Procedure For Becoming An Agent Law Commercial Essay

Published Date: 02 Nov 2017

Educational Requirements/ Eligibility for Insurance Agents (Section 42 of Insurance Act and IRDA Act) - Employers prefer to hire insurance agents who have college degrees, particularly in business or economics. They might consider hiring a high school graduate who has proven sales ability (10th standard for rural, 12th standard for urban). Agent should be a major; 18 and above. Agent should be mentally and physically sound.

Other Requirements for Insurance Agents - Every state requires insurance agents to be licensed. They are required to obtain separate licenses to sell life and health insurance or property and casualty insurance. In most states, sales agents, in order to become licensed, must complete pre-licensing courses and pass state examinations.

Process

Person intending to be the agent should contact your nearest Branch Office and meet the Development Officer there.

The Branch Manager will conduct an interview, and if found suitable, person will be selected for training at Divisional/Agency Training Centre.

The training is for 100 hours and covers all aspects of Life Insurance Business. After successful completion of training, person will have to sit for Pre-Licensing examination conducted by the Insurance Regulatory and Development Authority (IRDA).

After successful completion of the examination person will awarded a License by the IRDA to work as an insurance agent.

Candidates will be appointed as an agent by the Branch Office and he will be a part of the team under the Development Officer.

The Development Officer will impart him field training and other valuable inputs, which will help him in the market place.

Job Description of Insurance Agents - Insurance agents, who may be referred to as insurance sales agents, help clients choose insurance policies that suit their needs. Clients include individuals and families as well as businesses. Captive agents work for an insurance company, and only sell that company's products. Independent insurance agents, or brokers, represent several companies. Types of insurance include property and casualty, life, health, disability and long-term care insurance. Many insurance agents also sell mutual funds, variable annuities and other securities.

Employment Facts for Insurance Agents - Insurance agents held about 435,000 jobs in 2008.

Advancement of Insurance Agents - An insurance agent with ability can advance into a management position, becoming, for example, a sales manager in a local office. Later on one can become an agency superintendent or land another executive position.

Job Outlook for Insurance Agents - Employment of insurance agents is expected to grow as fast as the average for all occupations through 2018. Job candidates who are multi-lingual and those who have a strong knowledge of relevant technical and legal terms will have the best chance of getting hired.

How Much Do Insurance Agents Earn? - Wage and salary insurance agents earned median annual earnings of $45,500 in 2009. Independent insurance agents earn only a commission, while insurance agents who work for an agency or carrier receive either a salary only, a salary plus commission or a salary plus bonus. Insurance agents often receive benefits that include continuing education, training to help with licensing requirements, office space and clerical support.

DOCTRINES OF WAIVER AND ESTOPPELS

The doctrines of waiver and estoppels have direct relevance to the law of agency and to the powers of insurance agents. The practical significance of these concepts is that an insurer legally may be required to pay a claim that it ordinarily would not have to pay.

‘Waiver’ is defined as the voluntary relinquishment of a known legal right. If the insurer voluntarily waives a legal right under the contract, it cannot later deny payment of a claim by the insured on the grounds that such a legal right was violated. For example; assume that an insurer receives an application for insurance at its home office and that the application contains an incomplete or missing answer. Assume that the insurer does not contact the applicant for additional information and the policy is issued. The insurer later could not deny payment of a claim on the basis of an incomplete application. In effect, the insurer has waived its requirement that the application be complete by issuing the policy.

The legal term estoppel was derived centuries ago from the English common law. ‘Estoppel’ occurs when a representation of fact made by one person to another person is reasonably relied on by that person to such an extent that it would be inequitable to allow the first person to deny the truth of the representation. Stated simply, if one person makes a statement of fact to another person who then reasonably relies on the statement to his or her detriment, the first person cannot later deny the statement was made. The law of estoppels is designed to prevent persons from changing their minds to the detriment of another party. For example assume that an application for health insurance tells the agent of a health problem and the agent assures the application that the health problem does not have to be stated in the application. The insurer could be stopped from denying benefits on the grounds that this information was not included.

FUNCTIONS OF AN AGENT, PERSONAL DEVELOPMENT AND BEHAVIORAL ASPECTS

FUNCTIONS OF AN AGENT

The agent’s main function is to solicit and procure life insurance business for the insurer which has appointed him/her for that purpose. At the same time, he/she is trusted by the prospect to advice him suitable, keeping his circumstances and needs in mind. He is thus, in the unique role of a person trusted by both parties to the transaction.

Role in the Past

An insurance broker is seen as one of the intermediaries who operate in the insurance market. The term insurance broker finds a mention in the definition of the term intermediary or insurance intermediary in the Insurance Regulatory and Development Authority Act, 1999. The definition intermediary includes and limits itself to insurance brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors. It would be pertinent to note that there is no mention of the term agent in this definition as of date.

The description "intermediary" is usually synonymous with the concept of a third party whose role is to ensure that both the parties to a contract obtain what they want, the third party working for both parties for their joint benefit. However, in the Indian context, the insurance broker has been seen since the introduction of the broking regulations as a person who will represent the insured and add value to the transaction. The relationship is almost invariably contractual supported by a mandate from the insured and is usually intended to be paid for the services rendered, by way of brokerage which forms part of and emanates usually out of the premium.

The outcome of this view was that although the broker owes his loyalty primarily to the insured, the broker gets ultimately paid by the insurer for services being rendered primarily to the insured. This leads to a dichotomy of sorts with the poser as to how an insured could trust the loyalty of his broker when the latter was being actually paid by the insurer. In the light of this method of receiving compensation, the scenario could be ripe for an unprincipled insurer to step in and take advantage of the situation vis-a-vis the insured by justifying his stance that it was the insured who desired to approach the insurer directly despite the presence of the broker owing to alleged loss of confidence and trust in the broker by the insured. Of course, in the international arena there were departures from this norm with consultancy assignments being undertaken on a fee basis with payments made by the insured to the broker. The transition into this phase in India is seen in some segments where the role of the broker is perceived rightly by the user of such services by seeing value creation by the broker in the transaction.

As regards general insurance business in the tariff regime, the function of the broker was to advise the insured on a suitable insurance programme by improving the current programme and to attract suitable insurers on the best terms. In the absence of opportunity being provided to the intermediary to bring to the table his experience in drafting the policy wordings or for that matter in improvising the rates, a question was often raised as what is the value addition that the broker can bring to the transaction. The most important and crucial role that a broker played, which all would appreciate, was to increase the level of informed "decision making" by the insured in transferring the risk to the most competitive insurance company.

However, in the detariff scenario the role and responsibilities of the insurance broker has multiplied in the sense that he not only has to get the right price for the insured to enable him to take informed decision to select the right underwriter, but he also has a duty towards the underwriter to ensure that all parameters of rating a risk have been rightly applied. This is only to ensure that a clear balance is maintained so that one does not impinge on the other in the event of a catastrophe.

The Way Forward: Thrust towards developing and cultivating consumer loyalty

Advances in technology are transforming the traditional roles of the broker and the consumer. The broker is gradually evolving into the new role of the facilitator. He facilitates the satisfaction of the needs felt by the insured. In the process, the underwriter, broker and the consumer are forming symbiotic relationships in which their mutual loyalties are recognized and nurtured.

In the earlier era, when the broker was absent, the consumer was taken for granted. He was a docile underdog in the world of insurance. Business opening hours, mode of payment, suite of products, and range of services was all decisions dictated by the underwriter at his sole discretion. Dissatisfied insured’s were pushed aside and the queue for buying the products continued to be filled in by the less demanding and more subservient consumers.

However, the unprecedented sea change brought in by the private insurers both in life and general insurance business post liberalization of the insurance industry has resulted in a new movement where consumer delight is the buzz word. We have witnessed this in the banking and telecom sectors in our country in the last two decades and there is no reason why it will not catch up with insurance sector in the next decade.

Shift towards retaining the client

Handling overzealous and well informed consumers who are increasingly demanding to satisfy for themselves the best of services, thanks not only to the purchasing power but also due to the variety of choice confronting them is going to be the order of the day. We have seen new patterns of consumption with the spread of electronic media and consumer activist groups. Though quality of product becomes the focus area together with price sensitivity, the moves made by the different players in the market clearly herald a drive towards consumer retention.

Today, as environmental awareness is on the rise and further, the media reporting of any managerial misadventure prompt and instantaneous, consumer reactions impinge far more swiftly on purchasing patterns. At times, the immediate fall out of this is that the consumer forms pre conceived notions with regard to supply side of insurance. In this context, the broker will have to play an important role to play as he will do the cementing of relationships with the right information. The true role of a broker will get tested and be up for judgment by those who would avail of his services.

Adequate Data Based Experiences

In the wake of the discussions above, a broker’s office would be expected to deliver far more than what has been delivered in the past. This would call for a high degree of qualified professionals with hands-on experience manning the brokers’ offices and the brokers’ offices functioning with a combined strength of the extended marketing arm of the underwriters and the erstwhile risk management role played by the in house team of the insured’s.

Implementing such schemes requires a high degree of professionalism, infrastructure to understand the forces that are redesigning the concept of the insured’s and dynamism into the market brought in by the changing roles of consumer group activists. A broker’s office therefore will have to be built on these foundations on which it is expected that the consumer loyalty will be built and sustained.

His functions would require him to :

Customize insurance programs to suit individual customers, often covering a variety of risks and persuade them to buy a plan of insurance that suits to their best interest.

Interview prospective clients in order to obtain data about their financial resources and needs, the physical condition of the person or property to be insured and to discuss any existing coverage.

Ensure that policy formalities are fulfilled, including paper work and any necessary medical examinations and the completion of appropriate forms to get the policy expeditiously.

Keep in touch to ensure that changing circumstances are reflected in the arrangement relating to premium payments, nomination and other necessary alterations.

Monitor insurance claims to ensure they are settled equitably for both the client and the insurer.

Confer with clients to obtain and provide information when claims are made on a policy.

Be totally honest with both the prospect and his insurer.

The regulations framed by the IRDA lays down a code of conduct which incorporate some of these concepts. The code says interalia that the agent shall :

Identify himself and the insurance company of which he/she is an agent.

Disclose the license to prospect on demand.

Explain all available options to the prospect.

Recommend a suitable plan taking into account the needs of the prospect.

Disclose the scales of commission, if asked by the prospect.

Explain the nature and importance of the information required in the proposal form.

Compel the prospect, the need to disclose all information asked in the proposal form.

Not to interfere with the proposals introduced by other insurance agents.

Make all enquiries about the prospect in advance.

Inform the insurer about any material facts, including habits that could adversely affect the underwriting decision.

Convey to the prospect about the acceptance or rejection of the proposal.

Render necessary assistance to policyholders or claimants or beneficiaries in complying with requirements asked for by the insurer.

Advise policy holders to effect nomination.

Make every attempt to ensure remittance of premium by the policyholders within the stipulated time, by giving notice orally and in writing.

Not to induce prospects to submit wrong information.

Not demand or receive from beneficiary, share proceeds under an insurance contract.

Not cause the termination of an existing policy with a view to effect a new proposal.

It is to be noted that commissions are paid to your agent, if you used one. Otherwise, commissions are retained by the company. These commissions are part of the expense of purchasing life insurance. Even if a company does not employ outside agents, it may use the money ordinarily spent on paying an agent to increase profits to the company. Part of this process involves cashing your premium check, since this is where commissions will be paid from. Your life insurance policy will be issued once the check has been cashed. The initial commission is referred to as "FYC" or "first year commissions." If you used an agent or broker, the policy may pay a trailing commission (commissions’ payable after the first year) to the agent or broker. A trailing commission is a commission that your agent earns each year based on premiums you pay to the policy.

PERSONAL DEVELOPMENT OF AN AGENT

As stated earlier, the insurance agent is an agent of the prospect as well. He is looked upon as a knowledgeable person, who can be trusted to give the right advice. To be able to match these expectations, the agent must be familiar with the benefits and advantages of other financial instruments suitable for savings and investments and also the laws, particularly on taxation matters, relevant to these instruments. The variety of instruments available for an individual is very vast and it is difficult for anyone to master the details of all of them. Some agents, who do not have the necessary knowledge, give answers on the basis of guesswork or hearsay. Others admit that they do not know enough and promise to come back after checking out the details. The latter are respected and trusted more.

An agent is a professional. A professional has to study and master a body of specialized knowledge. A professional constantly enhances his knowledge and skills and also helps other similarly placed professionals. Such personal development and growth will be measured, in the case of an agent, partly by the business that is done and the commission that is earned. It is also measured by the improvement in the effort that gets a sale. It is also to be measured in terms of the reputation that the person enjoys in the market. Agents can be spoken of well, as a person who knows, who can be trusted to look after the customer’s interests, who does not mislead, who is nice to deal with, and so on. It is such reputations that help one to collect more and more references from satisfied policyholders and thus expand one’s circle of contracts.

Product knowledge is the primary requirement. Product knowledge does not end with knowing the broad terms and conditions of the various plans of insurance. One has to be aware of the possible drawbacks in the policy, the tax implications, the fit with the client’s needs, the extent to which the client has to take precautions so that the benefits may not be lost, and so on. The agent must have knowledge of all the products offered by the insurer for whom he works, and not only of the few which are most frequently sold.

Customers are entitled to full information from those who provide services. This requirement, the right to information, is enshrined in the Consumer Protection Act. The law is only stating a principle which every successful salesman practices and is consistent with the principle of utmost good faith in insurance. In the case of life insurance, the person representing the insurer and having the responsibility to inform the consumer is the agent. Before the agent can inform the consumer, he has to be informed himself. That is why it is repeatedly pointed out that product knowledge is important.

BEHAVIORAL ASPECTS OF AN AGENT

Of late, serious concerns are voiced about the appropriateness in business, because increasingly there are reports of improper behavior. Some of the world’s biggest companies have been found to have cheated through false accounts and dishonest audit certification. The funds of banks have been misused by their managements to bolster the greed of some friends. Officials have used their authority to promote personal benefit. Courts of justice have failed to render justice. Increasingly, people who are trusted by their community to perform their task are seemed to have betrayed the trust. It is seen that, personal enhancement and greed prevails in the end.

In this vicious cycle of frauds, the issues of propriety and ethics are extremely important in this business of insurance where the agents are in a position of trust. On agent’s assurance, the policy holders entrust their small savings to the insurer, trusting it to look after their funds and dependants in later years.

Unethical behaviors happen when the benefits of self are considered more important than of the others. The code of ethics spelt out by IRDA in the agent’s regulations, as referred earlier, direct towards ethical behavior. while it is important to know every clause in the code of conduct, to ensure that there is no violation of the code compliance would be automatic, if the agent always keeps the interests of the prospect in mind. things go wrong when the agent becomes concerned with the commission that he will earn from the policy, rather than the benefits to the prospect.

Some agent’s think that, by not revealing the vital information in the proposal form, they are doing the prospect a favor, as they are escaped from the underwriter, who sometimes raises awkward queries. in fact, its other way round, because if there happens to be an early claim; who can guarantee that this will not happen; the claim may be repudiated finally. The loser at that time will be the prospect’s family, but the commission collected by the agent is not affected in any case. the credibility of the life insurance industry (both agents and the insurers) will be at stake and stories will be circulated that insurers do not pay claims, but people will be unknown from the actual fact.

Typical characteristics of an ethical behavior are :

placing the best interests of the client above one’s own direct or indirect benefits.

holding in the utmost confidence and considering the privilege, all business and personal information pertaining to the client’s affairs.

making full and adequate disclosure of all facts to enable clients make informed decisions.

there could be a likelihood of ethics being compromised in the following situations :

having to choose between two plans, one giving much less commission than the other.

temptation to recommend discontinuance of an existing policy and taking a new one.

Becoming aware of circumstances that, known to the insurer, could adversely affect the interest of the client or the beneficiaries of the claim.