Insurance Amendment Act, 2002 amended the provisions of the section
40 of the Insurance Act, 1938 to permit the payment of a portion of
the premium received by an insurer for purposes of intermediation. An
agency other than an insurance agent has also been recognized for this
purpose. Arising out of this, this Authority had received, considered
and granted licenses to various organizations to permit them to carry
on insurance broking business either as direct brokers or as reinsurance
brokers or as composite brokers in the country.
Consequent on the admission of the brokers, this Authority had received
some complaints about rebating and the non-implementation of the provisions
of the Insurance Act, 1938 more particularly section 41 thereof. The
attention of the brokers was drawn to this. Insurers and other components
of the insurance industry were also notified about the events and their
cooperation was sought for the implementation of the Insurance Act in
all its provisions. The Authority has since carried out a series of
advertisements in newspapers drawing the attention of the insurers and
insuring public to the unethical nature of the rebating and emphasizing
that rebating is an immoral and unethical practice which is likely to
be penalized under the provisions of the Insurance Act.
IThe persons who have been licensed to act as brokers in this country
have necessarily to be members of the Insurance Brokers Association
of India. This is one of the stipulations contained in the Code of Conduct
prescribed under the IRDA (Brokers) Regulations, 2002. The representatives
of the association have met the members of the Authority frequently
and have brought the upto date information to the Authority about their
conforming to the various provisions of the Insurance Act, 1938. More
particularly the brokers association has taken steps to convert itself
into a self-regulatory body with a Disciplinary Committee being put
in place. The association has also accepted the suggestion of the Authority
to include one of the members of the Authority as a member of the Disciplinary
Committee. The association has also been required to include the representative
of the IRDA on the Disciplinary Committee as a permanent member on all
disciplinary matter which have been discussed by them. The Authority
hereby appoints Shri P.A. Balasubramanian, a member of the Authority
to be the member of the Disciplinary Committee appointed by the Insurance
Brokers Association of India. Shri Prabodh Chander, Executive Director
of the Authority will be the alternate of Shri P.A. Balasubramanian.
Consequent upon the complaints received, this Authority had issued a
notification on 22nd March, 2003 laying down a procedure for the payment
of brokerage. This was because of the unsettled conditions prevalent
in the market and the non formation of a Disciplinary Committee by the
brokers association. Now that the brokers association has conformed
to the requirement of the Authority and has taken steps to control and
discipline its members, the Authority hereby makes the following notification
in modification of the one that was issued on 22nd March, 2003.
a) With effect from June 15, 2003, the facility of discount of 5% in
lieu of commission/brokerage on the face of the insurance policy available
in case of all classes of business to non public sector entities shall
stand withdrawn, and all general insurers may initiate steps to inform
their clients accordingly.
b) In respect of business emanating from public sector undertakings,
defined as Government companies under Companies Act, 1956, no brokerage
or commission will be paid. The insurance companies can if they so choose
grant a 5% discount on the face of the policy.
c) In respect of all other businesses emanating from all other companies,
organizations, individuals and Authorities, the insurance companies
will be guided by the provisions of the Regulation (19) of the Brokers
regulations. These have laid down individual limits on payment of brokerage
on general insurance business (on tariff as well as non-tariff) and
also life insurance, annuity, group insurance, pension schemes etc.
The limits mentioned under regulation 19 would be the maximum brokerage
that would be payable by an insurer.
This order will come into effect from June 15, 2003.
(N.
Rangachary)
Chairman