LIC bars ‘new’ agents from selling Ulips

MUMBAI: Life Insurance Corporation (LIC) has decided to limit the number of agents selling unit-linked insurance plans (Ulips). LIC has decided that from July, only those who have sold Ulips in the past will be allowed to sell new products. Thisis to ensure that there is no mis-selling of the policy.

LIC has over a million agents who have for decades been selling traditional insurance products. These policies are primarily aimed at protection and investments are mostly in gilts. The scope of mis-selling is much lower as agents could not forecast phenomenal returns on a policy that invested in government bonds.

Although Ulips account for over 40% of sales, only a fraction of the agency force sells Ulips. Ulips still account for a high percentage of sales because of the high average premium.

Bulk of the agency force is not interested in selling Ulips because of low commissions. Last year, LIC tried to reduce dependency on Ulips, to ensure that sales force productivity did not fall. Its 50th anniversary policy was structured as a traditional ‘with profits’ policy to revitalise LIC’s sales force.

In Ulips, the investor chooses between schemes that invest largely in either equities or bonds or a mix of both. In an equity scheme, an agent can forecast an over optimistic return by basing projections on high returns generated during a short uptrend in the market.

The Insurance Regulatory and Development Authority (Irda) forbids companies from making projections based on past performance.

Irda has, therefore, asked insurers to ensure that all agents receive separate training before they are authorised to sell unit-linked life insurance products.
In addition to the training insurance companies are required to put in place a code of conduct for insurance agents to ensure that no mis-selling takes place.