Rights and Duties of Insurance Agents

Rights of Insurance Agents:

• Right to Remuneration (Commission)

An agent has the fundamental right to receive fair and timely commission for the business procured, as per the agreed terms with the insurer. The commission structure is regulated by IRDAI to prevent unfair practices. The agent is entitled to commission on the first-year premium and renewal premiums for the subsequent years the policy remains in force. This ensures their efforts in securing long-term business are rewarded, providing a sustainable income stream and incentivizing them to ensure good customer service and policy persistency.

• Right to Obtain License & Appointment Letter

A qualified individual has the right to apply for and, upon meeting all criteria, receive an official license from IRDAI to act as an insurance agent. Subsequently, upon appointment by an insurer, they have the right to receive a formal Appointment Letter or agreement. This document outlines the terms of engagement, scope of authority, and obligations of both parties. This formalizes the relationship, grants the agent legal authority to represent the insurer, and provides clarity on their professional standing and responsibilities.

• Right to Receive Training and Support

Agents have the right to receive adequate initial and ongoing training from the insurer on products, sales techniques, underwriting guidelines, and regulatory updates. They are also entitled to reasonable marketing support, such as sales literature, product brochures, and digital tools. This right ensures agents are equipped with the necessary knowledge and resources to perform their duties effectively, serve customers professionally, and stay compliant with evolving industry norms, thereby protecting both the agent’s and the insurer’s interests.

• Right to Access Necessary Information

To serve clients accurately, an agent has the right to access relevant and updated information from the insurer. This includes details on product features, premium rates, policy terms, claim procedures, and the status of proposals or pending requirements. Transparency from the insurer empowers the agent to provide correct advice, manage client expectations, and resolve queries efficiently, which is essential for maintaining trust and ensuring smooth business operations.

• Right to Grievance Redressal

If an agent has a dispute with the insurer regarding commission payments, contract termination, or any unfair treatment, they have the right to a fair grievance redressal mechanism. The insurer must have a defined process to address agent complaints. If unresolved internally, the agent can escalate the matter to the designated Grievance Redressal Officer of the insurer and further to IRDAI’s Integrated Grievance Management System (IGMS). This right protects agents from arbitrary actions and ensures their concerns are heard and addressed impartially.

• Right to Sell and Service Policies within Scope

Once licensed and appointed, an agent has the right to actively solicit and sell the insurance products of their principal insurer (for a tied agent) within their authorized territory or segment. They also have the right to service the policies they have sold, which includes assisting with renewals, endorsements, and claim documentation. This right acknowledges their entrepreneurial role and allows them to build and maintain their client portfolio, which is the foundation of their professional practice and income.

Duties of Insurance Agents:

• Duty of Utmost Good Faith (Uberrimae Fidei)

The agent’s paramount duty is to act with complete honesty and transparency. They must ensure the proposer (customer) discloses all material facts truthfully to the insurer, as any concealment can void the policy. Conversely, they must not misrepresent policy features, benefits, or exclusions to make a sale. This duty is foundational, protecting the integrity of the insurance contract and ensuring the insurer can accurately assess risk. A breach undermines trust and can lead to claim repudiation, legal liability for the agent, and damage to the industry’s reputation.

• Duty to Act in Client’s Best Interest

The agent must prioritize the client’s needs and financial situation over their own commission. This involves conducting a proper needs analysis, recommending a suitable product that provides adequate coverage, and avoiding overselling or mis-selling. The recommendation should be based on a genuine assessment of the client’s risk profile and ability to pay premiums. This fiduciary duty ensures the client receives valuable protection and builds long-term trust, which is essential for the agent’s professional sustainability and the ethical growth of the insurance business.

• Duty to Maintain Confidentiality

An agent is privy to highly sensitive personal and financial information about clients, such as health details, income, and family circumstances. They have a strict legal and ethical duty to maintain absolute confidentiality of all such information. This data must not be disclosed to any third party without the client’s explicit consent, except as required by law or for policy processing. Breaching confidentiality is a serious professional misconduct that can lead to legal action, license revocation, and irreparable damage to the agent-client relationship.

• Duty to Provide Ongoing Service

An agent’s responsibility extends far beyond the initial sale. They are obligated to provide continuous policy servicing throughout its tenure. This includes assisting with premium payments, renewals, processing endorsements (changes), and facilitating the claims process. They must act as a reliable liaison between the client and the insurer, ensuring smooth communication and timely resolution of issues. This duty enhances customer satisfaction, improves policy persistency (renewal rates), and fulfills the agent’s role as the primary point of contact for the lifetime of the policy.

• Duty to Comply with Regulatory Norms

Agents must strictly adhere to all rules and codes of conduct prescribed by IRDAI and their principal insurer. This includes selling only licensed products, obtaining valid license renewals, maintaining prescribed records, and following approved sales practices. They must also complete mandatory continuing professional education (CPE) credits to stay updated. Compliance ensures the market operates fairly, protects consumers from malpractices, and upholds the professional standards of the industry. Non-compliance can result in penalties, suspension, or termination of their license.

• Duty to Represent the Insurer Fairly

While serving the client, the agent also has a duty to represent the insurer fairly and accurately. They must not make unauthorized promises or guarantees about policy performance or claim outcomes that are not supported by the policy contract. They should present the insurer’s terms and conditions without bias or distortion. This duty balances their obligation to the client, ensuring that the insurer’s risk is properly understood and that the contractual relationship is built on clear, accurate information from the outset.