Commission-sharing referral arrangement by a newly appointed general insurance agent

No. Under the Insurance Act, 1938 and the IRDAI (Appointment of Insurance Agents) Regulations, 2016, an insurer may appoint an individual as an insurance agent only if the person meets the prescribed qualification, completes the required training and passes the specified examination, or holds a recognised equivalent qualification. The IC-38 examination is the standard qualifying examination for general insurance agents. Twenty-five years of banking experience is not itself a statutory substitute for the examination unless a specific exemption applies, and the insurer cannot create an exemption by calling the activity "supervised soliciting". The development officer's assurance does not cure the defect: soliciting and signing proposals is the act of an agent, and supervision by an insurer employee does not convert an unqualified person into a licensed agent. The appointment is therefore irregular, and proposals procured and signed by Anil before qualification are exposed to challenge. The insurer should stop him from soliciting until he qualifies, review the 14 proposals, and treat the issued policy according to its underwriting and policy-avoidance rules rather than assuming the agent was validly appointed.

The arrangement is a commission-sharing and rebate problem. Section 41 of the Insurance Act, 1938 prohibits an insurance agent from offering or paying any rebate of commission or inducement to any person as an inducement to take out or renew a policy. Paying 25% of commission to a bank manager for referrals is effectively sharing agency commission with an unlicensed person and rewarding solicitation by someone who is not appointed as an agent. It also breaches the agent's code of conduct, which requires conduct in accordance with the law and prohibits rebating. The bank manager's direct solicitation makes the position worse: a referral arrangement may permit a referral fee in limited circumstances, but it does not permit an unlicensed person to solicit or to share commission. The insurer should terminate or suspend the arrangement, recover any improper payments where possible, report the matter internally, and review the fire policy. The policy itself is not automatically void merely because the agent misconducted himself, but the insurer must assess whether the proposal was properly procured and whether any material facts were withheld.

It is primarily a contractual and supervisory problem, not necessarily a licensing one. Once validly appointed by the insurer under the 2016 Regulations, an individual agent's appointment is not ordinarily limited by state boundaries in the same way as a corporate agent's registration; the agent may solicit business for the appointing insurer. However, the insurer may impose territorial or product restrictions in the appointment letter, and an agent must act within the authority actually granted. Collecting proposals from another state without informing the insurer breaches that authority and defeats the insurer's ability to supervise, inspect and underwrite the risk. The licensing dimension arises if Anil was soliciting for an insurer that had not appointed him, or was holding himself out as an agent without a valid appointment. The insurer should verify whether the 14 proposals were for its own products, whether Anil held a valid identity card, and whether any proposal was signed on behalf of another insurer. The compliance finding should distinguish unauthorised territory from unauthorised solicitation for another insurer.