New Irdai guidelines to make life tougher for insurance agents

The new guidelines, with higher penalties and more onus on selling based on the requirements of customers, will be effective from April 1

The Insurance Regulatory and Development Authority of India (Irdai) has released the final guidelines for the appointment of insurance agents. With higher penalties and more onus on selling based on the requirements of customers, regulations have turned more stringent for agents.

These guidelines are effective April 1.

Irdai has said insurers will be responsible for all acts and omission by its agents, including violation of the code of conduct specified under the guidelines. For violations, they will be liable to a penalty of up to Rs 1 crore.

“Insurers will be more cautious while appointing agents, now that the power to appoint them is in our hands. As penalties on insurers are very high, further checks on agents might also be made in the future," said the chief distribution officer of a mid-size private life insurer.

According to the new norms, an individual can act as an insurance agent for only one life insurer, one general insurer, one health insurer and one monoline insurer. Irdai has said anyone acting as an insurance agent in contravention of the provisions of the Act will be liable to pay a penalty of up to Rs 10,000.

Industry executives say so far, the penalties imposed on agents were negligible, adding with the new provision, commission-based product sales might virtually come to an end.

Irdai also said it would maintain  a centralised list of agents. It will also maintain a list of agents whose appointment is cancelled or suspended by a designated official of an insurance company for violation of the code of conduct and/or fraud. If a complaint is lodged against an agent with an insurance company, the details of the complaint will be preserved. Such agents might not be allowed to sell insurance-related products in the future.

Irdai has said if an insurance agent represents more than one insurer offering the same line of products, she/he should dispassionately advise policyholders on the products of all insurers.

Now, the regulator is also empowered to appoint one or more of its officers as 'investigating officers' for inspection of the affairs of an insurance agent.

Detailed regulations on remuneration will also be announced. This will ensure an agent does not sell a product for first-year commissions alone. For this, commissions are expected to be distributed between the first, second and third years of the premium-paying term.