Visakhapatnam: Reduce Interest on Loans Provided by LIC to Policyholders, Agents Federation Urges Union Finance Minister

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“LIC interest rates are the highest compared to the banking sector and recognized financial lenders”

“LIC interest rates are the highest compared to the banking sector and recognized financial lenders”

The “abnormal rate” of interest charged by the Life Insurance Corporation of India (LIC) on loans made to policyholders has drawn criticism from the Life Insurance Agents’ Federation of India.

In a letter to Union Finance Minister Nirmala Sitharaman, Federation General Secretary N. Gajapathi Rao demanded that the interest rate on loans granted to policyholders and that applied in case of late premium payment is reduced. He regretted that LIC interest rates are the highest compared to the banking sector and recognized financial lenders.

He said it was unfortunate that the state-controlled company was doing business of interest, ignoring LIC’s goals and bringing a black mark on the Union government.

While the LIC declares around 4% bonus to policyholders on policies, it charges a whopping 9.5% interest on all loans. All banks give 5.5% interest on deposits and lend on FDs at 1% more i.e. 6.5%, while LIC squeezed interest from its policyholders. Interestingly, LIC’s sister company, LIC HFL, lends at 6.5%.

He demanded that the LIC also collect an interest rate of 1% more than the declared bonus according to the policy. Policyholders have the privilege of paying the premium amount within 30 days of the due date. If the premium is paid after the grace period, a late payment charge will be levied. The interest rate on late payments is also levied at 9.5%, which shows the harshness of the LIC on policyholders. He requested that a nominal interest of 4% be charged on these types of transactions.

Mr. Gajapathi Rao noted that a policy expires when the premium is not reinstated within six months of the due date. However, policyholders can revive the same by paying the arrears premium as well as late fees under certain conditions. No risk would be covered during the expiration period. LIC also collects 9.5% interest on these arrears. He wondered why the policyholder was taxed to return to the LIC-fold and asked that a nominal interest rate of 4% could be charged on this type of transactions.

LIC only pays an interest rate of 6.5% on late payment of claims, but collects 9.5% interest on late payment from policyholders in the event of revival of expired policies. He said the actuarial department, which advises LIC on bonuses and interest rates, has no interface with the public and does not take into account the opinion of officers, who act as a bridge between the public and the society.

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