The Securities and Exchange Commission of Pakistan (SECP) has issued general requirements to be applicable on all corporate insurance agents, which have entered into agency agreement with the insurers. According to SRO 1236(I)/2017 issued by the SECP here on Tuesday, the Commission has issued directive, namely 'the Securities and Exchange Commission (SEC) Directive for the Corporate Insurance Agents (excluding Banks) and Technology Based Distribution Channels, 2017.'
The SECP directive is applicable to all corporate insurance agents, other than banks, of life and non-life insurers including the family and general Takaful operators. The relevant provisions of this directive are also applicable to the distribution of insurance through technology based channels, with or without the involvement of corporate insurance agent.
The provisions of this directive will apply to all new insurance business underwritten by insurers on or after March 31, 2018 under the agency agreements with the corporate insurance agents. However, the insurers and the corporate insurance agents shall make amendments to the existing agency agreements, wherever necessary, to comply with the provisions of the directive not later than April 1, 2018.
The insurer shall send written confirmation, signed by the designated insurance executive, to the Commission, mentioning that the necessary changes have been made and the relationship with corporate insurance agent complies with the requirements of this directive, the SECP added.
The provisions of the directive will apply to all corporate insurance agents, which have entered into agency agreement with the insurers. Agency arrangement between insurer and corporate insurance agent: All insurers are required to submit to the Commission the agency agreement entered into with the corporate insurance agent, or any subsequent change made thereto, within thirty days of coming into effect of such agreement or such amendment, as the case may be.
The insurer is required to submit the insurance agency agreement with clear roles and responsibilities of each party involved such as the insurer, insurance broker when working in the capacity of corporate insurance agent or administrative support provider, and, or Third Party Administrator (TPA), if any.
The agency agreement shall, at the minimum, clearly state the roles and responsibilities of each party involved in the distribution arrangement in respect of areas including policy acquisition/ enrollment; administration and servicing; claims processing and complaint handling. The agency agreement shall contain the "termination of agreement" clause and rights and obligations of the corporate insurance agent and insurer subsequent to such termination and such clause shall also state the treatment to be given to existing policyholders and remuneration to the corporate insurance agent subsequent to the termination.
The agency agreement shall clearly define the certification process which shall include a definition of the training required prior to certification. Certification requirement for the corporate insurance agent: Every corporate insurance agent will ensure that all the specified persons are properly trained and possess sound knowledge of the insurance products they would market, and have undergone the process of the certification.
The SECP directive said that the insurer may assign the responsibility of collecting premiums due on policies issued through the corporate insurance agent but before outsourcing, the insurer shall ensure that the corporate insurance agent has the necessary premium collection mechanism in place. The corporate insurance agent shall always pay the gross premium, inclusive of all applicable taxes and levies, to the insurer and shall not retain any part of the insurance premium received from the policyholders for payment to the insurer.
Every corporate insurance agent is required to remit the premium collected from the policyholder to the insurer within fourteen (14) days of receipt of premium. For the purpose of policy inception, the premium paid to the corporate insurance agent will be considered premium paid to the insurer and any anomaly in transfer of premium from corporate insurance agent to the insurer will not affect the policyholder and the insurance coverage for which he has paid premium to the corporate insurance agent.
Marketing brochures and sales material: The insurer shall be primarily responsible for the accuracy of all contents of advertising and sales material. In all such sales material the roles of the corporate insurance agent and the insurer shall be clearly stated at a prominent place including, but not limited to, policy servicing, claims lodgment and claims processing. it must clearly state that the corporate insurance agent is acting on behalf of the insurer who is the risk bearer and name, address and contact details of the insurer shall also be mentioned at a prominent place.
Commission payable to corporate insurance agent: The level of commission payable to the corporate insurance agent for its role of soliciting and procuring insurance business may vary based on any performance criteria which the insurer and corporate insurance agent may agree and such criteria will be clearly mentioned in the agency agreement. Any commission to be paid by the insurer to the corporate insurance agent must be computed on premiums received by the insurer and under no circumstances the commission on premiums to be received in future, be paid.
The corporate insurance agent shall not charge, to the policyholder, any service fee, processing fee, administration charge or any other charge unless such a charge has been included by the insurer in the premium and communicated to the policyholder in advance. The SECP added that any insurer or its chief executive officer, or director, or key officer will not hold any direct or indirect ownership or management interest, whether pecuniary or otherwise, in any corporate insurance agent with whom it has entered into an agency agreement and vice versa.
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