New Delhi: Life Insurance Corporation of India, the country’s largest life insurer, has decided to hike charges on a slew of services like reducing the insurance cover, changing the mode of premium payment, adding additional riders like accident cover, reviving lapsed policies and changing nominee among others reports Economic Times.
It has increased the charge for most services to Rs 50 from Rs 5, with the fee for assignment of policies going up to Rs 250. Thomas Mathew, MD, LIC, says the insurance firm has only standardised the fee structure.
"We had various alteration fees for different changes. It was different for some policies, too. Some of these charges haven’t changed may be for the last 40 years. That is why we decided to standardise the fee," he says.
As for steep hike in assignment charge, he says, "A lot of work is done while endorsing the policy. That is why we decided to hike the fee on assignment".
However, LIC’s sales force is not happy with this. According to them, the new fee, which looks deceptively small, will have a compounding effect on policyholders who have multiple insurance policies.
"In India, people often buy a lot of policies for smaller sums. I have clients, who have more than 10 policies," says an insurance consultant. If a client with 10 policies wants to make a change in any of the above policy terms, s/he would have to shell out Rs 500.
They said most of these changes made by its customers actually help LIC’s business.
"Some of these alterations like reduction of sum assured, increasing the frequency of premium payment...actually help the company more than the client".
"For example, a person can always stop paying the premium and take out whatever his policy is worth after three years. But when he is opting for reduced insurance cover or increasing the frequency of premium payment, he is actually staying with the company," adds the agent.
Another LIC agent says slapping a charge, while policy holders are opting for riders like accident benefit, premium waiver benefit, term rider benefit among others is discriminatory in nature.
"LIC sells a lot of policies to minors. How can they deny them an opportunity to add new riders when they become majors."
He also says the new endorsement fee while reviving lapsed insurance policies would be an additional burden.
"You are paying the penal interest to revive the lapsed policies. Why additional burden? LIC doesn’t want policies to be revived?" he asks.
"One nominates insurance policy to a person to receive the proceeds if something happens to the policyholder. If someone changes the nomination for second or third time, there would a valid reason for it," argues an LIC agent.
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