ICP 24 Intermediaries

Suresh Mathur

Supervisory Authority sets requirements,

directly or through the Supervision of the
Insurers, for the conduct of Intermediaries
Intermediaries for this purpose include
Insurance Agents, Corporate Agents, Insurance
Brokers, Insurance Surveyors and Loss
Assessors and Third Party Administrators in
Health Insurance
Intermediaries are an essential area of
supervision in the insurance sector and may
have a reputation risk or a prudential impact on
Insurers.
Intermediaries serve as an important distribution
channels of insurance
They provide interface between Consumers and
Insurers
Their good conduct is essential to protect
consumers and promote confidence in the
insurance markets.
Therefore there is a need for supervision of
intermediaries
 Essential Criteria
A) The supervisory authority requires intermediaries to
be licensed or registered.
Provisions of Insurance Act (sec 42) Prescribes
the policy guidelines for licensing
Authority may determine by regulations to issue
licence as intermediary / insurance intermediary
(Sec 42 D)
All the intermediaries in the insurance sector are
licensed and the procedure for licensing is laid
down in the respective regulations.
B) The supervisory authority requires intermediaries to
have adequate general, commercial and professional
knowledge and ability as well as having a good
reputation.
Respective regulations on Intermediaries prescribe
qualification, training and pre licensing examination
criteria for Intermediaries to ensure that only person with
adequate professional knowledge are involved in
insurance intermediation
C) If necessary, the supervisory authority takes
corrective action, including applying
sanctions,
directly or through insurers, and canceling
the
intermediarys licence or registration, when
appropriate.
Regulations prescribe Code of Conduct for
respective intermediaries.
The Section 42D in the Insurance Act,1938 and
relevant Regulations prescribe actions for
violations which include penalties/ suspensions/
cancellations.
D) The supervisory authority requires an intermediary who handles
clients money to have sufficient safeguards in place to protect
these funds.
Section 64VB mandates that the risk in policy of insurance will
commence only after receipt of premium by insurer, further under
provisions of this section, any intermediary who is authorized to
collect insurance premium shall deposit with, or dispatch by post to,
the insurer, the premium so collected in full without deduction of his
commission within 24 hours of the collection
Regulation 23 of IRDA Insurance Brokers Regulations, 2002
prescribe the manner in which money collected by Insurance Broker
shall be dealt and it ensures enough safeguards with regard to the
Protection of these funds.
E) The supervisory authority requires
intermediaries to give customers information on
their status, specifically whether they are
independent or associated with particular
insurance companies and whether they are
authorised to conclude insurance contracts on
behalf of an insurer or not.
Under provisions of regulations which prescribe
code of conduct for respective intermediaries
mandates that intermediary shall identify himself
and the insurance company of whom he is an
intermediary.
Code of Conduct prescribed for Insurance
Brokers specifically in matters relating to Sales
Practices
F) The supervisory authority or other authority must have powers to
take action against those individuals or entities that are carrying
on insurance intermediation activity without license or reg
registration.
As per Section 42 D(8) of Insurance Act, 1938, any person who acts as
an intermediary or an insurance intermediary without holding a license
issued under this section to act as such, shall be punishable with fine.
Further, as per Section 42 D(8) of Insurance Act, 1938, any insurer or
any person who appoints as an intermediary or an insurance
intermediary or any person not licensed to act as such or transacts any
insurance business in India through any such person , shall be
punishable with fine.
Regulation 17 IRDA (Insurance Brokers) provides for penal action under
act for any person who acts as insurance broker without holding valid
license. This action is without prejudice to initiation of any criminal
proceedings against the said person.
Penalty U/S 102 Upto Rs 5 lacs