Omission of Section 44 relating to prohibition of cessation of payments of commission.

Omission of Section 44 relating to prohibition of cessation of payments of commission.

27. Clause 57: Omission of Section 44 relating to prohibition of cessation of payments of commission. 27.1 Clause 57 of the Bill seeking to omit Section 44 of the Act relating to prohibition of cessation of payments of commission to agents states as under: ―
Section 44 of the Insurance Act shall be omitted.‖ 27.2 Provisions of Section 44 of the existing Act, read as below: ―(1) Notwithstanding anything to the contrary contained in any contract between any person and an insurance agent, providing for the forfeiture or stoppage of payment of renewal commission to such insurance agent no such person shall, in respect of life insurance business transacted in India, refuse payment to an insurance agent of commission due to him on renewal premium under the agreement by reason only of the termination of his agreement, except for fraud: Provided that—

(a) such agent ceases to act for the insurer concerned after the Central Government has notified in the Official Gazette that it is satisfied that the circumstances in which the said insurer is placed are such as to justify the agent's ceasing to act for him; or

(b) such agent has served the insurer continually and exclusively in respect of life insurance business for at least five years and policies assuring a total sum of not less than fifty thousand rupees effected through him for the insurer were in force on a date one year before his ceasing to act as such agent for the insurer, and that the commission on renewal premiums due to him does not exceed four per cent. in any case; or

 (c) such agent has served the insurer continually and exclusively for at least ten years and after his ceasing to act as such agent he does not directly or indirectly solicit or procure insurance business for any other person.

(b) Explanation.— For the purposes of this sub-section, service of an insurance agent under a chief agent of the insurer, whether before or after the commencement of the Insurance (Amendment) Act, 1950, shall be deemed to be service under the insurer.

 (2) Any commission payable to an insurance agent, under the provisions of clauses (b) and (c) of the proviso to sub-section (1) shall, notwithstanding the death of the agent, continue to be 164 payable to his heirs for so long as such commission would have been payable had such insurance agent been alive. 44A. For the purposes of ensuring compliance with the provisions of sections 40A, 40B, 40C, 42B and 42C the Authority may by notice— (a) require from an insurer, principal agent, chief agent or special agent such information, certified if so required by an auditor or actuary, as he may consider necessary; (b) require an insurer, principal agent, chief agent or special agent to submit for his examination at the principal place of business of the insurer in India any book of account, register or other document, or to supply any statement which may be specified in the notice; (c) examine any officer of an insurer or a principal agent, chief agent or special agent on oath, in relation to any such information, book, register, document or statement and administer the oath accordingly, and an insurer, principal agent, chief agent or special agent shall comply with any such requirement within such time as may be specified in the notice.‖ 27.3

           The suggestions made by Life Insurance Agents Federation of India, National Federation of Insurance Field Workers of India as also an expert, on the omission of section 44, as proposed, are stated as below: “Section 44 was introduced in the Insurance Act, 1938: (i) 44 (1), apparently to protect the Agent from loosing his earned but deferred income and inserting subsections (a) ,(b) and (c) to protect the Insurers from the liability of payment of renewal commission not before the latent period of 5 years. (ii) 44(2), apparently to protect the heirs of the Agent from loosing their rights to the renewal commission. The reminiscence of the deletion of this Sec 44 shall be felt by the country in the year 2020-25, when we are destined to be the 3rd growing economy behind USA and CHINA. The economic prosperity shall come with its own problems of intra mismatch, big population, high unemployment etc. We shall be a Democratic country of 150 crore people of which about 50 crore shall be in the impatient age group of 20-30 and seeking for employment. We advocate for the Insurance Agency as a whole time career and as a respectable source of employment, provided the profession gets protection by such Sections as Sec 44 and the Govt takes other measures towards professionalizing the Agency Career (for which we have a separate panel of people working on the scheme).

         We strongly request you to stop the omission of the Sec 44 of the Insurance Act 1938 and scrap the Clause 57 of the Insurance Laws Amendment Bill, 2008.”165 (iii) There is a proposal to omit this Section. This omission of Section 44 of Insurance Act will deprive the agents of their hard earned commissions. This will encourage companies to even withhold commissions by terminating the agents on flimsy grounds. This was the style of functioning of many companies prior to Nationalisation. This will lead to exploitation of work force who have to work on commissions after spending and ensuring productivity. In order to protect the Insurers interest it can be added that if an Agent joins another Insurer then the Renewal commissions can be stopped. Based upon a few decades of experience, Section 44 was introduced in 1950 as a measure to give partial protection to the renewal commission of agents. It is now proposed to drop this Section, based on just two years‘ experience. There does not appear to be any logic behind this step which would only show the IRDA, in poor light. The Regulator has not only to be strictly impartial between different sections of the industry, but should also appear to be so. This move, to withdraw the protection provided to agents, is sure to affect the image of impartiality.

           Another aspect has also to be noted. The number of agents just dropping out is many times greater than the number of agents moving from one company to another. If the companies, which complain about their agents being lured away by rival companies, take proper action to prevent drop out of agents, there would be no need to worry about a few agents moving to rival companies. The problem of ‗agency drop out is to be tackled by the IRDA, with the cooperation of all companies, not by amending the insurance Act. With the Bill seeking to omit the entire section, the protection given to the family of the deceased agent, in the form of hereditary commission, also gets removed. So the proposed amendment is not only unfair, but will not also stand the test of law.

(THANK YOU MR. VINAY MOHANTHY)

POSTED BY 

SECRETARY, LIAFI,COIMBATORE DIVISION.