Chapter 5 Legal & Regulatory Matters cHUsSS CHAPTER-§ LEGAL & REGULATORY MATTERS AGENDA: 1. Legal Framework on Regulating Insurance Business ‘A. Basic Legal Framework B. Regulatory Measures, 2. Regulatory Aspects of Insurance Intermediaries 1. Regulations of Insurance Agents A Licensing of Insurance Agents 1) Introduction 2) Types of License 3) Licensing Requirements 4) License requirement for Sales Staff of Insurance Companies 5) Licensing Criteria 6) Training for Agents ‘7 Suitability of Agents 8) Authorization for a License 9) Continuous Training for AgentCHAPTER-5 LE ‘AGENDA: (Continue.) B. Licensing of Corporate Agents 1) Licensing Process for Corporate Agents 2) Suitability of Corporate Agents 3) Authorization of Corporate Agents GAL & REGULATORY MATTERS ‘Agency Agreement D. Agent Registry E. Commission F, Conduct of Business of Insurers and Agents 1) Liabilities of Insurers 2) Liabilities of Agents 3)_ Safeguards for Client's Money 4) Prohibited Activities 5) Reporting Inappropriate Behavior 6) Prohibited Activities for Bancassurance 7) Confidentiality ifinsurance Information 8) Supervision ofthe Conduct of Insurers and Agents G. Complaint Handling 1) Dispute Resolution Mechanism cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS 1. Legal Framework on Regulating Insurance Business A. Basic Legal Framework 1) Third Party Liability Insurance Law, 1976 - Insurance for liability for death or bodily injury caused to any person in the event of an accident by vehicle is transferred to Myanma Insurance on behalf of the owner. 2) Myanma Insurance Law, 1993 + Myanma Insurance was established under this law as a legal entity capable of suing and being sued in its ‘own name (state owned and sole shareholder). ~The law provides Myanma Insurance to undertake certain life and non life insurance. 3) The Insurance Business Law, 1996 - This law provides formation of Insurance Business Regulatory Board (BRB). ets procedures for application and issuance of business licenses for insurance companies, agents and brokers. - Under this law, private companies.are allowed to undertake insurance business. - 11 private companies granted licenses in 2013. 4) The Insurance Business Rules, 1997 Issued by Ministry of Planning and Finance. 5) Notifications and Directives - Issued by IBRB to regulate insurance business,CHAPTER -5 LEGAL & REGULATORY MATTERS 1. Legal Framework on Regulating Insurance Business B. Regulatory Measures 1D Regulatory Body Ministry of Planning & Finance empowered by Insurance business law to regulate and supervise Insurance business. Ministry then formed IBRB (Insurance Business Regulatory Board). Financial Regulatory Department (FRD) acts as secretariat of IBRB. 2) Myanmar Insurance Association (MIA) MIA isan association whose members are licensed insurance companies under Insurance Business Law. Itisa body representing all insurance companies and responsible for cooperation and coordinating with all members to develop the insurance industry. Provide trainings and facilitating agent qualification examination through National Insurance Institute of Myanmar (NIM) ‘MIA keeps the register of all insurance agents and submits to FRD. cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries 1 Regulations of Insurance Agents, = Directive relating to regulation of Insurance Agents was issued by IBRB. (Directive No, 2020 was issued by IBRB on 4 March 2020) A. Licensing of Insurance Agents 1) Noone shall act as an agent or engage in agent activities of insurance business or offering any advice, without a license for agent. 2) Types of License: a) Life Insurance Agent ¢nsed by IBRB. Can only sell the products lawfully permitted by IBRB. ‘© “Tied Agent” shall work with only one life insurance company © Ifnot affiliated to insurance company as “Tied Agent” can work for not more than two life insurance companies. ) General Insurance Agent - Natural person licensed by IBRB. Can work for not more than three general insurance companiesCHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries 2) Types of License: Life Insurance Corporate Agent {An incorporated or registered body corporate under Myanmar Companies Law, licensed by IBRB under the Insurance Business Law, who can work as corporate insurance agent. Shall employ Licensed lie insurance agents, ‘May make agency agreements with not more than two life insurance companies. ) General Insurance Corporate Agent Same as life corporate agent but sells general insurance. May make agency agreements with not more than three general insurance companies. ©) Bancassurance Abank or a microfinance institutions may act as a corporate insurance agent, Distribution Models of Bancassurance © Referral Model: Financial Institution may refer customers to an insurer Direct Sale: Financial Institution may solicit, negotiate and consult to customers for purchasing policy. Bank Shall have permission from Central Bank of Myanmar & microfinance institution have permission from Microfinance Business Supervisory Committee May make agency agreement with Maximum two life insurers / Maximum three general insurers cHUsSS CHAPTER -5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries A. Licensing of Insurance Agents 3) Licensing Requirement a) Insurance Agents - required licenses at individual level. ) Corporate Insurance Agents - licensed at the entity level ©) Financia! Institution - must hold a corporate insurance agent license , @) Financial Institution - shall have at least 3 licensed insurance agents on its Board or Management Team, 4) License Requirement for Sales Staff of Insurance Companies a) Sales Staff of insurance companies shall have insurance agent license 'b) Personnel who do not required to have insurance agent license; ‘Who only involved in administrative, managerial, clerical (not related to sales) ‘Who involved in underwriting, loss contro}, claim handling... 5) Licensing Criteria ~ Agent undergo training and exam in accordance with instructions from IBRB & FRD. -Approved Insurance Agent Qualification Testing Center (NIIM) will submit to FRD for those who passed the exam and suitable for agents.CHAPTER -5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries A. Licensing of Insurance Agents 6) Training for Agents a) Approved training institutions will provide training for life and general agents in accordance with the syllabus and the study material approved by IBRB. b) Schedule of the training program will be announced in advance to the public. 7) Suitability of Individual Agents: ‘To be eligible for an insurance agent, an applicant: a) Must be an Ordinary Resident of Myanmar; bb) Has passed the Basic Education High School examination. If he or she hasn't passed the Basic Education High School examination, he or she must have five (5) years experience in the insurance field: ©) Has not been declared bankrupt; d) Has not been convicted of a criminal offense; ©) Has not been involved in money laundering and financing the terrorism activities 1) Has not been denied, suspended or revoked for issuance or renewal of any kind ofinsurance license in Myanmar orany other countries; 8) Has not been prosecuted for any offence misappropriation; involving dishone: hh) Has met the requirements that FRD may prescribed from time to time. fraud or cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries A. Licensing of Insurance Agents 8) Authorization for a license a). FRD receive the results and reports from insurance agent qualification testing center (NIIM) and review for suitability as insurance agent and seek approval from IBRB. b) An individual may hold dual license (life & general) ©) Life & General Insurance Agent License - valid for (2) years, Agent require to attend Continuous Professional Development (CPD) Program for renewal of license, 9) Continuous ‘Training for Agents = Tokeep up with changing environment. = Agents to spend a specified min amount of time on Continuous Professional Development (CPD) training program.CHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries B. Licensing of Corporate Agents 1) Licensing Process for Corporate Agents a) A corporate shall apply to 1BRB with necessary information stipulated in accordance with the laws, rules, regulations and directives from IRBB for grant of a Corporate Agent License. by The application for corporate agent shall include the following information: i. Official Name of the Corporate Insurance Agent and Date of Establishment (True copy of Incorporation Certificate issued by Directrate of Investment and Comp: yy Administration must be attached); li, Address of Headquarters and Name of In-charge; iii, Name and Address of Directors; iv. Major businesses apart from insurance agency business; v. ‘True copy of Company Constitution; vi. Names of insurance agents to be worked for company and true copy of theirlicenses; vii, Other information as may be required by FRD. cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS: 2. Regulatory Aspects of Insurance Intermediaries B. Licensing of Corporate Agents 2) Suitability of Corporate Agents a) No corporate shall be granted a corporate agent license unless it satisfies that: i. Individuals who carry on the activities to which the license relates to on behalf of the corporate insurance agent have appropriate agent license; ii Financial Institutions applying for corporate insurance agent license have at least three (3) individual insurance agents licensed by IBRB; iii, Corporate insurance agent must not have been taken action in accordance with Insurance Business Law, Rules, Directives thereof or any other existing laws; iv. ‘The person acting in a managerial position in that corporate insurance agent must not be involved in other insurance business: vv. Acorporate agent satisfies the requirement for minimum paid-up capital as prescribed by IBRB/FRD: vi. Any other requirements prescribed by FRD are satisfied. 3) Authorization of Corporate Agents 4) ‘The FRD will review the submitted materials including the recommendation from MIA for suitability as corporate insurance agent and seek approval from IBRB for issuance of the license, ) Conporate Insurance Agent License aid for () year. cHUSsSCHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries Agency Agreement = Agent must enter into an agency agreement wit surer before selling insurance. Insurer and agent to agree on rights, obligations and matters relating to conduct of business. D. Agent Registry Agent registry will be maintained and administered as follows; a) Insurance Agent Qualification Testing Center (NIIM) will maintain the records of agents and submit the information to FRD through MIA Insurance companies to provide all details of Insurance Agents to Insurance Agent Qualification Testing Center (NIIM) ©) MIA will maintain a registry of all agents with details of licenses and their affliated insurance companies. & publish on MIA website. » E.Commission ~ Insurer shall not pay commission, fee etc. toa person for selling insurance if not licensed. + Insurer shall follow the commission rates as prescribed by IBRB. cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries F. Conduct of Business of Insurers and Agents 1) Liabilities of Insurers + Insurers shall be liable for any damage caused by their agent, Insurers who have agreement with corporate agent shall be liable for damage caused by corporate agent. 2) Liabilities of Insurance Agents = Insurance agent shall disclose the terms and conditions of policies to customers. Shall disclose his/her relationship with insurance companies Shall disclose fees/commission obtain from insurance company, 3) Safeguards for Client's Money + Insurers to ensure safeguards in place for agents who handle client's money. Premiums deemed collected by insurer once customers pay premium to agent.CHAPTER-5 LEGAL & REGULATORY MATTERS: 2. Regulatory Aspects of Insurance Intermediaries F. Conduct of Business of Insurers and Agents 4) Prohibited Activities No one, including insurers, insurance agents and corporate insurance agents, shall commit any (or in combination) of the following acts in relation to insurance solicitation: a) Serve, negotiate or advise for any insurance policy by taking fee or commission without being licensed as an insurance agent or corporate insurance agent; ) Involve in any insurance business if he or she has been revoked, suspended or denied the insurance agent license due to any reasons, whatsoever: ©) Inappropriately withhold or misuse or alter the money or assets obtain through the transac business @) Intentionally misrepresent the terms and conditions, of the insurance policy actually contracted or proposed to contract, or of the proposal form; ©) Mis-sell any insurance product by providing wrong information on insurance benefits and policy terms and. conditions deviating from what has been described in the policy, which can influence the decision making of the potential insurance customers or policyholders; ) Deter the prospect to report any material information to the insurer; @) Urge the prospect to submit wrong information in the proposal form or documents submitted to the insurer which have material impact on insurance policy; ion of insurance cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS. 2. Regulatory Aspects of Insurance Intermediaries F. Conduct of Business of Insurers and Agents 4) Prohibited Activities 1h) Urge a prospect to terminate the existing policy and to affect a new proposal without informing the adverse effects the policyholders can sustain from making such termination, 1) Fumish wrong information which can lead the potential customer or insured or the public to make important decision ineentering into an insurance contract Change the documents relate to insurance business or insurance proposal forms into another person's name; 1) Misuse the money collected from insurance business transaction; or behave to be mistrustful or act unprofessionally; ‘or act dishonestly; or coerce; or cheat D_ Knowingly accept the service for insurance of a person who is not licensed as an insurance agent 1m) Knowingly or purposely representing false or fraudulent information in proposal form: 1). Knowingly or purposely representing false or fraudulent information in insurance claim and falsifying any supporting documents ofthe same; (0) Fail to pay tax due by him or her; pp) Solicit, negotiate or sell the insurance products not permitted by Insurance Business Regulatory Board; 4) Inducing, coercing or inappropriately acting with the purpose of controlling the insurance business; 1) Encouraging insurance agents to act things which can deviate from their honest duties in performing their service; s) Undertake any other activities prohibited by Insurance Business Regulatory Board through directives, guidelines and instructions from time to time. cHUSsSCHAPTER -5 LEGAL & REGULATORY MATTERS 2. Regulatory Aspects of Insurance Intermediaries F. Conduct of Business of Insurers and Agents 5) Reporting Inappropriate Behavior 4) Report to FRD ifany fraudulent claim ) Report to FRD ifthetr agents involved in 1 isappropriation of funds, fraudulent or criminal acts 6) Prohibited Activities for Bancassurance a) Shall not negotiate for a policy or contract of insurance to extend credit to any person or business as a necessary condition b) However, Can inform the borrowers the requirement of insurance to obtain a loan or credit. (©) Anvindividual or business has the right to choose their insurer or agent. 7) Confidentiality of Insurance information obtained by the lender/Creditor. 4) Shall use separate document for credit guarantee insurance, credit transaction and insurance services ’b) Maintain separate records relating to insurance transactions (©) Shall not require a borrower to provide insurance information in connection with the extension of credit. «Insurance agent may use insurance information to offer insurance, only if insured or borrower consents in writing, cHUsSS CHAPTER-5 LEGAL & REGULATORY MATTERS ‘2. Regulatory Aspects of Insurance Intermediaries §8) Supervision of the Conduct of Insurers and Agent 4) Insurance agents shall provide the information required by FRD in the forms stipulated. b) Ifthe performance of an insurance agent is found to be in breach of Directives, Notifications and Regulations issued by BRB, FRD may inspect or require records, documents and relevant information pertaining to the performance of that insurance agent ©) The license of an insurance corporate agent may be suspended, revoked or refused for renewal ifthe FRD finds that an individual licensee's violation was known or should have been known to the insurance corporate agent and the violation was neither reported to the FRD nor corrected. 4) The FRD shall direct insurance corporate agents and insurers to ensure that their individual insurance agents do not breach the provisions of laws, regulations ©) Where insurance agents and corporate agents fil to meet requirements set by the Insurance Business Law ts regulations or other laws, or where consumers may otherwise be at risk, IBRB may require corrective measures to be taken by the agent or its afiliated insurer. This may occur, under the circumstances including, but not limited to the following i. there is evidence of unfair treatment; i, required information isnot provided to customers; ii, policies and procedures are inadequate; iv. internal controls, ile keeping or documentation are inadequate: ¥. conflict of interest are not adequately identified or managed; ot Vi_there are concerns over business continuity. cHUSsSCHAPTER-5 LEGAL & REGULATORY MATTERS 2, Regulatory Aspects of Insurance Intermediaries '8) Supervision of the Conduct of Insurers and Agent 6) ERD shall investigate and review whether the insurance agents and corporate agents comply with the actions taken by IBRB. Ifthe actions taken are not fully comply with, BRB may take further actions as necessary, 8) When reported by any person or instructed by IBRB, FRD may investigate whether unfair competition or activities prohibited by laws, rules and regulations are conducted by insurance agents or corporate agents or insurers, G. Complaint Handling 1) Dispute Resolution Mechanism a) Insurers & agents shall establish policies and procedures to dealin a fair manner with complaints. ) Respond to complaints without delay. (©) Insurers and agents shall observe the directives, instructions and guidelines on complaint handling issued by IBRB. cHUsSS