The Life Insurance Corporation of India (LIC) recently experienced a significant drop in its profit. This decline was largely attributed to the new surrender value norms introduced by the insurance regulator, which came into effect on October 1, 2024. The new norms were expected to impact the entire insurance industry, but LIC was particularly affected.
However, according to Siddhartha Mohanty, Managing Director and CEO of LIC, the decline in profit was not solely due to the new surrender value norms. Mohanty stated that the company has taken steps to realign its commission structure, product designs, and policy covers to minimize the impact of the new norms on agent commissions. This realignment was done to ensure that the margins of the company remain intact, despite the changes in the industry.
Mohanty’s statement suggests that LIC has been proactive in responding to the new regulatory requirements and has made adjustments to its business model to mitigate the potential negative effects. By adjusting its commission structure and product designs, LIC aims to maintain its profitability while still complying with the new surrender value norms.
The new surrender value norms are intended to provide policyholders with a more transparent and fair surrender value for their insurance policies. The norms require insurers to provide a guaranteed surrender value to policyholders who choose to surrender their policies before maturity. This change is expected to benefit policyholders, but it may also impact the profitability of insurance companies like LIC.
Despite the challenges posed by the new norms, LIC’s efforts to realign its business model and minimize the impact on agent commissions demonstrate the company’s commitment to maintaining its profitability and competitiveness in the market. As the insurance industry continues to evolve, LIC’s ability to adapt to changing regulatory requirements and market conditions will be crucial to its long-term success. By taking proactive steps to address the new surrender value norms, LIC is positioning itself to remain a major player in the Indian insurance market.