METHODS OF REMUNERATING AGENTS

A life insurance agent works on commission, which is a stated percentage of premium.

Section 40 A(1) of the Insurance Act stipulates that the maximum amount which can be paid to a life insurance agent, by way of commission or remuneration in any form, shall be
(a) 35% of the first year’s premium ]
(b) 7 ½% of the second and third years renewal premium © and 5% of subsequent renewal premium.

It is necessary in all cases, that the policy must have been effected through that agent.

Agency Remunerations

There are some exceptions to the general procedure of granting commission to the agents

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

Within these limits, the manner of remunerating the agent will be determined by the insurer.

Normally, under Term Assurance Plans, commission rates are less.

Similarly, for shorter duration policies, commission rates are lesser than under longer duration plans.

Under single premium plans and pension/annuity plans, rate of commission is nominal.

REMUNERATION

The remuneration of an agent is in the form of Commission.
The maximum amount of commission is regulated under Section 40 A(1) of Insurance Act, 1938.
The rate of Commission depends on the Plan and term of the policy.

Stipend to Agents

New agents may paid a stipend to be adjusted against the commission to be earned, as and when the business begins to come in.



Non-compliance with the provisions of Agency Regulations

Non-compliance with the provisions of the agency Regulations may lead to termination of licence, which automatically leads to termination of agent.

Offences liable for action

Some of the offences for which penalties are imposed are in the nature of non-fulfillment of certain requirements, like inadequate business, applications not made on time, etc.

Most of the offences however, relate to the code of conduct, which is laying down the standards of fairness expected in dealings with the policyholder and with the insurer.

Attempts to mislead either by withholding correct information or giving false information are taken serious note of.

Right of the Customer

Customers are entitled to full information from those who provide services.

This requirement comes from the Consumer Protection Act.

In the case of life insurance the person representing the insurer i.e. the Agent has the responsibility to inform the consumer of all the products offered by the insurer for whom he works, and not merely of the few which are most frequently sold.


Business Ethics

Professionals do not interfere with the clients of the other professionals. This is professional etiquette. Agents are professional. They are also expected to maintain such proprieties.

Unprofessional behavior is subject to penalties under the regulations. This is also a punishable offence, not only under the regulations, but under the Insurance Act itself.

Adjudication

Provisions exist whereby the Authority can adjudicate on disputes between insurers and intermediaries or between intermediaries.

The Authority has powers, under section 47A of the Insurance Act, to decide on disputes relating to settlement of claims of amounts not exceeding Rs.2000.

Not many disputes are likely to be referred to the Authority under this section, as the amount of Rs.2000 is very small