Life for insurance agents is set to get tougher as the Insurance Regulatory and Development Authority of India (Irdai) has brought out final guidelines for appointment of insurance agents.
With higher quantum of penalties and more onus on correct selling based on need-based requirements of customers, regulations have become more stringent for distributors of insurance products.
Irdai has said that the insurer shall be responsible for all acts and omissions of its agents including violation of code of conduct specified under these guidelines, and shall be liable to a penalty which may extend to Rs 1 crore.
“Insurers would take more caution while appointing agents, now that the power to appoint them is in our hands. Since penalties on the insurers are also very high, further checks on agents may also be made in the future,” said the chief distribution officer of a mid-size private life insurer.
As per the new norms, no individual can act as an insurance agent for more than one life insurer, one general insurer, one health insurer and one of each of other mono-line insurers. Irdai has said that any person who acts as an insurance agent in contravention of the provisions of this Act shall be liable to a penalty which may extend to Rs 10,000.
Industry executives said that till now, the penalties imposed on agents was negligible and with this provision, commission-based product sales may virtually come to an end.
Irdai has also said that there would be a centralized list of agents maintained by the Authority, which contains all details of agents appointed by all insurers.
Also, there would be a centralized list of black listed agents maintained by the Authority whose appointment is cancelled/suspended by a designated official of insurer on grounds of violation of code of conduct and / or fraud.
For instance, if there is any agent against whom a complaint is lodged with an insurance company, a database on the same and the details of the complaint will also be preserved. In the future, such agents may not be allowed to sell insurance related products. This, said life insurers, is an attempt to reduce misselling and related complaints. Life insurance complaints have the highest cases of misselling or wrong product sold.
The regulator has said that if the insurance agent represents more than one insurer offering same line of products, he should dispassionately advice the policyholder on the products of all Insurers whom he is representing and the product best suited to the specific needs of the prospect.
The regulator now also has the powers to appoint one or more of its officers as an 'Investigating Officer' to undertake inspection of affairs of an insurance agent.
These guidelines shall come into force with effect from April 1, 2015 and be valid till the regulations in this regard are issued.
On the issue of commissions too, detailed regulations on remuneration will be brought out. This would ensure that an agent does not sell a product purely for the first year commissions and puts equal emphasis on renewals. For this, the commissions are expected to be distributed between the first, second and third year of the premium paying term.
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