Insurance companies can directly recruit agents; existing agents may not be required to pay license renewal fee. The guideline will come into effect from April 1.
Insurance agents need not obtain IRDAI license to carry out distribution business in India from April 1.
IRDAI
has issued a final guideline on appointment of insurance agents in which it
has allowed insurance companies to directly appoint insurance agents. However, the
applicants have to pass the insurance examination to become an insurance agent.
This also implies that existing agents may not be required to cough up a fee to renew their licenses. Currently, insurance agents need to pay a nominal fee of Rs. 125 every three years to renew their licenses.
Insurers are mandated to verify credibility of applicants. The insurance companies can check details of applicant by putting a PAN number in a centralized list of black listed agents maintained by the IRDAI.
Recently, TS Vijayan, had said at a public forum, “The appointment of agents will be given to the insurance companies. So the whole licensing system will go. The new system pertaining to the appointment of insurance agents will come into effect from the next financial year, i.e. April 1.”
“Though a person is still required to pass IRDAI examination, he/she need not procure license from IRDAI for distribution. Also, there would be no renewal fee for existing agents. This could benefit the industry which is struggling from high attrition,” said the senior official from a mid-sized private insurance firm.
An agent can tie up with a life insurer, a general insurer or a stand-alone health insurer.
Insurance agents will be required to disclose their commission structure to the policyholders, if asked. They also need to carry out risk profiling and need analysis before recommending any product. Also, the insurance agents need to ensure that the policyholder should remain invested in the recommended policy for at least three years, failing which there could be a penalty.
In line with the Insurance Regulation (Amendment) Bill, IRDAI has tightened norms for selling of insurance policies and increased the penalty on mis-selling and violation of code of conduct.
IRDAI can impose a fine of up to Rs.1 crore on insurance companies for mis-selling and violation of code of conduct by an agent. The regulator has doubled the penalty on insurance intermediaries from Rs.5 lakh to Rs.10 lakh for pass backs. The guideline restrains insurance agents from becoming directors on the insurer’s board.
In addition, multi-level marketing schemes will also be a thing of past. Simply put, insurance intermediaries cannot hire unauthorized persons to execute sales by offering incentives. IRDAI can impose a fine of up to Rs. 10,000 for such violations.
Besides, the insurance regulator will appoint a few officials to carry out investigation on affairs of an insurance agents to monitor the compliance.
Meanwhile, the insurance regulator has mandated insurance companies to clearly specify the criteria for the payment of incentive (bonus) to agents which is over and above the standard commission. Also, the insurers clearly need to specify commission structure and schedule of payment, minimum persistency ratio, criteria for payment of hereditary commission and loyalty programs to agents in form of health insurance and life insurance.