The Life Insurance Agents' Federation of India, the apex body of LIC agents, has been demanding that agents' gratuity benefits be brought on par with that of LIC staff. Currently, an agent can avail of a maximum of Rs 1 lakh as gratuity benefit as opposed to Rs 3.5 lakh for LIC employees.

"Gratuity admissible to an agent shall be at the eligible rate for each qualifying year for the first 15 qualifying years and at half the eligible rate for the subsequent 10 qualifying years, provided the maximum amount of gratuity payable shall not exceed Rs 2 lakh," LIC said in a communication to its zonal managers and others on February 12.

According to observers, the move to raise agents' gratuity is aimed at boosting sagging morale as other channels are posing stiff competition to the traditional agency channel.

For instance, bancassurance channels have grown rapidly at 30-40 per cent year-on-year. The entry of the private sector has added a new dimension by introducing several incentives, including foreign trips for agents performing well.

Of course, LIC has a semblance of such incentives only for agents who are top performers.  Currently, LIC agents receive commissions ranging from 14-35 per cent for traditional products depending on the sum assured and only 2 per cent for investment products. In the case of renewal premia, the commission is around 5 per cent.

Last year, LIC handed out Rs 6,000 crore (Rs 60 billion) in commissions to agents.