Insurance Distribution
Selling is regulated as tightly as the products. This domain covers who may distribute life insurance, through which channel, what a distributor may and may not say, and how remuneration works - the daily decisions of an agent or POSP.
Channels
Individual agents, corporate agents such as banks, direct and reinsurance brokers, web aggregators, insurance marketing firms, POSPs and the insurer's own direct channel. Each has a defined scope; a POSP, for instance, may sell only the pre-approved simple products - Saral Jeevan Bima and similar listed plans - and must not handle complex underwriting, claims or advisory functions outside that mandate.
Rules that shape the sale
- Solicit only products the insurer has filed with IRDAI and the distributor is authorised to sell.
- Disclose premium, benefits, exclusions, waiting periods, surrender terms and any commission on request.
- No rebating (Section 41), no misleading comparison, no 'guaranteed' returns on a market-linked or non-par plan.
- Remuneration, after the Payment of Commission Regulations, 2023, is board-approved by the insurer and must stay within expense-of-management limits; commission is payable only to licensed persons (Section 40A).
- The insurer remains responsible for the conduct of its agents and POSPs; mis-selling can lead to cancellation of appointment and penalty.
Worked example
A POSP trained on simple term products is asked for a unit-linked plan with a 12% 'assured' return that another agent promised. He must not sell the ULIP, and must not repeat the return claim. The right conduct is to explain the Saral Jeevan Bima cover he can offer, state clearly that a ULIP's returns follow the fund and are not guaranteed, and refer the customer to a licensed agent for an authorised product - recording the referral.
Traps
Assuming a POSP can sell anything its insurer sells; describing a bonus as 'guaranteed'; treating a rebate as a harmless courtesy; believing the old 35% first-year cap still operates; and comparing two products on premium alone without matching benefits.