As per Existing Rules:
Eligibility:
1. An agent shall be eligible for gratuity:
(i) if he has worked continually and for fifteen or more qualifying years, and
(a) he is not below sixty years of age; or
(b) is found to be of unsound mind by a court of competent jurisdiction ;
OR
(ii) if he has been confirmed in his appointment, and
(a) he dies while his agency is subsisting or
(b) his appointment as an agent is terminated on becoming physically and mentally incapacitated for carrying out his functions as an agent.
2. An agent may, before he has attained the age of 59 years, by notice in writing to the Divisional Manager, request that his eligibility for gratuity may be determined on completion of 65 years of age.
3. Gratuity admissible shall be at the eligible rate for each qualifying year for the first 15 qualifying years and at half the rate for subsequent 10 qualifying years. Maximum gratuity payable shall not exceed Rs 300000.
4. Gratuity is payable to an Agent, or his nominees or heirs.
5. No Gratuity is payable to an employee of the corporation for the period of his employment as an agent.
6. Where once gratuity is paid, no further gratuity is payable even if the agency is continued.
7. Once gratuity is paid to a terminated agent, the fresh agency can also be granted but gratuity will not be paid again. (Cir: Mktg/ZD/18/2012 dated 06/03/2012).
8. Gratuity is not payable if his agency is terminated due to disqualifications as given below:
a) If he is found guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or abetment of or attempt to commit any such offense by a court of competent jurisdiction
b) if any judicial proceeding, has been found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealing with Corporation or any of its subsidiaries,
c) If he has failed to discharge his functions and failed to comply with the code of conduct as set out in regulation 8 and regulation 14, and directions issued by the Authority from time to time, to the satisfaction of the competent authority;
d) If he acts in a manner prejudicial to the interests of the corporation or to the interest of its policyholder.
e) If evidence comes to its knowledge to show that has been allowing or offering to allow rebate of the whole or any part of the commission payable to him.
f) if the competent authority is satisfied that either directly or indirectly the agent is involved in embezzlement of premiums or cash collected from policyholders or prospects or on behalf of Insurer, and he has been knowingly involved in or connived at any fraud, dishonesty, misrepresentation, misappropriation, cheating, and forgery against the Corporation or its policyholders or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries;
g) If it is established that the agent has acted with a view to defrauding the Corporation.
Terminology Meanings:
a. Relevant Date:
The date on which eligibility for payment of gratuity is determined.
Is that date which is the agency year ending date of the agent falling on or before the date attaining age 60 or 65 and 15 agency years (both the conditions i.e. completing age 60 and 15 qualifying years have to be satisfied necessarily)
Explanatory:
i. Suppose the agent has completed 60 years of age but has not completed 15 qualifying years then as per rule 2 of Schedule IV, then the relevant date will be on the completion of 15 qualifying agency years.
ii. if the agent has completed 15 qualifying agency years but not attained age 60, then the relevant date will be the date of ending of agency year immediately prior to completion of age 60.
When an Agent dies or his appointment is terminated on account of his becoming physically or mentally incapacitated for carrying out his functions as an agent:
When a confirmed agent dies while his agency is subsisting or when his appointment is terminated on account of his becoming physically or mentally incapacitated for carrying out his functions as an agent, the date following the date of death or the date of termination, as the case may be, will be the date of eligibility to Gratuity.
For example:
if a confirmed agent aged 35 dies on 20.08.2017 or if he is found to become Physically or mentally incapacitated for carrying out his functions as an agent and his appointment is terminated on that account under Regulation 16(1)(m) on 20.08.2017, his heirs, nominees or the agent as the case may be will become eligible for Gratuity on 21.08.2017.
b. Eligible Rate:
After noting the Relevant date, the Eligible rate is to be determined as under:
i. if the agent has worked for 15 or more agency years, from the 15 agency years immediately preceding the relevant date (which may consist of both qualifying agency years and non-qualifying agency years), the no. of qualifying agency years is to be ascertained and the aggregate of renewal commission earned by the agent in these qualifying agency years is divided by 180 (15 years x 12 months) to get an eligible rate.
Example:
If the agent has qualified for 12 agency years out of 15 agency years immediately preceding the Relevant date then Eligible rate = Total Renewal Commission paid during these 12 Qualified years / 180
ii. if the agent has worked for less than 15 agency years on the relevant date, then the aggregate renewal commission earned by him in the qualifying agency years should be divided by the total number of years for which the agent has worked as an agent and 1/12th of the resultant sum will be the eligibility rate.
Example:
If the agent has worked for 13 agency years and he has only 11 qualifying years then the eligibility rate = Renewal Commission for 11 Qualifying years / (13×12)
c. Qualifying year:
The agency year in which an agent had completed the business required of him under regulation 9 of agents regulation. Agents who have opted for exemption from MBG, then exemption from MBG will not be treated as a qualified year.
d. Qualifying yearly renewal commission:
i. Ascertain the number of agency years in which the agent has completed MBG.
ii. Qualifying yearly renewal commission will be the renewal commission paid to the agent in each of the qualifying years on the 2nd and subsequent year’s renewal premiums. It does not include commission paid on first-year renewal premium.
iii. The qualifying yearly renewal commission would be NIL in respect of those agency years in which the agent did not complete the MBG.
Calculations of the amount of Gratuity Payable:
1. Arrive at the eligible rate.
2. Arrive at a total number of qualified agency years during which the agent has completed MBG since inception.
3. Gratuity payable:
a. If the Number of Qualified years exceeds 15:
Gratuity Payable = (Eligible Rate x 15) + {(Eligible Rate/2) x (Number of qualified years above 15, Maximum 10 years)}
b. If Number of Qualified years is 15 or less:
Gratuity Payable = Eligible Rate x Number of Qualified years
c. Maximum Gratuity Payable is Rs 300000.
Example:
1. Date of Birth of Agent: 05/05/1958
2. Date of appointment: 3rd June 1980, Agency Year: 1st July to 30th June.
3. Relevant Date for calculation of gratuity: 01/07/2017 ( i.e. Agency ending before age 60)
4. Number of Agency Years Completed as of 01/07/2017: 27
5. Number of years for which MBG is completed since appointment: 27
6. Period for calculating Eligible Rate: 15 agency years immediately preceding 01/07/2017. i.e. from Agency Year 2002-03 to Agency Year 2016-17.
7. Eligible rate: 180th part of an aggregate of qualifying renewal commission earned during qualified agency years out of 15 agency years mentioned under (6).
Total Renewal Commission earned during 15 years = Rs 15,00,000
Eligible rate: 15,00,000 / 180 = Rs 8,333
8. Gratuity Payable:
For First 15 years = 15 x 8,333 = Rs 1,24,995
For Next 10 years = 10 x 8333/2 = Rs 41,665
Total Gratuity Payable = Rs 1,66,660
Gratuity Rate for 15 Qualified years = 1,24,995 / 1500000 x 100 : 8.33%
Gratuity Rate for 25 Qualified years = 1,66,660 / 1500000 x 100 : 11.11%
Important Points:
1. Eligible rate of gratuity is arrived at by considering Renewal Commission earned during qualifying years only out of 15 agency years immediately preceding age 60/65.
2. So it is advisable to do the minimum business guarantee (MBG) during the last 15 agency years before age 60/65 even though one has opted for exemption from MBG. The renewal commission earned during the year of failure to bring MBG will not be considered to arrive at an eligible rate; this will reduce the eligible rate payable.
3. If one has opted for exemption from MBG at age 45 and failed to complete MBG during the next 15 years, then he will not get any Gratuity as the eligible rate will be zero. So opt for exemption from MBG only after taking gratuity.
4. Considering the current growth rate the maximum gratuity payable may increase to 10,00,000 Rs. For that the average Renewal Commission during each of last 15 qualifying years should be 8,00,000 Rs or Rs 6,00,000 i.e. premium of Rs 1,60,00,000 or Rs 1,20,00,000 in force for last 15 years before age 60/65.
5. So plan in such a way that you should have at least `1,20,00,000 renewal premium in force at your age 45.
6. Do need-based selling. This will help you to sell long-term policies and policyholders also know the purpose of taking policy and will be motivated to keep their policies in force till maturity.
7. Keep track of policies getting lapsed.
