Life Insurance Corporation of India (LIC) believes an open architecture of insurance agents will be detrimental for the recruitment of agents in future.

The parliamentary standing committee on finance in its seventh report presented in Parliament on December 6, 2024 has supported the need for an open architecture for insurance agents where agents would be permitted to associate with multiple insurance companies, resulting in higher insurance penetration and lower distribution cost.

“It will also provide an equitable footing for the insurance agents vis-à-vis the insurance intermediaries. Also, customers would have access to more options at a competitive price,” the report said seeking industry consultations.

“Open architecture is not a good idea. Overall growth of the industry will be impacted. If one agent works for all others, companies themselves may not be interested in recruiting. This is because recruitment and training involves a lot of cost. We have made our position on this very clear,” Siddhartha Mohanty, MD and CEO, LIC, told analysts at the Q3 earnings call of the insurer on Friday evening.

Mohanty said that LIC may have to recalibrate its current model if the open architecture is allowed to be implemented.

“Even if it is implemented, we are ready. Our agency profession is almost like a full time job. Agents not only get commission, but also gratuity, group insurance, loans for vehicles, housing etc. If this (open architecture) comes, LIC will have to consider a recalibated approach to the entire agency model as it works today,” Mohanty said.

At present, LIC agents can sell policies offered by LIC. If any agent wants to sell policies from multiple insurance companies, he/she would need to obtain a point of sales person (PoSP) licence, which lacks certain financial benefits as mentioned above.

As of December 31, 2024, LIC’s total agency force stood at 14.19 lakh, up from 14.15 lakh as of March 31, 2014. LIC has a share of 47.4 per cent of agency force of the entire life insurance industry and LIC sources 94.68 per cent of its new business premium through its vast distribution of agents.

LIC has trained 3.68 lakh agents between April-December 2024 across its infrastructure covering 8 zonal training centres, 35 sales training centres, 113 divisional training centres and 576 agent training centres.