Insurance Agency as a Career

7/27/2019 Insurance Agency as a Career

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INSURANCE AGENCYCHAPTER 10

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AGENT:-

An agent is one who acts on behalf ofanother.

PRINCIPAL :-He is the person on whose behalf the

agent acts.


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For e.g.,

Principal Agent

Client Lawyer

Country Ambassador


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In the court, the lawyer acts as an

agent for his client who is theprincipal.

An ambassador in a foreign countryacts as an agent for his country

(Principal).


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THE INDIAN CONTRACTS

ACT(Section 182)

Defines Principal as

Principal is the person for whom suchact is done or who is so represented.


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Insurance Company (Principal)

Insurance Agent (Middle person)

Prospect / Policy Holder (3

rd

Party)

In this case, the insurance company is theprincipal who will enter into a contract with the

third party i.e. prospect & the insurance agentacts as a middle person who

represents the Insurance Company

(Principal)


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THE INSURANCE ACT( Section 42)

DefinesAn insurance agent is one who is

licensed under Section 42 of the Actand is paid commission for solicitingor procuring insurance business ,including business relating to

continuance , renewal or revival ofpolicies of insurance.


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In other words

A person who has authorized licenseand can bring business for whichcommission is paid is an Insurance

Agent.

The business brought need not be

new business. It can be business forrenewal or revival also.


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qui facit alium facit perse

The above legal maxim means

He who acts through others acts tohimself ie.,

The principal is bound by what theagent does.


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WHICH MEANS

The Principal is totally bound and can be

held liable for any act done by the agent.


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AUTHORITY OF AN

AGENT:

The principal is liable for all the acts done

by the agent. However he can restrict hisliability by specifying the extent of

authority granted to the agent.


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Authority of the Principal

It can be

EXPRESSEDOr

IMPLIED


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Implied Authority

Eg. LIC does not authorize agents to

collect premia (except first premium

along with the proposal) from the policy

holder. However, if he collects theamount, remits to the insurer & gets the

receipts delivered to the policy holder

implied authority can be inferred.


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WHO

CANEMPLOY

AN AGENT?


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The Contracts Act

(Section 183)

According to Section 183 of the ContractsAct

Any person

who is a major & who is ofsound mind.


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WHOCAN

BECOMEAN AGENT?


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Individuals

Collectives like

companies , firms,

banks,

cooperative societies etc


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CORPORATE INSURANCE

EXECUTIVE

In case of collectives a CORPORATE

INSURANCE EXECUTIVE/s is / are

appointed who will be required to obtain

licenses Others who work for the

corporate agent will be called Specified

Persons and they will be required toobtain certificates.


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Which means..

In case of collectives like companies,firms, banks a person will be appointed

who will hold a license and the others

who work along with him will have toobtain certificates.


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WHATIS THE

PROCEDURE FORBECOMING

AN AGENT ?


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PROCEDURE FOR

BECOMING AN AGENT

The Insurance Act, 1938 (Section 42) states

that an insurance agent must possess alicense issued by IRDA.

The IRDA has authorized designated

persons in each insurance company toissue licenses on behalf of IRDA.

LICENSE


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LICENSE

The licence allows the person to act as agent forlife insurer, for a general insurer or as acomposite insurance agent working for a lifeinsurer as well as a general insurer.

No agent is allowed to work for more than onelife insurer or more than one general insurer

The licence issued by IRDA will be valid for 3years

Fees is Rs 250/- for individuals as well ascorporate agents

The fees for the certification of thespecified person is Rs 500/-


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QUALIFICATIONS TO GET A LICENSE

The individual or corporate insurance executive

must be at least 18 years old. have passed at least 12th standard or

equivalent examination if he is to be

appointed in a place with a population of

5000 or more or 10th standard otherwise.


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QUALIFICATIONS TO GET A LICENSE(Contd)

Have undergone training for at least 50hours

in life or general insurance business. In case of composite insurance agent 75

hours training is must.

Must have passed the pre-recruitment

examination conducted by the InsuranceInstitute of India or any other examinationbody recognized by the IRDA.


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DISQUALIFICATIONS

A person is debarred from holding a license or anissued license is subject to cancellation if

He is a minor

Has been found to be of unsound mind by acourt of competent jurisdiction.

Has been found guilty of criminal breach of

trust, misappropriation, cheating, forgery orabetment or attempt to commit any such

offence.


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DISQUALIFICATIONS

(CONTD...) Found guilty of or knowingly participating in or

conniving at any fraud , dishonesty or

misrepresentation against an insurer or an insured.

Not possessing the requisite qualifications andspecified training.

Not passed examinations as specified by the

Regulations. Found violating the code of conduct as

specified by the Regulations


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RENEWAL OF LICENSEApplications for renewal have to made at least 30 daysbefore the expiry of the license

Renewal Period Amount( Rs.)

At least 30 days beforethe expiry of license

250

Before the date of

expiry of license but

not made at least 30days in advance

350

After the date of

expiry of license

Normally be refused


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Prior to renewal of license the

Agent should have completed

25 hours practical training in life orgeneral insurance business.

50 hours practical training in life and

general insurance business in case ofcomposite insurance agent.


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RENUMERATION OF AGENT

An agent works on commission basis. A stated

percentage of the premium collected through

his agency is paid as commission.

Section 40 A(1) if the Insurance Act statesthat commission

shall be 35% of the first years premium

71/2% of the second and third years renewalpremium

5% of subsequent renewal premium.


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Exceptions

During the first ten years of insurers business

, 40% may be paid instead of 35% of first

years premium.

6% commission can be paid on the renewalpremium even beyond the third year.

Commission rates are less

under term assurance plan for shorter duration policies

under single premium plans

under pension/annuity plans


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AGENCY AS A PROFESSION

An agent is expected to obtain lifeinsurance business and contribute tothe revenues of the insurer.

He should report on relevant featuresthat affect the risk .

Having met the prospect , he would be

aware of the nature andcharacteristic of risk . He istherefore, called the primaryunderwriter.


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Agent - Primary Underwriter

He is expected to disclose all the relevant

facts that would affect the risk. Since he

is the person who has seen andobserved the prospect, he is aware of the

nature & the risk. Hence he is obliged to

report all the true facts about the

prospect.


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AGENCY AS A PROFESSION

Agent has the dual responsibility ofbeing true to the interests of both theparties .

He is obliged to reveal all the importantterms and conditions of the policy tothe prospect even if they are restrictive

andunpleasant. He is also obliged toreport to the insurer all the truefacts about the prospect .


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THANK

YOU

Insurance Agency as a Career

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