Code of Conduct of Insurance Agency

The Code of Conduct for Insurance Agents is a mandatory set of ethical and professional rules prescribed by IRDAI. It governs every aspect of an agent’s interaction with clients, insurers, and the public. Its core purpose is to ensure integrity, fair dealing, and competence, thereby protecting consumer interests and upholding the reputation of the insurance industry. Adherence is a legal licensing condition.

Code of Conduct of Insurance Agency:

• Honesty & Fairness in Communications

An agent must provide clear, accurate, and complete information about policy features, benefits, exclusions, and costs. They must avoid misrepresentation, exaggeration, or concealment of any material fact. Comparisons with other products must be factual and unbiased. All communications, whether verbal or in promotional material, must be truthful and not misleading, ensuring the client can make an informed decision based on a genuine understanding of the product being offered.

• Disclosure of Material Information

The agent has a duty to explicitly disclose their role and remuneration. They must inform the client they are acting as an agent for a specific insurer (if tied) and that they earn a commission on the sale. Crucially, they must explain all key policy terms, exclusions, and the free-look cancellation right. Any conflict of interest must be disclosed. This transparency builds trust and fulfills the legal requirement of utmost good faith (Uberrimae Fidei) in the insurance contract.

• Suitability and Needs-Based Selling

An agent must conduct a reasonable assessment of the client’s financial situation, needs, and objectives before making a recommendation. The product sold must be suitable for the client’s needs and affordable within their means. They must avoid unsuitable replacements (twisting) of existing policies merely to earn new commissions. The primary motive should be to provide adequate risk coverage, not to maximize personal gain from an inappropriate or excessive sale.

• Professional Competence and Due Diligence

Agents must maintain and enhance their professional knowledge and skill through ongoing training. They must perform due diligence in completing proposal forms, ensuring all client disclosures are accurately recorded. They should explain the importance of disclosing pre-existing conditions and the consequences of non-disclosure. Acting with reasonable care and diligence in all client interactions is mandatory to ensure proper policy issuance and to prevent future disputes or claim rejections.

• Handling of Client Funds and Confidentiality

An agent must promptly remit any premium collected from the client to the insurer. They cannot withhold or misuse client funds. Furthermore, they are obligated to maintain strict confidentiality of all personal and financial information shared by the client. Such information can only be used for the purpose of the insurance business and cannot be disclosed without the client’s consent, except as required by law or for claim processing.

• Grievance Redressal & Post-Sale Service

The agent must provide efficient after-sales service, assisting clients with renewals, endorsements, and claims. They must inform clients about the insurer’s grievance redressal procedure and, if needed, help them lodge a complaint. They should not interfere with the client’s right to approach the insurer or IRDAI directly. Their role is to facilitate resolution, not to obstruct it, ensuring continued service and client satisfaction throughout the policy lifecycle.

• Compliance and Ethical Market Conduct

Agents must strictly comply with all applicable insurance laws, IRDAI regulations, and their insurer’s guidelines. They must not engage in unethical practices like offering rebates (illegal discounts) from their commission, making false comparisons to disparage competitors, or spreading misleading information. Their conduct must always enhance public confidence in the insurance institution. Violations can lead to disciplinary action, including license suspension or cancellation.

• Avoidance of Unfair Practices

An agent must strictly avoid any fraudulent, coercive, or deceptive practice. This includes forging signatures, fabricating documents, or inducing a client through fear or undue influence. They cannot make false promises about policy performance, such as guaranteed bonuses or returns not backed by the contract. Engaging in high-pressure sales tactics or exploiting a client’s lack of knowledge is prohibited. This principle ensures all transactions are entered into freely and knowledgeably, protecting the vulnerable and maintaining the voluntary nature of the insurance contract.

• Duty to Insurer and Professional Integrity

While serving the client, the agent must act with loyalty and integrity towards the principal insurer. They must not submit proposals with knowingly false information or conceal material facts that increase risk. They should protect the insurer’s proprietary information and not misuse their position for personal gain against the company’s interest. Simultaneously, they must maintain professional integrity by not making false statements about competitors or their products, ensuring fair competition and upholding the dignity of the profession.

• Continuous Professional Development

An agent has a duty to stay updated and competent. This involves regularly undertaking mandatory training and Continuing Professional Education (CPE) as specified by IRDAI. They must stay informed about new products, regulatory changes, and market developments. This commitment to continuous learning ensures they provide current and accurate advice, adapt to evolving industry standards, and serve clients with the highest level of professional expertise. It is not merely a requirement but an ongoing responsibility for career sustainability and ethical practice.

• Responsible Advertising and Public Communication

Any advertisement or public communication by an agent must be truthful, clear, and not misleading. It should accurately describe policy benefits and not create unrealistic expectations. All promotional material must carry necessary disclaimers and comply with IRDAI’s advertising guidelines. Agents must not use ambiguous comparisons or testimonials that could deceive the public. This duty ensures that the public receives honest information, preventing mis-selling at the very first point of contact and maintaining the industry’s reputation for transparency.