Chapter 4:- Legal and Regulatory Aspects of Insurance Agency

This Chapter Focuses upon following
1. The importance of insurance regulations
2. The insurance regulatory framework of the country
3. Regulations that apply to insurance agents
4. Appreciate code of conduct applicable to agents
5. Relevance of the Indian Contract Act, 1972 to insurance agents

*IRDA was Formed mainly to protect the interest of Policy holders. IRDA is know changed to IRDAI, Insurance Regulatory and Development Authority of India.

*Licence that we get from IRDAI is under the section 42 of Insurance Act.

*Stand Alone Health Companies:- Along with General Insurance Licence you can also take one single private licence of a Stand alone Health Company. for example... Appolo, MAx, Star, Relegate etc.

*Criteria of Licence
10th Pass - Minimum
Rs 250 fee and 25 Hour Training.

*The Validity of Licence is 3 Years. If your Licence is Cancelled due to Fraud, You can not re-new it for say five years.

*If you want a Dublicate Licence, Charges are Rs 50

* You have to produce your licence in case anyone demands it.

*Corporate Agents:- Like individual insurance agents, corporate agents are also licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Regulations, 2002. An agent represents only one insurance company (one general, one life or both if a composite agent, apart from a health insurance company).

*Insurance Brokers:- These are licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002. These regulations lay down the code of conduct for the respective intermediaries. An insurance broker is licensed by IRDA to arrange insurance contracts with insurance companies on behalf of clients. A broker may deal with more than one life insurance company or general insurance company or both.

*Surveyors and third party administrator:- These are intermediaries who are not involved in procurement of business. Surveyors assess losses on behalf of the insurance companies or insured. Third party administrators provide services related to health insurance for insurance companies.

*Composite Agent:- A Agent with both Life and Non Life Licence.

*Other Acts / Regulations linked to insurance
In addition, insurance business in India is linked to various other Acts / legislations of the country, some of which are listed below:
a) The Workmen's Compensation Act, 1923 [amended and renamed as Employees Compensation Act in 2010]
b) Employees. State Insurance Act, 1948
c) Life Insurance Corporation Act, 1956
d) Deposit Insurance and Credit Guarantee Corporation Act, 1961
e) Marine Insurance Act, 1963
f) Export Credit Guarantee Corporation Act, 1964
g) General Insurance Business (Nationalisation) Act, 1972
h) General Insurance Business (Nationalisation) Amendment Act, 2002
i) Motor Vehicles Act, 1988
j) Public Liability Insurance Act, 1991

*Caveat Emptor:- The principle of “Caveat Emptor” implies buyer beware.

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Summery 

a) The prime purpose of insurance regulations is to protect the policyholder.

b) Insurance Regulatory and Development Authority (IRDA) Act 1999, created the IRDA as an independent authority for the purpose of regulating the insurance industry.

c) The Insurance Act, 1938 has provisions for monitoring and control of operations of insurance companies.

d) An individual agent is an individual representing an insurance company while a corporate agent is other than an individual, representing an insurance company.

e) Insurance agents who hold licence to act as agent for both a life insurer and a general insurer are called composite insurance agents.

f) The first time applicant for agency licence shall have completed from an IRDA approved institution, at least, fifty hours. practical training in life or general insurance business.

g) If the insurance agent suffers, at any time during the currency of the licence, from any of the disqualifications mentioned in the regulations, then her / his license can be cancelled.

h) An agent cannot offer any rebates on premium as an inducement to the policyholder, except as allowed by the insurer.

Key Points
a) Agent
b) Rebate
c) Intermediaries
d) Caveat Emptor

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Question 1
Moral hazard means:
I. Dishonesty or character defects in an individual
II. Honesty and values in an individual
III. Risk of religious beliefs
IV. Hazard of the property to be insured

Question 2
Insurance agent represents the ______________.
I. Insurance company
II. Sub-agent
III. Co-agent
IV. Broker

Question 3
Licence to work as an insurance agent is issued by __________.
I. General Insurance Corporation (GIC)
II. Insurance Regulatory & Development Authority (IRDA)
III. By the respective life insurance company
IV. Finance Ministry

Question 4
Agent‟s licence is to be renewed __________.
I. Every year
II. After 5 years
III. After 3 years
IV. After 15 years

Question 5
Identify the statement which is not correct. Insurance agent should __________.
I. Indicate the scale of commission if asked by the customer
II. Share the commission by way of rebate
III. Disclose his licence on demand
IV. Indicate the premium to be charged

Question 6
Rs.______________ is the fees payable to the Authority for issue / renewal of licence to Act as an Insurance Agent or Composite Insurance Agent.
I. 250
II. 150
III. 520
IV. 100

Question 7
The Authority may issue duplicate licence in case it is ____________.
I. Lost
II. Revoked
III. Suspended
IV. Withdrawn

Question 8
If an agent is found guilty of criminal misappropriation, the designated person will _______________.
I. Cancel the licence
II. Issue a duplicate licence
III. Renew the existing licence
IV. Take some fees from the agent

Question 9
Minimum qualification required for an insurance agent is _______ pass.
I. Graduate
II. 10th
III. Post-Graduate
IV. 7th

Question 10
________________ may deal with more than one Life Insurance Company or general insurance company or both.
I. Agent
II. Broker
III. Corporate agent
IV. Retail agent

________________________________________________________________________________

Answer 1
The correct option is I.
Applicant shall complete 50 hours training to become an insurance agent.

Answer 2
The correct option is I.
Insurance agent represents the insurance company.

Answer 3
The correct option is II.
Licence to work as an insurance agent is issued by the IRDA.

Answer 4
The correct option is III.
Agent‟s licence is to be renewed every three years.

Answer 5
The correct option is II.
Insurance agent cannot share commission through rebates.

Answer 6
The correct option is I.
Rs. 250 is the fees payable to the Authority for issue/ renewal of licence to act as an insurance agent or composite insurance agent.

Answer 7
The correct option is I.
The Authority may issue duplicate licence in case it is lost.

Answer 8
The correct option is I.
If an agent is found guilty of criminal misappropriation the designated person will cancel the license.

Answer 9
The correct option is II.
Minimum qualification required for an insurance agent is 10th pass.

Answer 10
The correct option is II.
An insurance broker may deal with more than one life insurance company or general insurance company or both.

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