Returns of LIC policyholders may decrease, changes have been made in surplus distribution rules

If you are a policyholder of Life Insurance Corporation of India (LIC), then there is an important news for you and that is that the return you get on your policy may decrease in future. The reason for this is that LIC has changed the rules for sharing the surplus. According to the changed rule, now the policyholders of LIC will get less returns. The company has given this information in a document filed with SEBI.

what is the real issue

In the document filed by LIC in SEBI, it has been said that section 24 of the LIC Act has been amended. Before the amendment in Section 24 of the LIC Act, the company used to have a Consolidated Life Fund. The surplus amount in the life fund was divided between the policyholders and the government.

How much return did the policyholders get

Let us tell you that the policyholders used to benefit the most in sharing the surplus amount with LIC. The reason for this is that in the distribution of the additional amount, about 95 percent was given by LIC to the policyholders, while 5 percent was given to the shareholders.

How will the returns decrease?

According to the documents submitted to SEBI, two types of funds have been created after amendment in Section 24 of the LIC Act. Policyholders are investing in the first fund out of the two funds created by LIC and they are not showing interest in the second fund. The additional amount of LIC’s second type of fund will go completely to the account of the shareholders i.e. Government of India. At the same time, in the distribution of the additional amount in the first fund, 90 percent of the money will be given to the policyholders and 10 percent of the amount will go to the government’s account. Overall, out of 95 per cent stake to policyholders, the amount will be reduced by five per cent and the amount going to the government’s account by five per cent will increase to 10 per cent. Thus, the total return accruing to the policyholders will be reduced by five per cent.