Insurance Regulatory and Development Authority of India (IRDAI) Insurers Insurance Intermediaries Insurance Agents Point of Sales Person (POSP)

 

TOPICS COVERED

• Insurance Regulatory and Development Authority of India (IRDAI)
• Insurers
• Insurance Intermediaries
• Insurance Agents
• Point of Sales Person (POSP)

1. Insurance Regulatory and Development Authority of India (IRDAI)

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory agency tasked with regulating and promoting the insurance and re-insurance industries in India. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an act of Parliament passed by the government of India. The agency's headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001. IRDAI is a 10-member body including the chairman, five full-time and four part-time members appointed by the government of India.

Birth of IRDAI

Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous body set up under the IRDA Act, 1999. IRDAI’s Mission is to protect the interests of policyholders and to regulate and develop the insurance industry.

IRDA regulate the Indian insurance industry to protect the interests of the policyholders and work for the orderly growth of the industry.

Background

1991: Government of India begins the economic reforms programme and financial sector reforms

1993: Committee on Reforms in the Insurance Sector, headed by Mr. R. N. Malhotra, (Retired Governor, Reserve Bank of India) set up to recommend reforms.

1994: The Malhotra Committee recommends certain reforms having studied the sector and hearing out the stakeholders

CONSTITUTION OF INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

The IRDA Act has established the Insurance Regulatory and Development Authority (“IRDA” or “Authority”) as a statutory regulator to regulate and promote the insurance industry in India and to protect the interests of holders of insurance policies. The IRDA Act also carried out a series of amendments to the Act of1938 and conferred the powers of the Controller of Insurance on the IRDA. The members of the IRDA are appointed by the Central Government from amongst persons of ability, integrity and standing who have knowledge or experience in life insurance, general insurance, actuarial science, finance, economics, law, accountancy, administration etc. The Authority consists of a chairperson, not more than five whole-time members and not more than four part-time members.

Every Chairperson and member of IRDA appointed shall hold office for a term of five years. However, Chairperson shall not hold office once he or she attains 65 years while whole time members shall not hold office beyond 62 years.

Central Government may remove any member from office if he or she is adjudged insolvent or is physically or mentally incapacitated or has been convicted of an offence involving moral turpitude or has acquired financial or other interests or has abused his position. Chairperson and the whole time members shall not for a period of two years from the date of cessation of office in IRDA, hold office as an employee with Central Government or any State Government or with any company in the insurance sector.

IRDAI’s Activities

• Frames regulations for insurance industry in terms of Section 114A of the Insurance Act 1938
• From the year 2000 has registered new insurance companies in accordance with regulations
• Monitors insurance sector activities for healthy development of the industry and protection of policyholders’ interests

The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999 and include:

• Issuing, renewing, modifying, withdrawing, suspending or cancelling registrations
• Protecting policyholder interests
• Specifying qualifications, the code of conduct and training for intermediaries and agents
• Specifying the code of conduct for surveyors and loss assessors
• Promoting efficiency
• Promoting and regulating professional organisations connected with the insurance and re-insurance industry
• Levying fees and other charges
• Inspecting and investigating insurers, intermediaries and other relevant organisations
• Regulating rates, advantages, terms and conditions which may be offered by insurers not covered by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938)
• Specifying how books should be kept
• Regulating company investment of funds
• Regulating a margin of solvency
• Adjudicating disputes between insurers and intermediaries or insurance intermediaries
• Supervising the Tariff Advisory Committee
• Specifying the percentage of premium income to finance schemes for promoting and regulating professional organisations
• Specifying the percentage of life- and general-insurance business undertaken in the rural or social sector
• Specifying the form and the manner in which books of accounts shall be maintained, and statement of accounts shall be rendered by insurers and other insurer intermediaries.

INSURERS

Introduction

The insurance industry of India consists of 53 insurance companies of which 24 are in life insurance business and 29 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.

Out of 29 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.

There are six (6) private sector insurers registered to underwrite policies exclusively in Health, Personal Accident and Travel insurance segments. These are:–

• Star Health and Allied Insurance Company Ltd.
• Apollo Munich Health Insurance Company Ltd.
• Max Bupa Health Insurance Company Ltd.
• Religare Health Insurance Company Ltd.
• Cigna TTK Health Insurance Company Ltd.
• Aditya Birla Health Insurance Company Ltd.

In addition to 54 insurance companies, there are two re-insurer, namely, General Insurance Corporation of India and ITI Reinsurance Limited.

Insurance Laws (Amendment) Act, 2015 provides for enhancement of the Foreign Investment Cap in an Indian Insurance Company from 26% to an Explicitly Composite Limit of 49% with the safeguard of Indian Ownership and Control.

State Insurance Funds not controlled by IRDAI:

• Maharashtra State Insurance Fund
• Gujarat State Insurance Fund
• Kerala State Insurance Fund
• Rajasthan State Insurance Fund

Postal Department also operates two Life Insurance Schemes which are not under IRDAI:

1. Postal Life Insurance (PLI) which is available to employees of Government, Semi Government and Public Sector Undertakings

2. Rural Postal Life Insurance (RPLI) to provide insurance cover to the Rural Public

HISTORY OF INSURANCE IN INDIA

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. Now, we will be discussing brief about the history of Life Insurance and General Insurance in India.

LIFE INSURANCE

Year 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

GENERAL INSURANCE

The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd was set up. This was the first company to transact all classes of general insurance business.

1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.

REGULATION OF INSURANCE BUSINESS IN INDIA

This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.

Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.

Beside IRDA Act and Insurance Act, 1938, there are some common Act/Regulation to the General and Life Insurance Business in India and some Acts have been made for specific requirement of Life Insurance/General Insurance Acts/Regulations common to General and Life Insurance Business in India

The following Acts regulate the Insurance Business in India.

• Insurance Act, 1938
• IRDA Act, 1999
• Insurance Amendment Act, 2002
• Exchange Control Regulations (FEMA)
• Insurance Co-op Society
• Indian Stamp Act, 1899
• Consumer Protection Act, 1986
• Insurance Ombudsman

Regulations governing/ affecting Life Insurance Business in India

The following Acts govern /regulate the life insurance business in India.

• LIC Act, 1956
• Amendments to LIC Act

Regulations Affecting General Insurance Business in India

The following Acts affect, circumscribe or regulate in some way or the other, some aspect of the General Insurance Business in India.

• General Insurance Nationalization Act, 1972
• Amendments to GIN Act, 1972
• Multi-Modal Transportation Act, 1993
• Motor Vehicles Act. 1988
• Inland Steam Vessels Amendment Act, 1977
• Marine Insurance Act, 1963
• Carriage of Goods by Sea Act, 1925
• Merchant Shipping Act, 1958
• Bill of Lading Act, 1855
• Indian Ports (Major Ports) Act, 1963
• Indian Railways Act, 1989
• Carriers Act, 1865
• Indian Post Office Act, 1898
• Carriage by Air Act, 1972
• Workmens Compensation Act, 1923
• ESI Act, 1948
• Public Liability Insurance Act. 1991

Why Regulation of Insurance Businesses is required?

Any industry wherein the stakes of the public are high would come within the purview of a Regulation – reason being that failure of such companies could result in serious implications on the economy of the country at large.

Insurance business involves collection of money from various Policyholders, investing them properly, honouring the obligations of the Policyholders and providing an efficient service. It is important to ensure that the entities providing these services stick to their commitments. Failure to honour commitments by such entities could have major repercussions on the financial services industry.

After liberlisation and entrance of Private players in Insurance business and seeing the large numbers of customers and high risk potential, Government of India constituted the Insurance Regulatory and Development Authority in Year 1999.

3. INSURANCE INTERMEDIARIES

A basic definition defines an intermediary as ‘action between two parties - mediatory’ or ‘situated or occurring between two things - intermediate’. The latter form refers more to a position within a process or level of achievement. The former, by contrast, refers to an intermediary as an agent in some form, as ‘one who acts between others - a do-between or mediator’, or as ‘something acting between things persons or things’. As actors then, what intermediaries do is mediate, they work in-between, make connections, enable a relationship between different persons or things. Indeed in common parlance the meaning implied by the concept intermediary tends to refer to a neutral player trying to mediate between different sets of interests.

The assumption of neutrality is however, problematic. Rather than focus on everything as an intermediary, the interesting question is to ask in what ways, where, when and how particular things, people, organizations etc. are/ become defined as ‘intermediaries’. Further still, there is the question of the active role that intermediaries play in defining the relationship between other actors. In Insurance industries, an insurance intermediary is a person or a company that helps you in buying insurance. Insurance intermediaries facilitate the placement and purchase of insurance, and provide services to insurance companies and consumers that complement the insurance placement process. Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance brokers.

ROLE OF INTERMEDIARIES IN INSURANCE INDUSTRY

As players with both broad knowledge of the insurance marketplace, including products, prices and providers, and an acute sense of the needs of insurance purchasers, intermediaries have a unique role indeed many roles – to play in the insurance markets in particular and, more generally, in the functioning of national and international economies.

Intermediary activity benefits the overall economy at both the national and international levels:

The role of insurance in the overall health of the economy is well-understood. Without the protection from risk that insurance provides, commercial activities would slow, perhaps grinding to a halt, thus stunting or eliminating economic growth and the financial benefits to businesses and individuals that such growth provides. The role of insurance intermediaries in the overall economy is, essentially, one of making insurance – and other risk management products – widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth.

There are several factors that intermediaries bring to the insurance marketplace that help to increase the availability of insurance generally:

Innovative Marketing

Insurance intermediaries bring innovative marketing practices to the insurance marketplace. This deepens and broadens insurance markets by increasing consumers’ awareness of the protections offered by insurance, their awareness of the multitude of insurance options, and their understanding as to how to purchase the insurance they need.

Dissemination of information to Consumers

Intermediaries provide customers with the necessary information required to make educated purchases/ informed decisions. Intermediaries can explain what a consumer needs, and what the options are in terms of insurers, policies and prices. Faced with a knowledgeable client base that has multiple choices, insurers will offer policies that fit their customers’ needs at competitive prices.

Dissemination of Information to the Marketplace

Intermediaries gather and evaluate information regarding placements, premiums and claims experience. When such knowledge is combined with an intermediary’s understanding of the needs of its clients, the intermediary is well-positioned to encourage and assist in the development of new and innovative insurance products and to create markets where none have existed. In addition, dissemination of knowledge and expansion of markets within a country and internationally can help to attract more direct investment for the insurance sector and related industries.

Sound Competition

Increased consumer knowledge ultimately helps increase the demand for insurance and improve insurance take-up rates. Increased utilization of insurance allows producers of goods and services to make the most of their risk management budgets and take advantage of a more competitive financial climate, boosting economic growth.

Spread insurers’ Risks

Quality of business is important to all insurers for a number of reasons including profitability, regulatory compliance, and, ultimately, financial survival. Insurance companies need to make sure the risks they cover are insurable – and spread these risks appropriately – so they are not susceptible to catastrophic losses.

Intermediaries help insurers in the difficult task of spreading the risks in their portfolio. Intermediaries work with multiple insurers, a variety of clients, and, in many cases, in a broad geographical spread. They help carriers spread the risks in their portfolios according to industry, geography, volume, line of insurance and other factors. This helps insurers from becoming over-exposed in a particular region or a particular type of risk, thus freeing precious resources for use elsewhere.

Reducing Costs

By helping to reduce costs for insurers, broker services also reduce the insurance costs of all undertakings in a country or economy. Because insurance is an essential expense for all businesses, a reduction in prices can have a large impact on the general economy, improving the overall competitive position of the particular market.

Of course, the insurance cycle of “hard” and “soft” markets can have a significant impact on the benefits – both good and bad – of increased availability. Generally, however, increased availability benefits the consumer by leading to product competition, price competition, and improved services. By reducing insurance costs across markets, intermediaries make an important contribution to improving the economic conditions in a country.

MARKET PLAYERS AND THEIR ROLES

There are many market players in insurance industries i.e.

• Agents,
• Brokers,
• Surveyors & Loss Assessors,
• Health Third Party Administrators,

The role of various players of insurance market is being discussed hereby:

Insurance Broker

Regulation 2(k) of the IRDA (Insurance Brokers) Regulations, 2018, defines Insurance Broker" means a person who is a direct broker, a reinsurance broker or a composite broker for the time being registered by the Authority, as the case may be, unless expressly stated to the contrary.

Licensing of Insurance Brokers

Every Insurance Broker shall possess a valid and subsisting license to act as an Insurance Broker issued by IRDA. The framework for licensing of an Insurance Broker is similar to that of a Corporate Agent. However, as we have seen earlier a Broker differs from an Agent in the sense that a Broker represents customers interests and is required to select the best product amongst all insurance companies, while an agent represents an insurer at any point in time (one in life and one in general insurance) and will present the product of only such insurer(s) with whom the agent is attached with.

Categories of the Insurance brokers –

• Direct broker (life)
• Direct broker (general)
• Direct broker (life & general)
• Reinsurance broker
• Composite broker

Direct Broker‖ means an Insurance Broker, registered by the Authority, who for a remuneration and/or a Fee, solicits and arranges insurance business for its clients with insurers located in India and/or provides claims consultancy, Risk Management services or other similar services, permitted under these regulations.

Composite Broker‖ means an Insurance Broker, registered by the Authority who for a remuneration and/or a fee, solicits and arranges insurance and/or re-insurance for its clients with insurers and/or reinsurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or other similar services, permitted under these regulations.

Reinsurance Broker‖ means an Insurance Broker, registered by the Authority who for a remuneration and/or a Fee, solicits and arranges re-insurance for its clients with insurers and/or reinsurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or other similar services, permitted under these regulations.

Functions of a direct broker

The functions of a direct broker shall include the following: (a) Obtaining detailed information of the client's business and risk management philosophy; (b) Familiarizing himself with the client's business and underwriting information so that this can be explained to an insurer and others; (c) Rendering advice on appropriate insurance cover and terms; (d) Maintaining detailed knowledge of available insurance markets, as may be applicable; (e) Submitting quotation received from insurer/s for consideration of a client; (f) Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover; (g) Acting promptly on instructions from a client and providing him written acknowledgements and progress reports; (h) Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938); (i) Assisting in the negotiation of the claims; (j) Maintaining proper records of claims; (k) Assisting in opening of e-insurance accounts; (l) Assisting in issuing e-insurance policies; and (m) Any other function which the Authority may specify.

Functions of Reinsurance broker

The functions of a re-insurance broker shall include the following: (a) Familiarizing himself with the client‘s business and risk retention philosophy; (b) Maintaining clear records of the insurer's business to assist the reinsurer(s) or others; (c) Rendering advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets; (d) Maintaining a database of available reinsurance markets, including solvency ratings of individual reinsurers; (e) Rendering risk management services for reinsurance; (f) Selecting and recommending a reinsurer or a group of reinsurers; (g) Negotiating with a reinsurer on the client‘s behalf; (h) Assisting in case of commutation of reinsurance contracts placed by them; (i) Acting promptly on instructions from a client and providing it written acknowledgements and progress reports; (j) Collecting and remitting premiums and claims/refunds within such time as agreed upon; (k) Assisting in the negotiation and settlement of claims; (l) Maintaining proper records of claims;

(m) Exercising due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services; (n) Creation of market capacity and facility for new, stressed, emerging and existing business and asset class for and from both direct insurers and reinsurers; (o) Render preliminary loss advice (PLA) within reasonable time; (p) Given the nature of business, separate norms need to be followed for Inward and Outward business a. Inward business i. Broker to have adequate specific knowledge of the country whose business is being offered like: political stability, economic position, local regulations, tax laws, etc. ii. Introduce new business/ products depending on the reinsurers business plan and risk appetite b. Outward business i. Rating and market credibility of the reinsurer (q) To ensure prompt collection and remittance of funds, follow up for funds to be initiated sufficiently before the due dates for settlement from cedant to reinsurer and from reinsurer to cedant as relevant; (r) To comply with the laws and other requirements of the local jurisdiction while arranging insurance/ reinsurance for clients/ insurance companies based outside India; and (s) Any other function which the Authority may specify.

Conditions of grant of registration to Insurance Broker –

The registration granted under these regulations or the renewal of registration granted under these regulations shall, inter alia, be subject to the following conditions: - (1) The Insurance Broker registered under these regulations shall act exclusively to carry on the business of an insurance broker as permitted under these regulations; (2) The Insurance Broker shall comply with the provisions of the Act, Insurance Regulatory and Development Authority Act, 1999 and the Regulations, Circulars, Guidelines and any other instructions issued there under from time to time by the Authority; (3) The Insurance Broker shall forthwith inform the Authority in writing, if any information or particulars previously submitted to the Authority by them are found to be false or misleading in respect of any material particular or if there is any material change in the information already submitted; (4) The Insurance Broker shall take adequate steps for redressal of grievances of its clients within 14 days of receipt of such complaint and keep the Authority informed about the number, nature and other particulars of the complaints received from such clients in format and manner as may be specified by the Authority; (5) The Insurance Broker shall solicit and procure reasonable number of insurance policies commensurate with their resources and the number of Broker Qualified Persons they employ. (6) The Insurance Broker shall maintain records in the format specified by the Authority which shall capture policy-wise details wherein each policy solicited by the Insurance Broker is tagged to the broker qualified person or other authorised persons, wherever applicable. (7) The Insurance Broker under no circumstance undertake multi-level marketing for solicitation and procuring insurance products; (8) The Insurance Broker shall ensure compliance of Code of Conduct applicable to it; (9) The Insurance Broker shall maintain books of accounts as specified in these regulations (g) Minimum capital requirements for the broking entity:

Direct Broker Rs.75 lakhs

Reinsurance Broker Rs.4 Crore

Composite Broker Rs.5 Crore

Deposit requirements

(1) Every insurance broker shall before the commencement of their business, deposit and keep deposited with any scheduled bank a sum equivalent to: i. rupees ten lakhs for direct broker. ii. 10% of the minimum capital/ contribution specified under Regulation 19(1) for reinsurance / composite broker in fixed deposit, which shall not be released to them without the prior written permission of the Authority : Provided that the Authority may impose a separate limit of deposit, in any case not exceeding Rupees one hundred lakhs, for a person covered by regulation 2(1)(m)(iv). (2) The deposit shall have a lien with the Authority. (3) Such deposit shall not be pledged for taking any loan or overdraft facility by the insurance broker; (4) Every insurance broker shall furnish to the Authority as and when called upon to do so a non-encumbrance statement from scheduled bank in which such fixed deposit is kept. (5) The interest earned on the deposit shall not be subject to lien with the Authority.

Payment of Registration fee as follows:

Category of Insurance Broker Amount of Registration fee payable

Direct Broker Rs. 25,000/-

Reinsurance broker Rs. 50,000/-

Composite Broker Rs. 75,000/-

Qualifications and Disqualifications

(1) Bachelors degree in Arts, Science, or Social Sciences or Commerce or engineering or law or its equivalent from any institution/ university recognized by any State Government or the Central Government; or (2) Masters in Business Administration or its equivalent from any institution/ university recognized by any State Government or the Central Government; or (3) Associate/ Fellow of the Insurance Institute of India, Mumbai; or (4) Associate/Fellow of the Institute of Risk Management, Mumbai; or (5) Any post graduate qualification of the Institute of Insurance and Risk Management, Hyderabad; or (6) Associate/ Fellow of the Institute of Chartered Accountants of India, New Delhi; or (7) Associate/ Fellow of the Institute of Cost and Works Accountants of India, Kolkata; or (8) Associate/ Fellow of the Institute of Company Secretaries of India, New Delhi; or (9) Associate/ Fellow of the Institute of Actuaries of India; or (10) Associate/Fellow of Chartered Insurance Institute, London; or (11) Chartered Financial Analyst of Institute of Chartered Financial Analyst of India; or (12) Certified Associateship of the Indian Institute of Bankers, Mumbai; or (13) any other qualification specified from time to time by the Authority.

Theoretical and Practical Training requirements

(a) The Principal Officer and Broker Qualified Persons of the applicant should have completed the prescribed fifty hours of theoretical and practical training from an institution recognised by the Authority from time to time, and should have passed an examination, at the end of the period of training, conducted by the National Insurance Academy, Pune or any other examining body recognised by the Authority. III 127

(b) The theoretical and practical training from an institution recognised by the Authority from time to time as mentioned in (a) above shall be twenty five hours in cases where the principal officer and Broker Qualified. Persons of the applicant: (i) is an Associate/ Fellow of the Insurance Institute of India, Mumbai; or Associate/ Fellow of the Institute of Risk Management, Mumbai; or Associate/ Fellow of the Institute of Actuaries of India; or any post graduate qualification of the Institute of Insurance and Risk Management, Hyderabad; or Associate/Fellow of Chartered Insurance Institute, London; Associate/Fellow of- Institute of Chartered Accountants of India, Institute of Cost Accounts and Works of India, Institute of Company Secretaries of India, Chartered Financial Analyst of ICFAI or any other qualifications as recognized by the Authority from time to time;

(c) The candidate who is covered by (b) above, shall be required to pass the examination within one year from the end of the period of training, conducted by the National Insurance Academy, Pune or any other examining body recognised by the Authority.

Annual Fee

Every Broker shall pay an Annual License Fee as follows:

Category of Insurance Broker Amount of annual license fee payable per annum

Direct broker

Rs.50,000/- after grant of in-principle approval in case of a fresh applicant. In the case of Renewal of Registration, the fee shall be Rs 1,00,000/- for a period of 3 years .

Reinsurance broker

Rs.1,50,000/- after grant of in-principle approval in case of a fresh applicant. In the case of Renewal of Registration, the fee shall be Rs 3,00,000/- for a period of 3 years.

Composite broker

Rs.2,50,000/- after grant of in-principle approval in case of a fresh applicant. In the case of Renewal of Registration, the fee shall be Rs 5,00,000/- for a period of 3 years

Renewal of license

The application for renewal of certificate of registration shall be submitted to the Authority by the insurance broker in Schedule I – Form K of these regulations at least thirty days before the expiry of the certificate of registration. Provided that if the application reaches the Authority later than the period mentioned in sub-regulation (1) above but before the actual expiry of the current certificate of registration, an additional fee of rupees one hundred shall be payable by the applicant to the Authority. Provided further that in case the applicant submits in writing the reasons for the delay not covered by the previous proviso, and if the Authority is satisfied with those reasons, it may accept an application for renewal after the date of the expiry of the certificate of registration up to a period of 60 days of the expiry of certificate of registration, on payment of an additional fee of seven hundred and fifty rupees. Provided further that the application for renewal received after 60 days of the expiry of the certificate of registration will be considered only after a lapse of 12 months from the date of submission of the late application. However, during the interregnum, the certificate of registration of the insurance broker shall cease to exist and it shall not solicit any new business, except servicing the existing policies till the expiry of the contract. Note: An insurance broker is permitted to submit the application for renewal ninety days prior to the expiry of the registration. (2) No insurance broker shall be allowed to do any fresh insurance business after expiry of the certificate of registration, except servicing the existing policyholders. (3) The Principal Officer and Broker Qualified Persons of an insurance broker before seeking a renewal of certificate of registration shall have completed at least twenty-five hours of theoretical and practical training, imparted by an institution recognized by the Authority. While doing so, they shall ensure that they complete the renewal training within six months prior to the expiry of three years from the time the previous training was completed. (4) The application for renewal, under sub-regulation (1) shall be dealt with in the same manner as specified under regulation 8. (5) The Authority may seek further information/ clarification/ data on the application submitted by the insurance broker while processing the application. (6) The insurance broker shall submit such information as required under sub-regulation (5) above within 21 days of receipt of the communication from the Authority. Provided if the applicant seeks additional time, for the reasons specified, for submission of information sought by the Authority under sub-regulation (5) above, the request may be considered by the Authority on merit. (7) The certificate of registration of the insurance broker, on failing to comply with sub-regulation (6) above may be suspended till such time the information required under sub-regulation (5) above is received by the Authority. (8) The Authority, on being satisfied that the applicant fulfills all the conditions specified for renewal of the certificate of registration, shall renew the certificate of registration in Schedule I – Form L for a period of three years and send intimation to that effect to the applicant. (9) The category certificate of registration of an insurance broker may be modified by restricting its operation in a particular category where the certificate of registration was already issued by the Authority for the reasons specified in writing and after giving due notice to the insurance broker. In any case, no restriction of category of the certificate of registration shall be done unless the insurance broker has been given a reasonable opportunity of being heard.

Difference between Insurance Agent and Insurance Broker

The basic difference between an Insurance Broker and an Insurance Agent is that while an Insurance Broker represents the client, while an Insurance Agent represents the insurance company. As a corollary to the above, an Insurance Broker is licensed to recommend the products of any insurance company, whereas Insurance Agent at any point in time can sell the insurance products of only one insurance company with which he is attached.

SURVEYORS AND LOSS ASSESSORS

A Surveyor or a Loss Assessor is relevant for general insurance business, where assessment of the loss of the subject matter insured is very important for deciding the claim amount. As general insurance contracts are indemnity contracts in nature, the amount paid by the insurance company cannot exceed the amount of actual loss incurred. The job of the Surveyor or a Loss Assessor is therefore to arrive at the exact amount of loss incurred and his role is critical to a general insurer.

Every person who is a student-member of the Institutes of Surveyors and Loss Assessors intending to act as a Surveyor or Loss Assessor is required to be licensed by IRDA before he starts performing his functions for any general insurer. A licence issued for a Surveyor or a Loss Assessor shall be valid for a period of 5 years after which it is required to be renewed. A Surveyor and Loss Assessor shall be categorized into 3 categories, The three categories are Licentiate, Associate ship and Fellowship which is awarded by the Institute of Surveyors and Loss Assessors. The nature of surveyor or loss assessment work which can be undertaken would depend upon the categorisation. Further IRDA shall also allot the department or the area work for the Surveyor and Loss Assessor from time to time.

Requirements for issue of a license for Surveyor or Loss Assessor

Regulation 3 of the Insurance Surveyors and Loss Assessors (Licensing, Professional and Code of conduct) Regulations, 2000 specifies the requirements for issue of a license:

a) He holds a degree in any branch of engineering (or) Post graduate diploma in general insurance issued by Institute of Insurance and Risk Management (or) a Degree in Agriculture (or) b) He is a member of the Institute of Chartered Accountants of India or the Institute of Cost and Works Accountants of India (or) c) He possesses actuarial qualifications or holds a degree or diploma of any recognised university or an institute in relation to insurance (or) d) He holds a diploma in insurance granted or recognised by the Government (or) e) He holds such other technical qualifications as prescribed by IRDA (and) f) He does not suffer from any of the disqualifications mentioned in section 42(4) Where the entity is a company or a firm, all the directors or partners shall possess one of the qualifications as prescribed g) above and none of the directors or partners suffer from any of the disqualifications mentioned as above (and) h) Payment of fees based on the categorisation of the applicant (and) (h) Has undergone practical training as a Student-member under a licensed Surveyor and Loss Assessor (who shall be a Fellow or Associate member of the Institute) for a period of 12 months as contained in Chapter VII (persons who have more than 15 years experience in risk management and general insurance are exempt from this training) (and) i) Has passed the Surveyor examination conducted by the Insurance Institute of India or such other institute recognised by IRDA (and) j) Has undergone the special training provided by the Indian Institute of Surveyors and Loss Assessors for 100 hours for Fellowship, 50 hours for Associate and 25 hours for Licentiate level (and) k) He attends seminars and workshops organised by the Institute for a minimum number of seminars, viz., 10 seminars for fellowship, 8 for Associate ship and 5 for Fellowship level

Where the applicant is a company or firm, all the directors or partners, as the case may be, shall possess one or more of the qualifications specified above and does not suffer from any of the disqualifications mentioned in Section 42D(4) of the Insurance Act, 1938. At least 2 Directors or partners shall be members of the institute and shall hold the license to act as a surveyor and loss assessor. The level of membership or the department to which the directors or partners belong to shall become the level of membership or the department for the company or firm. Employees of the company of the firm, who are licensed as surveyor and loss assessor shall undertake survey only in those areas allotted to them based on the level of membership and the department to which they are eligible as per their individual licence. However this eligibility is subject to the level of membership or the department of the company or the firm (which is dependent on the directors/partners eligibility as above).

The following are the further conditions prescribed:

• Foreign equity in the Surveyor and Loss assessor entity shall not exceed 26%
• Common directors or partners between two Surveyor and Loss assessor entities prohibited
• One Promoter or Subscriber can have only one Surveyor and Loss assessor license
• Main objects clause of the deed of constitution shall contain the activity of “to carry our insurance survey and loss assessment”
• Name of the Company or firm shall contain the words “Insurance Surveyors and Loss Assessors”

IRDA, on being satisfied that the applicant is eligible for issue of a license shall send an intimation to the applicant together with an identity card mentioning the particular class or category of general insurance business, namely, fire, marine cargo, marine hull, engineering, motor, miscellaneous and loss of profit, for which the Authority has granted license.

Role of a Surveyor or Loss Assessor

The primary responsibility of a Surveyor or a Loss assessor is to estimate the liability of the loss incurred by the Policyholder who has taken an insurance cover, to enable the insurance company to arrive at the amount to be indemnified to the Policyholders under the terms of insurance contract. The following are the specific duties and responsibilities as enshrined under the Regulations:

• Declaration of conflicts of interest: In case the surveyor is interested in the subject matter under loss assessment or in the policyholder whose subject matter is being assessed, he must declare the conflict to the insurer and stay away from the assessment exercise. For example, if the Surveyor is the son of the Policyholder whose car has been damaged in a fire accident, such a Surveyor cannot assess the loss of the car of his Father, in view of the conflict of interest. He must declare this relationship to the insurer concerned and not conduct the survey proceedings in such cases
• Maintenance of confidentiality and neutrality in the loss assessment exercise. He has to keep the interests of both the insurer and the policyholder in mind
• He must investigate the causes and circumstances of the loss in question
• He must personally conduct a spot survey and comment upon excess insurance or under insurance
• Advise the insurer about loss minimisation or loss control efforts or security and safety measures which can be adopted to ensure that the incidence of loss is reduced or avoided in future
• Pointing out discrepancy in policy wordings, if any
• Satisfying the queries of the insured or the insurer in connection with the claim or loss
• Recommending applicability of depreciation and its percentage and quantum
• Commenting on salvage and its disposal

Either the insurance company or the insured can appoint a licensed surveyor for any loss exceeding 20,000, within 72 hours of knowledge of loss to the insured. Notice of such appointment shall be sent to the insurance company or the insured, as the case may be. The Surveyor and Loss Assessor shall undertake survey only in the department for which license was In case there is any dispute or difference by the insured, another licensed surveyor shall be appointed to conduct the survey at the cost of the insured. Dispute on the quantum of loss may be referred to arbitration.

A surveyor shall submit his report within 30 days of his appointment. In exceptional cases, the surveyor may seek extension of time up to 6 months from the insurer, under intimation to the insured. Where the report is incomplete, the insurer may seek additional report within 15 days of submission of the report by the Surveyor. Under such circumstances, the Surveyor shall submit the additional report within 3 weeks of request from the insurer.

THIRD PARTY ADMINISTRATORS-HEALTH

A Third Party Administrator (‘TPA’) is a person appointed by an insurance company to render services in connection with health insurance business or health cover, excluding the insurance business of an insurer and soliciting or procuring insurance business directly or through an intermediary or an insurance agent.

TPAs are normally engaged to provide services in connection with hospitalisation of an insured under a health insurance policy taken through a general insurance company or a standalone health insurance company or under health insurance rider covers offered by life insurance companies. They also offer certain other services like arranging for medical examination of the insured before a policy is issued by an insurance company etc.

Requirements for becoming a TPA

A person can act as a TPA only with a valid license issued by IRDA to perform the functions of a TPA. The requirements for obtaining a license are as follows:

• Entity: The person applying for a license shall be an entity which is a Company under the Companies Act, 1956
• Primary object: The main object as per the Memorandum and Articles of Association shall be to carry on business in India as TPA in the health services. Further engaging in any business other than TPA is prohibited
• Minimum paid up capital: Rupees One crore and maintenance of working capital of Rs.1 crore at all times.
• One of the Directors to be registered with Medical Council: One of the directors of the TPA shall be a qualified medical doctor registered with Medical Council of India
• Foreign equity restricted to 26%: TPA entity shall not have foreign holdings in excess of 26%
• Transfer of shares in excess of 5%: Prior approval of IRDA necessary before effecting any transfer of shares in excess of 5% either through direct transfer or through issue of fresh equity shares to new or existing shareholders
• Fee: A processing fee of Rs.20,000/- shall be payable along with the application. A further sum of Rs. 30,000/- shall be payable as license fee before the license is issued A license granted under these Regulations shall be valid for 3 years, after which, upon payment of a renewal of Rs.30,000/- may be renewed for a further period of 3 years.

Intimation of certain changes to IRDA

Every TPA shall inform the appointment of a new Chief Executive Officer (‘CEO’) or Chief Administrative Officer (‘CAO’) or a Director on the Board of TPA to IRD within 30 days of appointment Every TPA shall inform IRDA the details of head office or branch offices closed or relocated within 15 days of such closure or relocation

Qualifications of CEO or CAO

Every person proposed to be appointed as a CEO or a CAO of the TPA shall possess the following qualifications:

(a) He shall hold a degree in arts, science, commerce or management or health or hospital administration or medicine

(b) A pass in the Associate ship examination conducted by the Insurance Institute of India or such equivalent examination as decided by IRDA

(c) Completion of 100 hours of practical training with institutions recognized by IRDA

(d) He shall not be of unsound mind or un discharged insolvent or a person who had been subject to imprisonment for a period of 3 months by a Court on the grounds of misfeasance, misconduct or forgery etc

Decision making on claims by TPAs prohibited

A TPA is prohibited from taking any decisions on any claims. A TPA can only assess and recommend admission of a claim or otherwise based on the guidelines provided by the insurer in terms of the agreement entered with them. Once the insurer takes a decision on the claim and communicates it to the TPA, the TPA shall clearly state as follows in their communication to the Policyholder who has registered a claim:

“As per the instructions of the insurer . the claim is being settled/denied for Rs. on account of . For any further clarifications, you may directly contact the insurer.”

Bar on Non-insurance healthcare schemes

The TPA shall offer health services only in accordance with the IRDA (Third Party Administrators) Regulations, 2001 and shall not provide any services:

(a) directly or indirectly to non-insurance healthcare schemes or

(b) directly to health insurance schemes promoted, sponsored or approved by entities not

(c) being insurance companies, such as Governments, PSU’s etc.

(d) directly or indirectly to the policyholder or insured, except the health services as per the agreement with the insurer.

Agreement between a TPA and an Insurance company

a. The insurer and the TPA shall themselves define the scope of the Agreement, the health and related services that may be provided by the TPA and the remuneration therefore. Provided that there shall be a clause in the Agreement for its termination by either party on grounds of mutual consent or any fraud, misrepresentation, inadequacy of service or other non-compliance or default fraud. Provided further that, there shall be no element in the Agreement which dilutes, restricts or otherwise modifies the stipulations of the IRDA in respect of Policy Holder welfare, protection, service standards and turnaround-time parameters.

b. The remuneration to the TPA shall be based on the services rendered to the insurer and shall not be related to the product/policy experience or the reduction of claim costs or loss ratios of the insurer.

c. A copy of the Agreement entered into between the TPA and the Insurance Company or any modification thereof, shall be filed, within 15 days of its execution or modification, as the case may be, with the Authority.

d. More than one TPA may be engaged by an insurance company and, similarly, a TPA can serve more than one insurance company.

e. The Authority from time to time may prescribe minimum standard clauses to be included in the agreement between insurer and TPA.

Change of TPAs for servicing of Health Insurance Policies

a) A change in the TPA by the insurer shall be communicated to the policyholders 30 days before giving effect to the change.

b) The contact details like helpline numbers, addresses, etc. of the new TPA shall be made immediately available to all the policyholders in case of change of TPA.

c) The insurers shall take over all the data in respect of the policies serviced by the earlier TPA and make sure that the same is transferred seamlessly to the newly assigned TPA, if any. It shall be ensured that no inconvenience or hardship is caused to the policyholders as a result of the change. In this regard, the following aspects shall receive special attention:

i. Status of cases where pre-authorization has already been issued by existing TPA.

ii. Status of cases where claim documents have been submitted to the existing TPA for processing.

iii. Status of claims where processing has been completed by the TPA and payment is pending with th insurer/ TPA.

Data and related issues

a. The TPA and the insurer shall establish a seamless flow of data transfer for all the claims.

b. The respective files shall be handed over to the insurer within 15 days of the claim settlement or rejection

4. INSURANCE AGENT

Section 2(10) of the Insurance Act, 1938, defines an Insurance Agent as an insurance agent licensed under Section 42 of the said Act and who received or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance.

Fist going in detail about the role of an insurance agent, we will discuss the standing of Insurance agent.

Principal-Agent Relationship- Legal Implications and Status

Sections 182 to 238 of the Indian Contract Act, 1872 govern the relationship between a Principal and an Agent. An insurance agency contract is also governed by the principles enshrined therein. An Agent (“Insurance Agent”) is a person employed to do any act for another or to represent another in dealings with third persons. The function of an agent is to bring his principal into contractual relations with third persons. A Principal (“Insurer”) is a person for whom the above act is done or who is so represented.

There are two important rules of agency:

1. Whatever a person can do personally, he can do through an agent

2. He who does an act through another does it by himself In this regard, it is pertinent to note the provisions of Section 237 of the Indian Contract Act, 1872 on the extent to which the acts of the Agent bind the Principal. Where an Agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority.

Further Section 238 of the Indian Contract Act, 1872 states that misrepresentation or frauds committed by the agent acting in the course of business for their principals, have the same effect on agreements made by such agents as if such misrepresentation or frauds had been made or committed by the principals. But misrepresentation or frauds committed by agents in matters which do not fall within their authority do not affect the principals.

For example, if an insurance agent misrepresents to the customer while selling an insurance product, the policy contract (agreement between insurer and policyholder) may become voidable at the option of the Policyholder.

An agent, who acts within the scope of authority conferred by his or her principal, binds the principal in the obligations he or she creates against third parties. There are essentially three kinds of authority recognized in law, viz., actual authority (express or implied), apparent authority and ratified authority. Actual authority denotes the authority conferred on an agent by the Principal. It may be express or implied.

Implied authority, as opposed to an express authority which is clearly given to the agent, is the authority which the agent has by virtue or being reasonably necessary to carry out his express authority, which might be incidental or ancillary to the express authority.

Apparent authority or the ostensible authority exists where the Principal’s word or conduct would lead a reasonable person in the third party’s position to believe that the agent was authorised to act, even if the principal and the purported agent had never discussed such a relationship. This is also called as “agency by estoppel” or the “doctrine of holding out”.

Acts of the Agent constitute the acts of the Principal (Insurance company) if the said Agent acts within the scope of authority granted by the Principal. Further the principle of estoppel is also applicable. Here it is a mentionable fact that relationship between Brokers to an Insurance company is on a “principal to principal” basis. Since Broker represents a customer, acts of a Broker does not bind an insurer.

TYPES OF INSURANCE AGENTS

The following are the different types of Insurance Agents recognised under the Regulations:

(a) Individual Agent (b) Corporate Agent (c) Micro Insurance Agent

Individual Agents

IRDA (Licensing of Insurance Agents) Regulations, 2000 as amended from time to time, contains provisions relating to licensing of individual Insurance Agents. The following are the different types of licenses issued within the Regulations:

(a) Direct Life (b) Direct Non Life (c) Composite License (both Life and Non-Life)

The following are the pre-requisites for a candidate intending to get a license issued (common for all types of agents):

(a) Minimum qualifications:

The minimum qualifications prescribed are a pass in 12th standard or equivalent examination conducted by a recognised Board/Institution. This condition is relaxed to a pass in 10th standard for applicants residing in a place where the population is not less than 5,000 (‘Rural agents’)

(b) The applicant must not suffer from the following disqualifications:

(a) That the applicant is not minor

(b) That he is not found to be of unsound mind by a Court of competent jurisdiction

(c) That he has not been found guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or an attempt to commit any offence by a Court of competent jurisdiction and five years have not elapsed from the date of conviction

(d) That he has been found guilty of or has knowingly participated in or connived at any fraud, dishonesty or misrepresentation against an insurer or an insured during the course of: (i) Any judicial proceeding relating to any policy of insurance (or) (ii) Winding up of an insurance company (or) (iii) In the course of investigation of affairs of an insurer

(e) That he does not violate the code of conduct prescribed under the Regulations

(f) Practical Training: The applicant shall undergo a minimum of 50 hours practical training on insurance related matters in life or general insurance business, as the case may be, spreading to 1 to 2 weeks. Where the application is for a composite license, the training shall be 75 hours spread over 3 to 4 weeks covering both life and general insurance subjects. Where the applicant holds special qualifications such as membership of Institute of Chartered Accountants of India, Institute of Cost and Works Accountants of India, Institute of Company Secretaries of India, Insurance Institute of India or the Institute of Actuaries of India or a Masters degree in Business Administration of any institution recognised by Central Government or State Government, it is sufficient if the training is undergone for 25 hours (35 hours if the license is composite). The training can be undergone in any of the IRDA accredited training institutions

(g) Examination: Every applicant shall undergo a pre-recruitment examination in life or general insurance business or both, as the case may be, conducted by the Insurance Institute of India or any other body authorised by IRDA.

(h) AML & ULIP training: In addition to the above, the insurer with whom the agent is attached provides a special training on Anti money laundering (under the IRDA’s Anti money laundering Guidelines dated 31 March 2006) for all Insurance Agents. Training in Unit Linked Insurance Products (ULIP) is compulsory for life insurance agents before they are allowed to sell ULIPs on behalf of a life insurer (under the IRDA (Linked Insurance Products) Regulations, 2013)

(i) Payment of fees of Rs.250 along with the application for grant of license enclosing proof of age, qualifications, training and examination.

Renewal of license

A license is issued for a period of three years at a time. At the end of the third year, the license is required to be renewed. The following are the conditions for renewal of license:

(a) Completion of practical training for 25 hours for Life or General insurance, as the case may be or 50 hours for renewal of composite agency license

(b) Payment of fees of Rs.250 towards renewal of license. If the application for renewal does not reach at least 30 days before the due date for renewal, an additional fee of Rs.100 by way of penalty is payable. if the application for renewal reaches after the expiry of license, IRDA may consider the application for renewal upon imposition of a penalty of Rs.750.

(c) Maintenance of a minimum persistency of 50% during the license period (as per IRDA’s persistency guidelines dated 11 February 2011

(d) The Agent does not suffer from any of the disqualifications mentioned in the previous section

(e) Renewal training on Anti-money laundering as may be prescribed by the insurer from time to time

Authorisation to sell for one insurer at a time

A license issued under the provision of the above Regulations entitles an Insurance Agent to sell on behalf of one life insurer or one General insurer at a time. An identity card is issued by the concerned Insurer for this purpose. An Agent is entitled to change insurer but has to follow the process laid down in IRDA’s circular on issue of a ‘No objection Certificate” by the insurers, dated 2 September 2009.

LICENSING OF CORPORATE AGENTS

The IRDA (Licensing of Corporate Agents) Regulations, 2002 provides the licensing framework for Corporate Agents similar to the Regulations applicable to Individual Agents. The Corporate Agents regulations recognize agents who are one of the following entities (as against individual agents who are licensed under the IRDA (Licensing of Insurance Agents) Regulations, 2002):

(a) Firm (b) Company under the Companies Act, 1956 (c) Banking company (d) Co-operative society (e) Panchayat or local authority (f) Non-Government organisation

The license is issued to the entity as against the individual under licensing of individual agents. However, the persons who are authorised to sell on behalf of a Corporate Agent will have to undergo the training and examination requirements similar to that of an Individual agent. The Corporate agent shall have the following persons at the minimum as per the Regulations:

(a) Corporate Insurance Executive (‘CIE’) (b) Specified Persons (‘SP’)

A Corporate Insurance Executive is the Director or Partner or one or more of its officers or employees so designated by it (where the applicant is a Company or a Firm). Where the applicant is any other person, the Chief Executive or one or more of his employees designated by him shall be the CIE. In either case, the CIE shall possess the minimum qualifications, undergo the practical training and pass the required examination.

A Specified Person is responsible for soliciting or procuring insurance business on behalf of the Corporate Agent entity. He may be a Director or a Partner or one or more of its officers or other employees so designated by the Corporate Agent. The individual desirous of acting as a Specified Person shall also possess the requisite qualifications, undergo the practical training and pass the examination. A Certificate is issued to a Specified Person which authorises him to solicit or procure insurance business on behalf of the Corporate Agent. There may be as much number of Specified Persons as the Corporate Agent requires depending upon the business requirements.

The minimum qualifications, practical training and examination requirements are similar to that of an individual agent. A Corporate Agent is also allowed to act for only one life insurer (Direct-Life) or one general insurer (Direct-Non-Life) or Composite Corporate Agent (one Life and one General at a time) As per the IRDA guidelines on Corporate Agents, dated 14 July 2005, two types of Corporate Agents are recognized:

(a) Exclusive Corporate Agents –

i.e. those entities whose primary activity is solicitation or procure of insurance business. Such entities shall be Public Limited companies under the Companies Act, 1956, with a minimum paid up capital of Rs.15 lakhs deposited in a Scheduled Commercial Bank. Further entities belonging to Banking or Insurance Groups alone are allowed to form Exclusive Corporate Agencies

(b) Non-exclusive Corporate Agents –

entities which are already engaged in some other business and would like to take up insurance agency as a subsidiary activity. Further a Group to which the applicant Corporate Agent belongs to, can be granted only one corporate agency license. In other words, any proposal from an applicant, some of whose group entities are already engaged in insurance business, such as corporate agent, broker, insurer etc., shall not be normally granted a corporate agency license. IRDA does not normally grant any exception unless the entities are licensed by Reserve Bank of India with substantial client base or otherwise have assets, turnover or net worth of Rs.15 Crores.

Requirements for becoming a Corporate Agent:

(a) Formation or existence of an entity as required under the Regulations as above

(b) Identification of persons possessing the minimum qualifications to become a CIE or SP (a minimum of 1 CIE and 2 SPs are normally insisted by IRDA at the time of licensing). The actual number of persons will depend on the business plan of the applicant corporate agent. CIEs or SPs can also be changed or added (in addition to minimum) subsequently

(c) Document evidencing constitution of the Corporate agent entity (e.g. Memorandum and Articles of Association) shall contain “procuring or solicitation of insurance business” as one of the main objects

(d) Proof of CIE and SPs having undergone the practical training and passed the required examination

(e) Either CIE or one of the SPs must possess one of the following additional qualification:

• An Associate/Fellow of the Insurance Institute of India, Mumbai.
• an Associate/Fellow of the Institute of Chartered Accountants of India, New Delhi; with diploma in Insurance and Risk Management.
• an Associate/Fellow of the Institute of Costs and Works Accountants of India, Calcutta;
• an Associate/Fellow of the Institute of Company Secretaries of India, New Delhi;
• an Associate/Fellow of the Actuarial Society of India, Mumbai;
• possessing Certified Associate ship of Indian Institute of Bankers (CAIIB)
• MBA (Two year) Course / PG Diploma (One year) course in Insurance from Amity School of Insurance & Actuarial Science, Noida
• PG Diploma (One year) course in Insurance from Institute of Insurance and Risk Management, Hyderabad
• MBA (Two year) course in Insurance from National Insurance Academy, Pune
• PGMBA (Two Year) course in Insurance from National Law University, Jodhpur
• PGMBA (Two year) course in Insurance from MET, Mumbai
• MBA (Two year) course in Insurance from Birla Institute of Management Technology, Noida. The persons with above qualifications (except at (a)) shall undergo a “Workshop for Insurance executives” at National Insurance Academy, Pune or Insurance Institute of India, Mumbai or Institute of Insurance and Risk Management, Hyderabad as prescribed by the Authority.

(f) In the case of exclusive Corporate Agencies, proof of formation of a public company, injection of a capital of `15 lakhs and depositing the money into a Bank

(g) Fee of `250 for issue of licence to the Corporate Agent and `500 for issue of Certificate for each Specified person

Renewal of license

A license is issued for a period of 3 years and shall expire at the end of the term, unless renewed. The fee for renewal is Rs.250 as applicable to renewal of an individual agency license. The conditions for renewal of license for a corporate agent are similar to that of an individual agent, including maintenance of a minimum persistency of 50%.

MICRO INSURANCE AGENTS

Micro insurance Agents are a special category of insurance agents who support financial inclusion, i.e. the distribution of financial services at an affordable cost to the masses. Micro insurance contracts are typically low sum assured contracts which provide for the sum assured to be paid either on death – both natural and accidental, or an Endowment (which also provides a sum assured on maturity in addition to death) or a health insurance.

Only a Non-Governmental organisation or a Self Help Group Micro Finance Institutions or Associations not formed for Profit are entitled to become Micro Insurance Agents. Such Agents can distribute the products of one life insurer or one general insurer or both. A Micro insurance agent shall employ Specified persons with the prior approval of the Insurer to distribute the micro insurance products on its behalf. All the Micro insurance agents and their Specified persons shall be imparted a 25 hour training by the insurer in local vernacular language in the areas of insurance selling, policyholder servicing and claims administration.

A Micro insurance agent can sell only a Micro insurance product and not any other type of insurance products. However an Agent who is licensed to sell all products of an insurer can sell the Micro insurance products of such insurer, if any. An Insurance Broker, who can sell any product of any insurer, can sell Micro insurance products of any insurer as well.

All Micro insurance policies may be reckoned for the purpose of fulfillment of social obligations of an insurer pursuant to the provisions of the Insurance Act and Regulations. Where a micro insurance policy is issued in a rural area and falls under the definition of social sector, such policy may be reckoned for both under rural and social sector obligations as well.

Role of an Insurance Agent

An insurance agent represents the insurer with whom he or she is attached. He solicits or procures insurance business only for such insurer. The responsibilities of an insurance agent broadly include the following:

(a) Perform Need analysis for the customer – The agent is expected to sell the products of the insurance company, which suit the needs of the customer. For this purpose he has to analyse the needs of the customer, such as Insurance protection for family, Asset protection needs, Children’s marriage or education needs, Health insurance, Pension etc. Depending on the needs and the stage of the life cycle of the customer, the appropriate product of the insurer which suits the customer is recommended

(b) Explain the product benefits, premiums, exclusions and other terms and conditions so that the customer can take an informed decision

(c) Assist the customer in getting the requisite documents for the purpose of seeking an insurance cover and clarify the doubts of the customer in the proposal form filling process

(d) Bring to the notice of the insurer any adverse habits of the customer which will have a bearing on the insurer’s decision to accept a risk

(e) Inform the customer about the decision of the insurer to issue a policy or otherwise

(f) Provide assistance to customer at various stages of policy servicing and when a claim is made

5.POINT OF SALES PERSON (POSP).

IRDA had introduced a concept of POS vide its circular dated 26th October 2015. IRDA observed that there are lots of people who are involved in simple and routine solicitation work and who doesn’t require special expertise, POS is a person who can solicit and market certain pre-underwritten products approved by authority.

Appointment of Point of Sales Person

1. An insurance company or an insurance intermediary can engage a Point of Sales Person to represent him.

2. A Point of Sales Person can represent an insurance company or an insurance intermediary

Eligibility to be a POS?

1. Possess any one of the below listed KYC documents a. PAN Card or b. Aadhar Card.

2. Should be at least 10th pass.

Role of Point of Sales Person (POSP)

POSP is an individual who possesses the minimum qualifications, has undergone training and passed the examination as specified in IRDAI guidelines and solicits and markets only certain preunderwritten products approved by the IRDAI. As per the regulator, products such as motor insurance, travel insurance and personal accident insurance require very little underwriting as they are based on information provided by the prospect. Also, such insurance policies are automatically generated by the system. Therefore, the intervention required for such products is minimal and the training and exams for such persons could be of a lesser degree than those for a full-fledged distributor.

To start with, POSP Guidelines were issued by the IRDAI on 26th October 2015 to cover Point of Sales Persons - Non-Life and Health Insurance. In November, 2016 IRDAI allowed the life insurance industry to use point of sales person to sell life insurance products also. It identified products that are simple to understand, and in which the benefits are stated upfront and they are fixed and predefined. Accordingly, IRDAI identified pure-term insurance plans with and without return of premium, non-linked (non-participating) endowment plans that state the investment benefits upfront and immediate annuity as products that can be sold by the point of sales person. In February, 2017 in order to ensure faster certification of point of sales person in the life insurance space, the regulator has relaxed the certification programme by allowing the insurers or intermediaries hiring them to train and examine these individuals in-house.

There are two types of persons who can solicit and market insurance policies namely:

1. Insurance agent or specified persons of corporate agent or broker trained persons for soliciting and marketing insurance policies or insurance sales persons of Insurance Marketing Firm or rural authorised persons of Common Service Centre (CSC) or authorised person of web aggregators who can solicit and market all types of insurance policies.

2. “Point of Sales Person” who can solicit and market only certain pre-underwritten products approved by the Authority.