Insurance agents of Life Insurance Corporation (LIC) may not be employees of the giant Government owned insurer, but then LIC is not your standard PSU. A key reason why LIC has managed to hold its own against private competition is its hundreds of thousands of agents who procure the vast bulk of its business. The insurer has, over the years, honed a complex system of incentives and perks to keep its agents performing.
There is a minimum amount of business they have to do every year, to maintain their status as agents on LIC’s records. Agents are organized into a hierarchy of clubs – at the branch level which is the lowest ,then the division, the zone and finally the chairman’s club. Movement from one to the other depends on the amount of business procured. For instance, to get into the branch manager’s club, an agent has to mobilize business which pays him or her a commission of at least Rs 35000 on new policies, and Rs 50,000 of ‘renewal’ premium commission (premiums on policies sold in earlier years).
This criterion has to be met in at least two of three preceding years and the current year as well. Additional criteria in terms of actual lives insured must also to be met. From there, the bar gets progressively higher – for the chairman’s club, the criteria has to be a minimum business of Rs 2lakh first year commission, and Rs 2lakh renewal commission.
Club membership entitles you to an office allowance, reimbursements of phone bills, and loans for office expenses and overheads, or for a son or daughter’s wedding, and cheap home loans and car loans. A member of the chairman’s club for instance, can get an interest-free car loan of up to Rs 6lakh repayable in 6 years. They can take subsequent car loans of up to Rs 7.5lakh, also interest free.
In 2004-05, LIC formed another elite club of agents, over and above the chairman’s club, called the corporate club – the current minimum criteria for entry into it is a whopping Rs 17 lakh commission on new business in both the current and the preceding year. There were 82 members of the corporate club as of March 2011 (LIC’s total agent force was 1.3 million). The benefits are commensurately higher. For example, they are entitled to an interest free car loan of up to Rs 20lakh. One senior LIC agent claims that 80% of LIC’s business comes from the top 20% of its agents.
