Regulations for Corporate Agents under IRDAI

Ashish M. Shaji

27 Jul, 2021

The insurance regulatory authority has notified about the regulations to be followed by the corporate agents. The primary purpose behind such regulation is to protect the interests of policyholders. The matters relating to insurance are regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The authority in consultation with the Insurance advisory committee formed certain regulations for the proper operation of the corporate agents. In this article we shall highlight the regulations for corporate agents under IRDAI but before that let’s have a basic understanding of the meaning of corporate agents.

Who are Corporate Agents?

Corporate agents are entities that sell insurance policies to the customers. The IRDAI (registration of corporate agents) Regulations, 2015 defines corporate agents as any applicant who holds a valid registration certificate issued by the authority for soliciting and serving the insurance business for categories like life, general and health.

Corporate Agents can be categorized into the following:

Regulations for corporate agents concerning the grant of registration

The registration to a corporate agent shall be granted upon fulfillment of the following conditions:

• The corporate agent shall be allowed to solicit and service insurance business in the prescribed manner.
• The corporate agent must comply with the IRDA (Insurance Regulatory and Development Authority) Act, 1999 and other guidelines issued by the authority.
• It is the responsibility of the corporate agent to inform the authority regarding any change in the information submitted to the authority or if it contains anything misleading.
• The corporate agent must address the grievance of his client within 14 days from receipt of such grievance and the developments must be shared with the authority.
• The corporate agent is required to solicit and procure a reasonable number of insurance policies commensurate with their resources and the number of persons they employ.
• The corporate agents must maintain records that contain the details of the policy and the specified persons and such records and details must be made accessible by the corporate agents to the authority.
• The corporate agent cannot undertake multilevel marketing for solicitation of insurance products.
• The corporate agent must ensure compliance of the code of conduct applicable to its directors, specified persons, etc.
• The corporate agent is required to maintain the books of accounts.

Regulations for corporate agents regarding conflict of interest

A corporate agent is required to comply with the following while soliciting and procuring the insurance business:

• The corporate agent having tie-ups with more than one insurer should disclose to the prospective customers the list of insurers and provide the details like policy term, premium payable, the scope of coverage, etc. Further if asked by the prospect disclose the scale of commission.
• If the insurance is sold as an ancillary product with a principal business product then the corporate agent shall not compel the buyer of the principal business product to buy the insurance product. The principal officer and CFO of the agent will file a certificate confirming no forced selling of the same.
• No insurer can ask the corporate agent to insure every client with it.

Regulations for corporate agents concerning disclosures to the authority

• An applicant who intends to become a corporate agent must disclose all material facts to the authority at the time of applying and if there is any change in information that also must be disclosed to the authority.
• A corporate agent is required to notify the authority regarding any change in the material facts based on which registration was granted. It must be notified in 30 days of such change.
• A corporate agent is required to disclose any proceedings initiated against it by other regulatory or Government body within 30 days of such initiation.
• The authority may require the corporate agent to furnish appropriate information or return.
• The corporate agent is required to disclose to the authority the details of its office where they seek to distribute insurance products and any opening or closing of an office must be communicated to the authority.
• Failure to comply with the above-mentioned conditions shall invite regulatory actions like cancellation of registration etc.

Arrangements with Insurers for Products Distribution

• The Corporate agents registered under the regulations for corporate agents require entering into arrangements for distribution of their products. Such arrangements must be disclosed to the authority within 30 days of entering such arrangements and the minimum period for such an arrangement will be for one year.
• No corporate agent will promise and no insurer shall force the agent to distribute the products of a particular insurer.
• The arrangements must have provisions concerning the duties and responsibilities of the corporate agents and terms and conditions for termination of arrangements.
• The arrangements must not be against the policyholder.
• The corporate agent can terminate arrangement after informing it to the authority and the insurer along with the reason and if the insurer intends to terminate agreements they shall also inform the authority and the corporate agent along with the reason.
•  Apart from prescribed fees no other charges can be paid or received by insurers and corporate agents respectively.
• The authority has the power to direct the insurer/corporate agent to terminate arrangements by recording the reasons.

Conclusion- Regulations for Corporate Agents

The regulations for corporate agents lay down the essential aspects such as the code of conduct and other compliances that meets the requirements for the proper operation of the corporate agents.