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Legal Relationship Between Insurer and Insurance Agent

Insurance Laws Amendment, 2014 & Guidelines on Appointment of Insurance Agents of IRDA, 2015. The following is the relationship between Insurer and Insurance Agent:-

 The insurer shall be responsible for all acts and omissions of its agents including violation of code of conduct specified under these guidelines, and shall be liable to a penalty which may extend to one crore rupees.

Also it states, Any person who acts as an insurance agent in contravention of the provisions of this Act shall be liable to a penalty which may extend to ten thousand rupees and any insurer or any person acting on behalf of an insurer, who appoints any person as an insurance agent not permitted to act as such or transact any insurance business in India through any such person shall be liable to penalty which may extend to one crore rupees.

Legal Relation Between Them:-

Thus they are bounded by a contract of agency. They are principal and agents. But agents are not brokers. Brokers are different. They are the agents of the client and not the insurer. So all requisites of an agency are to be complied with in addition to the regulation made by IRDA or Insurance Act.

As a common corollary it can be said that if insurance agents commits fraud in the ambit of his apparent authority, then one needs to say that insurer will also be liable. It is a old maxim "Qui facit per alium facit per se", meaning if any one does an act through other only he is responsible.

What are the duties of an Insurance Agent

Who is an Insurance Agent:-

“Insurance Agent” means an individual appointed by an insurer for the purpose of soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance.

“Composite Insurance Agent” means an individual who is appointed as an insurance agent by two or more insurers subject to the condition that he/she shall not act as insurance agent for more than one life insurer, one general insurer, one health insurer and one of each of the mono-line insurers.

Code of Conduct That Every LIC Agent Must Observe

Every agent, shall adhere to the code of conduct specified below:-

• Every insurance agent shall,
  1. identify himself and the insurer of whom he is an insurance agent
  2. show the agency identity card to the prospect, and also disclose the agency appointment letter to the prospect on demand;
  3. disseminate the requisite information in respect of insurance products offered for sale by his insurer and take into account the needs of the prospect while recommending a specific insurance plan
  4. where the Insurance agent represents more than one insurer offering same line of products, he should  dispassionately advice the policyholder on the products of all Insurers whom he is representing and the product best suited to the specific needs of the prospect
  5. disclose the scales of commission in respect of the insurance product offered for sale, if asked by the prospect;
  6. indicate the premium to be charged by the insurer for the insurance product offered for sale;
  7. explain to the prospect the nature of information required in the proposal form by the insurer, and also the importance of disclosure of material information in the purchase of an insurance contract;
  8. bring to the notice of the insurer every fact about the prospect relevant to insurance underwriting, including any adverse habits or income inconsistency of the prospect, within the knowledge of the agent, in the form of a report called “Insurance Agent’s Confidential Report” along with every proposal submitted to the insurer wherever applicable, and any material fact that may adversely affect the underwriting decision of the insurer as regards acceptance of the proposal, by making all reasonable enquiries about the prospect;
  9. obtain the requisite documents at the time of filing the proposal form with the insurer; and other documents subsequently asked for by the insurer for completion of the proposal;
  10. advise every prospect to effect nomination under the policy
  11. inform promptly the prospect about the acceptance or rejection of the proposal by the insurer;
  12. render necessary assistance and advice to every policyholder on all policy servicing matters including assignment of policy, change of address or exercise of options under the policy or any other policy service, wherever necessary;
  13. render necessary assistance to the policyholders or claimants or beneficiaries in complying with the requirements for settlement of claims by the insurer;
• No insurance  agent shall,-
  1. solicit or procure insurance business without being appointed to act as such by the insure
  2. induce the prospect to omit any material information in the proposal form;
  3. induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of the proposal;
  4. resort to multilevel marketing for soliciting and procuring insurance policies and/or induct any prospect/policyholder to join a multilevel level marketing scheme.
  5. behave in a discourteous manner with the prospect;
  6. interfere with any proposal introduced by any other insurance agent;
  7. offer different rates, advantages, terms and conditions other than those offered by his insurer;
  8. demand or receive a share of proceeds from the beneficiary under an insurance contract;
  9. force a policyholder to terminate the existing policy and to effect a new policy from him within three years from the date of such termination of the earlier policy;
  10. apply for fresh agency appointment to act as an insurance agent, if his agency appointment was earlier cancelled by the designated official, and a period of five years has elapsed from the date of such cancellation;
  11. become or remain a director of any insurer;

Your Insurer is covered under Consumer Protection Act!

What is a SERVICE under consumer protection act:-

Section 2(1)(o) in the Consumer Protection Act, 1986, “SERVICE” means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service; "spurious goods and services" mean such goods and services which are claimed to be genuine but they are actually not so.

 

As insurance is covered under the definition of service so a consumer that is the insured can file a case under consumer protection act against the insurer for Deficiency of Service.

 

What is Deficiency Of Service:-

Section 2(1)(g) in the Consumer Protection Act, 1986, “DEFICIENCY” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;