Insurance Intermediaries, Agency and Distribution
Domain 7 tests who may sell, advise on or service insurance and what each intermediary may and may not do. Expect role-identification and conduct questions.
Core rules
- An individual agent is licensed by IRDAI and acts for an insurer; a corporate agent is a company authorised to distribute one or more insurers’ products as permitted.
- An insurance broker represents the customer, not the insurer, and must disclose remuneration and conflicts.
- A web aggregator compares products online; an Insurance Marketing Firm distributes products of multiple insurers within the permitted framework.
- A TPA administers health claims and cashless facilities; a surveyor/loss assessor investigates non-life losses.
- Intermediaries must hold the prescribed licence, follow the code of conduct, avoid rebating and remit premiums promptly. An agent cannot bind the insurer to a risk or alter policy terms.
Worked example
An agent collects a ₹25,000 premium in cash from a customer. The agent must remit the full ₹25,000 to the insurer within the prescribed period and receive commission separately; the agent cannot deduct commission from the premium. Reasoning: premium is held in a fiduciary capacity. Deducting commission creates a short remittance, misstates the insurer’s records and breaches conduct rules.
Traps that cost marks
- Saying a broker acts for the insurer.
- Treating an agent as having authority to issue or alter a policy.
- Confusing a TPA with an insurer.
- Believing rebating is a legitimate sales incentive.