The Insurance Regulatory and Development Authority of India (IRDAI) has recently released a new guidelines for the appointment of insurance agents, titled “Guidelines on Appointment of Insurance Agents, 2015”, making insurance agents’ businesses tougher. However, there is at least one reason for agents in the new guidelines to cheer- capping on agents’ commission has been lifted.
The Insurance Laws (Amendment) Ordinance has omitted Section 40A of the earlier Insurance Act, which was about commission to insurance agents. Currently, the regulator is working on revised commission structure, and it’s expected that the earlier capping could get hike. As per earlier Act, commission for 1st year was 7.5 per cent of the premium, and 2 per cent on renewal premium.
The New Guidelines would be Effective from April 1, 2015. Here are Key Points-
- The insurance company will directly recruit its agents after due verification of applicant’s eligibility and authenticity.
- The insurance company will be liable for all acts and omission by its agents.
- If the agent violates code of conduct specified under the guidelines, the insurer will be liable to pay penalty, maximum up to Rs. 1 crore.
- Now, since the insurer will have to pay penalties in case its agents violate code of conduct and penalties are very high, insurers may apply stiff checks on agents.
- An individual can now act as an insurance agent for only one life insurer, one general insurer, one health insurer and one monoline insurer.
- If an agent acts against the provision of the Act, he/she will be liable to pay a penalty, maximum up to Rs. 10,000.
- Commission-based sales of insurance products might virtually come to an end.
- Proposal of maintaining centralized database of agents.
- Centralized database of agents whose appointment is cancelled/suspended by any insurance firm for violation of the code of conduct and/or fraud in order to stop them getting job in any other agencies dealing in insurance business.
- If an agent represents more than one insurance player with same line of products, he/she should dispassionately advise customers on the products of all insurance companies.
- IRDAI to appoint ‘investing officer’ who will keep eyes on acts of insurance agents.
- Although, the detailed regulation on remuneration is yet to be announced, it is expected that the commission will be distributed between the first, second and the third years, a step to ensure the agent does not sell policy only for first-year commission. It would help curb mis-selling.