Code of Conduct, Ethics and Sales Practices
Ethics questions are not philosophical; they test codified conduct from the IRDAI (Insurance Agents) Regulations, 2016 and Section 41 of the Insurance Act, 1938. The correct option is usually the one that discloses more and promises less.
Conduct rules that appear in questions
- Identify yourself, your insurer and your licence; disclose that you are remunerated by commission.
- Explain the product fully: sum assured, premium, term, charges in a ULIP, exclusions, waiting periods, surrender and paid-up consequences, and the free-look right.
- No rebate, no inducement. Section 41 prohibits offering or accepting anything beyond the policy terms; penalties include fine and licence action.
- No misrepresentation. Past NAV performance is not a guarantee; declared bonus rates are not promises; "guaranteed" applies only to what the contract guarantees.
- No twisting or churning. Inducing surrender of an existing policy to sell a new one requires full comparison, disclosure of surrender loss and documented advice.
- Complete the proposal with the proposer present - no blank forms, no signatures obtained elsewhere, no signing on the client's behalf.
- Remit premiums to the insurer promptly; never route them through a personal account.
- Protect client confidentiality and obtain accurate KYC.
- Need-based selling: recommend cover appropriate to income, liabilities and goals rather than the highest-commission product.
Worked example
A client wants to surrender a five-year-old endowment for a new ULIP with attractive three-year returns. Reasoning: this is potential churning. The correct practice is to quantify the surrender loss and forgone bonuses, compare both products in writing, and record the advice. Stating that the ULIP return is "guaranteed" compounds the breach into misrepresentation.
Traps
"Rebating is acceptable if the client insists." "Verbal bonus promises are fine if informal." "Suitability is a matter of opinion" - it is a documented obligation. Assuming ethics marks come from general virtue rather than specific code clauses.