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IRDAI rolls out stringent norms for insurance agents

IRDAI will maintain a centralised list of agents whose appointment is cancelled or suspended by a designated official of an insurance company for violation of norms. If a complaint is lodged against an agent with an insurance company, the details of

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Last Updated - May 16, 2023
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Insurance Regulatory and Development Authority of India (IRDAI) released the final guidelines for the appointment of insurance agents which will be effective from 1st April 2015. The regulations bring in higher penalties for agents and enforce (customer) requirement-based selling practices on agents.

According to the new norms, an individual can be an insurance agent for one life insurer, one general insurer, one health insurer and one monoline insurer. If any agent contradicts the norm s/he will have to pay a penalty of Rs. 10,000. The insurance companies will be responsible for all acts and omission by their agents, including violation of the code of conduct. For violations, there will be a penalty of up to Rs. 1 crore.

IRDAI will maintain a centralised list of agents whose appointment is cancelled or suspended by a designated official of an insurance company for violation of norms. If a complaint is lodged against an agent with an insurance company, the details of the complaint will be preserved. Such agents might not be allowed to sell any insurance products in the future.

Now, the regulator is also empowered to appoint one or more of its officers as ‘investigating officers’ for inspection of the affairs of an insurance agent.

Detailed regulations on remuneration will also be announced. This will ensure an agent does not sell a product for first-year commissions alone. For this, commissions are expected to be distributed between the first, second and third years of the premium-paying term.

Earlier, the penalties imposed on agents were negligible which resulted in a lot of wrong selling and practices. Insurers needs to be more cautious while appointing agents, as penalties on insurers are very high. With the new norms in place, policyholders can breathe a sigh of relief, as one can expect lower cases of mis-selling in the near future.

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