Terminology that every LIC club member agent must know

LIC of India has more than 12 lac agents, and according to their performance, LIC rewards them in different forms. One is Club membership. According to the business procured by agents in the last 4 years LIC awards club membership to agents. These Clubs are Corporate Club, Galaxy Club, Chairman Club, Zonal Manager Club, Divisional Manager Club, Branch Manager Club and Distinguish Club.

LIC has made the criteria for entry to a new club or continuation in a new club. These criteria mainly depend upon many lives an agent procures in the financial year, total in-force lives, renewal commission, and first-year commission. But other than this, there are many other factors that an  LIC club member agent should know to continue or enter a new club, which we will discuss here one by one, all the points covered here to be done in a financial year.

“Number of Policies” in a financial year:

This is all the policies procured by an agent in a financial year (1st April to 31 March). This will also include policies done on the same life by the agent in the same financial year.

“Number of lives” by LIC club member agent in a financial year:

The number of lives is crucial to getting a club membership. The number of lives means, the number of the different people insured by an agent in a financial year. An agent may do 2 or more policies of a single person. When an agent does 100 policies it does not mean he has done insurance for 100 different people. There is no exact correlation between the Number of Policies and the Number of Lives, an agent can do insurance of 2 or more individuals in 1 policy also. But, the more the number of lives, the more the policies.

“Total Inforce Lives” by LIC club member agent.

This is nothing but all the policies procured by an agent from the first day of his agency, which is still running (in force condition as on  31 March of the current financial year). Only those policies will be considered in force where  FUP is less than 6 months. Policies under auto cover are not included in “total in force lives” where FUP is >6 Months.

Policies that are in auto cover (like New Bima Gold, New Janraksha, and Jeevan Saral) but FUP >6 months are considered as lapse and not included in the “Total in force lives” of the agent. In differed annuity policies where policy is vested and premium payment, the term is over are also excluded from “Total in force lives”. 

“Net Number of Lives” by LIC club member agent in a financial year

This is the first condition for an LIC club member agent, which he has to complete to continue or enter a new club. for the CM club, it is 40 Net lives and 30, 20 and 15 for the ZM, DM, and BM clubs respectively. The net number of lives arrives after reducing duplicate lives, the first-year lapse policy from the total number of lives introduced by an agent in a financial year.

Here yearly policy completed in the last financial year having FUP >6 months will also be taken as a first-year lapse policy. I am quoting the lines of LIC circular Mktg./A/ZD/29/2009 Date: 22nd October 2009 for club member conditions here for reference.

“Net Number of Lives” are distinct lives insured ( not number of policies) during the qualifying financial year reduced by the number of lives who had been insured in the financial year preceding the qualifying financial year whose policies are lapsed as on 31st March of the said qualifying financial year.

“First year Commission” by LIC club member agent in a financial year

This is the commission paid to an agent for the first year of the policy. The first-year commission includes the first commission paid on the yearly policy, the commission paid on the first two instalments of the half-yearly policy and the commission paid on the first 4 and 12 premiums in the quarterly and monthly mode policy respectively. Bonus commission paid to an agent on the first-year commission is also included here for club membership purposes.

“Renewal Commission” by LIC club member agent in a financial year

Renewal commission earned by an agent in a financial year. It is the commission paid to an agent on the second and subsequent year premiums deposited by the policyholder.

“First-year lapsation” for LIC club member agent in a financial year

Lapsation is a very important factor for a LIC club member agent. If, in a particular year, the lapse ratio is more than 15%, then that particular year will not be considered for club membership purposes for aspiring club members. For existing club member agent, lapse ratio >15% will lead to nonpayment of allowances, and exit from the club after lapse ratio >15% for 3 consecutive years.

The first-year lapsation arrives after reducing the number of policies procured in the current and last financial year but in lapse condition as of 31 March of the current financial year from the total number of policies procured by an agent in the current financial year.

Example: Let us assume that in the year 2014-15 an agent procured 52 policies, and in the current year 2015-16 agent procured 63 policies. Out of these 115 (63+52) policies, 12 policies have FUP >6 month on 31/03/2016. Then the lapse ratio will be (12/63)X100=19.04%.  These 12 policies will also reduce the net number of lives for an agent in the current financial year. If all the 63 policies are on different lives and 12 policies are also on different lives then net lives will be 51 only.

“Pucca Lapse” Policies

The policies under which overdue premiums remain unpaid for more than 6 months from the date of the first unpaid premium (FUP) are deemed to be pucca lapsed for the purpose of arriving at the net number of lives in determining agents eligibility for membership of any club. Policies issued in current and previous financial year which are “pucca lapse” as on 31st March of the current financial year will be reduced from the lives procured by an agent in the current financial year to arrive at “Net number of Lives”. Same will be reduced from the total lives introduced by an agent to arrive at “total in force lives by an agent”.

“Qualifying year” for club membership

The financial year immediately preceding the membership year is known as the “Qualifying year”. In other words, the financial year in which an agent qualify all the condition to become the club member of any club.

“Escalation Clause” for LIC club member agent

Escalation clause means that an agent has to earn 5% extra renewal and first-year commission in next financial year after the qualifying year. This will apply to both existing club member agents as well as aspiring club member agents.

“Membership year” for LIC club member agent

Membership year for an LIC club member agent is the period for which club membership is award to the agent. Membership year for club member agent starts from 1st September to 31st August after the qualifying financial year.

There are many other terms and conditions which an LIC club member agent should know. We will try to update the post accordingly to provide maximum information. To know more about relaxation conditions read the article “Relaxations In Club Membership Conditions For LIC Agents”