Mumbai: To check ponzi-like activities in the insurance sector, the new ordinance has prohibited multi-layered agent structure for sale of insurance products, while it has also barred offers aimed at inducing people to buy or renew policies through multi-level marketing schemes.
Under the newly promulgated ordinance, insurers cannot appoint any "principal agent, chief agent and special agent", neither they can transact any insurance business through them.
"No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance policy through multilevel marketing schemes," the ordinance further says.
These provisions are aimed to check mis-selling of insurance products by agents to earn high commissions, as also the practice of trail commissions that high-ranking agents get for the business generated by their subordinates or sub-agents recruited by them.
The ordinance also provides that no person can act as an insurance agent for more than one life insurer, one general insurer, one health insurer and one of each of the other mono-line insurers.
Besides, the Insurance Regulatory and Development Authority (IRDA) has been asked to frame necessary rules to ensure that there is no conflict of interest when an agent represents two or more insurers, across segments such as life and general insurance.
Besides, a minor person cannot be appointed an insurance agent and others disqualified to become an agent include those with unsound mind or those having found guilty of a crime including forgery, provided five years have lapsed since competition of the sentence.
Besides, payment of any commission to the agents or insurance intermediaries would need to be in accordance with the applicable regulations of the insurance regulator.
"The number of agents in the life insurance industry, which was at 29 lakh in 2010-11, came down to 21 lakh as on 31 March this year and now it has further slipped to 20 lakh as of now," Life Insurance Council secretary general V Manickam said.
Further, the ordinance has said that the insurer will be responsible for all the acts and omissions of its agents and in case of any violation of code of conduct insurers can be fined to the tune of Rs 1 crore.