Regulation and client advice

CHAPTER-13

The role of the Government

• The irda act 1999 gives the Central Government of India the powers to supersede the IRDA by issuing a notification.

• The Act gives power to the Central Government to issue directions, in writing from time to time, to the IRDA on questions of policy,other than those relating to technical and administrative matters.

• Under prevelling laws the government allows 26% FDI in the insurance sector.

• The Government offers various tax incentives to encourage people to invest in insurance .

Relationship between the IRDA and Central Government

Rules for carrying out the provisions of the Act

Returns, statements and particulars onprogrammes

Grants

Annual statement of accounts

Directions on questions of policy

CENTRAL

GOVERNMENT

IRDA

Key Indian and international insurance bodies

• Insurance Regulatory and Development Authority (IRDA)

• Life Insurance Council (LI Council)• General Insurance Council (GI Council)• Insurance Brokers Association of India (IBAI)• Institute of Actuaries of India (IAI)• Tariff Advisory Committee (TAC)• Insurance Institute of India (III)• National Insurance Academy (NIA), Pune• Chartered Insurance Institute (CII)• Institute of Insurance and Risk Management (IIRM),

Hyderabad

• Life Insurance Council (LI Council) develops and coordinates all discussions between the government, the IRDA and the public.it is the face of the life insurance industry.

• The Insurance Brokers Association of India (IBAI) is the IRDA recognised apex body for all licensed insurance brokers in india.

• The Institute of Actuaries of India (IAI) aims to advance the actuarial profession in india.

• The Tariff Advisory Committee (TAC) was established to control and regulate the rates, advantages, term and conditions that may be offered by insurers in respect of general insurance business.• The Insurance Institute of India (III) was established to promote insurance education and training in india.• The Chartered Insurance Institute (CII) works with local regulators, educational partners and industry organisations to improve the professionalism, skills and behaviour of insurance and financial service staff and agents working in their local markets.

Duties, powers and functions of the IRDA and other regulators

• IRDA was constituted as an autonomous body to regulate & develop the insurance industry.

• Section 14 of the IRDA Act 1999,lays down the duties,powers & fuctions of the IRDA.

• The IRDA has the duty to regulate,promote & ensure the orderly growth of insurance nad reinsurance business.

IRDA (Licensing of Insurance Agents) Regulations 2000

• Becoming an agent

• Application form (Regulation 3) & fee (Regulation 7)

• Qualification (Regulation 4)

• Practical Training (Regulation 5)

• Examination (Regulation 6)

• Licensed Agent

WHO CAN

BECOME AN AGENT?

• Individuals

• Collectives like

companies , firms,

banks,

cooperative societies etc

CORPORATE INSURANCE EXECUTIVE

In case of collectives a CORPORATE INSURANCE EXECUTIVE/s is / are appointed who will be required to obtain licenses Others who work for the corporate agent will be called Specified Persons and they will be required to obtain certificates.

Which means…..

• In case of collectives like companies, firms, banks a person will be appointed who will hold a license and the others who work along with him will have to obtain certificates.

WHAT

IS THE PROCEDURE FOR

BECOMING

AN AGENT ?

LICENSE

• The licence allows the person to act as agent for life insurer, for a general insurer or as a composite insurance agent working for a life insurer as well as a general insurer.

• No agent is allowed to work for more than one life insurer or more than one general insurer

• The licence issued by IRDA will be valid for 3 years

• Fees is Rs 250/- for individuals as well as corporate agents

• The fees for the certification of the specified person is Rs 500/-

Application

A person who wishes to obtain a licence to act as an insurance agent must make an application, in the required format, to a designated person as specified in Regulation 3. The application must be accompanied by the fee of Rs. 250, payable to the authority as specified in Regulation 7.

QualificationAn applicant living in a place that has a population of 5,000 or more as per the last census:

An applicant living anywhere else:

•MINIMUM 12TH PASS•AN EQUIVALENT EXAMINATION PROVIDED BY RECOGNISED BOARD.

•MINIMUM 10TH PASS•AN EQUIVALENT EXAMINATION PROVIDED BY RECOGNISED BOARD.

QUALIFICATIONS TO GET A LICENSE (Contd)

• Have undergone training for at least 50 hours in life or general insurance business.

• In case of composite insurance agent 75 hours training is must.

• Must have passed the pre-recruitment examination conducted by the Insurance Institute of India or any other examination body recognized by the IRDA.

DISQUALIFICATIONS

A person is debarred from holding a license or an issued license is subject to cancellation if

• He is a minor

• Has been found to be of unsound mind by a court of competent jurisdiction.

• Has been found guilty of criminal breach of trust, misappropriation, cheating, forgery or abetment or attempt to commit any such

offence.

DISQUALIFICATIONS (CONTD...)

• Found guilty of or knowingly participating in or conniving at any fraud , dishonesty or misrepresentation against an insurer or an insured.

• Not possessing the requisite qualifications and specified training.

• Not passed examinations as specified by the

Regulations.• Found violating the code of conduct as

specified by the Regulations

RENEWAL OF LICENSE

Applications for renewal have to made at least 30 days before the expiry of the license

Renewal Period Amount( Rs.)

At least 30 days before the expiry of license

250

Before the date of expiry of license but not made at least 30 days in advance

350

After the date of expiry of license

Normally be refused / 1000

Prior to renewal of license the Agent should have completed

• 25 hours practical training in life or general insurance business.

• 50 hours practical training in life and general insurance business in case of composite insurance agent.

RENUMERATION OF AGENT

An agent works on commission basis. A stated percentage of the premium collected through his agency is paid as commission.

Section 40 A(1) if the Insurance Act states that commission

• shall be 35% of the first year’s premium• 71/2% of the second and third year’s renewal

premium• 5% of subsequent renewal premium.

Exceptions

• During the first ten years of insurer’s business , 40% may be paid instead of 35% of first year’s premium.

• 6% commission can be paid on the renewal premium even beyond the third year.

• Commission rates are less • under term assurance plan• for shorter duration policies• under single premium plans• under pension/annuity plans

AGENCY AS A PROFESSION

• An agent is expected to obtain life insurance business and contribute to the revenues of the insurer.

• He should report on relevant features that affect the risk .

• Having met the prospect , he would be aware of the nature and characteristic of risk . He is therefore, called the primary underwriter.

Agent - Primary Underwriter

• He is expected to disclose all the relevant facts that would affect the risk. Since he is the person who has seen and observed the prospect, he is aware of the nature & the risk. Hence he is obliged to report all the true facts about the prospect.

AGENCY AS A PROFESSION

Agent has the dual responsibility of being true to the interests of both the parties .

• He is obliged to reveal all the important terms and conditions of the policy to the prospect even if they are restrictive and unpleasant. He is also obliged to report to the insurer all the true facts about the prospect .

THANK THANK YOUYOU