Insurance Agency Practice and Salesmanship: Licensing, Section 41 and Need-Based Selling
Domain 6 moves from the policy to the person selling it: how an agency is licensed, what the code of conduct forbids, and how a disciplined sales process produces persistency rather than a single sale.
Licensing and conduct
- An agent is licensed by the insurer on IRDAI's behalf: minimum age 18, minimum qualification 10th pass, prescribed training and examination, and a licence valid for three years and renewable.
- An agent represents one life and one general insurer within the rules, carries an identity card and discloses the licence number.
- Section 41, Insurance Act prohibits rebating - sharing commission or offering any inducement to win a sale. It is the most frequently examined conduct rule.
- Other duties: explain the product, record the proposer's own answers on the form, protect customer data, and never sign in the proposer's place.
The sales process
Prospecting → pre-approach → approach → fact-find or needs analysis → presentation → handling objections → closing → policy delivery → service and referrals. The test is fit, not cheapest premium: income, dependants, liabilities, existing cover and liquidity.
Salesmanship that survives scrutiny
- Need-based selling, with the recommendation written down, supports both persistency and the suitability requirement.
- Objection handling clarifies the real concern rather than overpowering the customer; 'I will think about it' usually hides a price, trust or need question.
- Asking for referrals at policy delivery is the cheapest source of qualified leads.
Worked example
A retiree of 62 with a ₹10,00,000 bank deposit asks for tax saving with high growth. A 15-year unit-linked plan with a lock-in and market risk does not fit the liquidity and capital-protection need; an immediate annuity plus a small health cover is the suitable recommendation. Selling the ULIP anyway is mis-selling, and the agent carries the persistency loss and the regulatory risk.
Traps
- Offering to pay the first premium out of commission - a Section 41 rebate.
- Letting the licence lapse and continuing to sell.
- Completing the proposal form for a semi-literate proposer without recording their answers.