15% to staff and through direct sales, which shows that LIC can afford to increase agent commissions in a similar way. They also cite past commission structures where agents received higher rates for long-term policies.
Disclaimer: The views expressed in this article are based on the protest letter sent by the All India Life Insurance Agents Federation of India to LIC management. The article reflects the agents’ concerns and demands but does not represent the official stance of LIC. Readers are encouraged to consult official LIC sources or authorized representatives for accurate information regarding commission structures and policies.