Ethics In Insurance Sale

Index

1.Introduction
2.Objective
3.Research Methodology
4.What is insurance & Concept of insurance.
5.Need of insurance
6.Various channels in insurance sales
7.Business Ethics
8.Ethics in insurance Sales Require.
9.Actual Practices.
10. Case Study
11. Bibliography
12. Questionnaire

Introduction
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Ethics In Insurance Sale

Life Insurance is the key to good financial planning. On one hand, it

safeguards your money and on the other, ensures its growth, thus providing you
with complete financial well being. Life Insurance can be termed as an agreement
between the policy owner and the insurer, where the insurer for a consideration
agrees to pay a sum of money upon the occurrence of the insured individual's or
individuals' death or other event, such as terminal illness, critical illness or
maturity of the policy.

Life Insurance always concern with financial risk which directly concern
with family and family’s financial securities. When insurance sales and purchase
then always based on material information and works on almost good faith
principal. When any person proposing for insurance to any insurer that time it is
assumed that the information provided by him is correct and base for the accepting
the risk by the insurer. So at time of accepting risk some ethics followed by both
insured and insurer, on this ethics insured and insurer make a contract which is
known as Life Insurance Policy.

As in India awareness of insurance is less comparing to European countries

and most of insurance business comes from relation of sales person to insured, and
most of time insured completely depends on the insurance sales person. In such
condition the sales person followed ethics for insured and insurer.

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Ethics In Insurance Sale

Objective
To study how insurance sale is it with ethics or not with ethics because its sales through
the relations.

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Ethics In Insurance Sale

Research Methodology

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Ethics In Insurance Sale

What is Life Insurance?

Human life is subject to risks of death and disability due to natural and accidental causes. When
human life is lost or a person is disabled permanently or temporarily, there is a loss of income to
the household. The family is put to hardship. Sometimes, survival itself is at stake for the
dependants. Risks are unpredictable. Death/disability may occur when one least expects it. An
individual can protect himself or herself against such contingencies through life insurance.

Life insurance is insurance on human beings. Though Human life cannot be valued, a monetary
sum could be determined which is based on loss of income in future years. Hence in life
insurance, the Sum Assured (or the amount guaranteed to be paid in the event of a loss) is by
way of a ‘benefit’ in the case of life insurance. Life insurance products provide a definite amount
of money to the dependants of the insured in case the life insured dies during his active income
earning period or becomes disabled on account of an accident causing reduction/complete loss in
his income earnings.

An individual can also protect his old age when he ceases to earn and has no other means of
income – by purchasing an annuity product.

There are a number of life insurance products which offer protection and also coupled with
savings.

A term insurance product provides a fixed amount of money on death during the period of
contract.

A whole life insurance product provides a fixed amount of money on death.

An Endowment Assurance product provided a fixed amount of money either on death during the
period of contract or at the expiry of contract if life assured is alive.

A money back assurance product provides not only fixed amounts which are payable on
specified dates during the period of contract, but also the full amount of money assured on death
during the period of contract.

An annuity product provides a series of monthly payments on stipulated dates provided that the
life assured is alive on the stipulated dates.
A linked product provides not only a fixed amount of money on death but also sums of money
which are linked with the underlying value of assets on the desired dates.

There are a variety of life insurance products to suit to the needs of various categories of people
—children, youth, women, middle-aged persons, old people; and also rural people, film actors
and unorganized labourers.

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Ethics In Insurance Sale

Life insurance products could be purchased from registered life insurers notified by the IRDA.
Insurers appoint insurance agents to sell their products. Public who are interested to buy life
insurance products should receive proper advice from insurance agents/insurer so that a right
product could be chosen to suit particular financial needs.

Thus life insurance policies offer protection and security to families and provide happiness to
society.

Concept of Insurance
On the one hand, human life is subject to various risks—risk of death or disability due to natural
or accidental causes. Humans are also prone to diseases, the treatment of which may involve
huge expenditure. On the other hand, property owned by man is exposed to various hazards,
natural and man-made.

When human life is lost or a person is disabled permanently or temporarily, there is a loss of
income to the household. The family is put to hardship. Sometimes survival itself is at stake for
the dependants.

When it comes to property, loss or damage to property results in either whole or partial loss in
income to the person or entity.

Risk has the element of unpredictability. Death/disability or loss/damage could occur at anytime.
Losses can be mitigated through insurance. Insurance is a commodity which offers protection
against various contingencies.

Insurance products available for life and non-life are many. In non-life, apart from personal
covers such as accident covers and health insurance, there are products covering liabilities under
a particular law and or common law. The various products are designed to cater to different
needs of an individual or industry such as fire insurance policy on multi-storeyed building,
householder’s policy.

An insurance contract promises to make good to the insured a certain sum in consideration for a
payment in the form of premium from the insured.

Human life cannot be valued. Hence the sum assured ( or the amount guaranteed to be paid in the
event of a loss ) is by way of a ‘benefit’ in the case of life insurance. Life insurance products
provide a definite amount of money to the dependants of the insured in case the life insured dies
during his active income earning period or becomes disabled on account of an accident causing
reduction/complete loss in his income earnings. An individual can also protect his old age when
he ceases to earn and has no other means of income by purchasing an annuity product.

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Ethics In Insurance Sale

A Personal Accident cover is also for protection. In the event of death or disability, permanent or
temporary, of the insured, it provides for compensation which is either the whole or a percentage
of the Capital Sum Insured depending on the kind of loss.

In the case of Health Insurance, the policy seeks to cover expenses towards of treatment of
diseases and or injury up to the Sum Insured opted for by the insured.

In respect of insurance relating to property, there are many products available. Property may be
covered against fire and perils of nature including flood, earthquake etc. Machinery may be
insured for breakdown. Goods in transit can be insured under a marine cargo insurance cover.
Insurance covers are also available for ships and other vessels. A motor insurance policy covers
third party damage as well as damage to the vehicle.

Insurance of property is based on the principle of indemnity. The idea is to bring the insured to
the same financial position as he /she was before the loss occurred. It safeguards the investment
in the property. Where there is no insurance, losses can mar a project or an industry. General
Insurance offers stability to the economy and to the society.

Insurance offers security and so peace of mind to the individual. The concept of insurance is that
the losses of a few are made good by contribution from many. It is based on the law of large
numbers. It stemmed from the need of man to find a solution for mitigation of losses. It also
reflects the nature of man to find a solution collectively.

It is important for all to understand the various products that life and general insurance
companies offer before they make a choice as to the product they want to buy.
As per regulations, insurers have to give the various features of the products at the point of sale.
The insured should also go through the various terms and conditions of the products and
understand what they have bought and met their insurance needs. They ought to understand the
claim procedures so that they know what to do in the event of a loss.

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Need of Insurance
All assets have some economic value attached to them. No person can deny that there is also a
possibility that these assets may get damaged/destroyed or become non-operational due to
risks like breakdowns, fire, floods, earthquake etc. Different assets are exposed to
different types of risks like a car has a risk of theft or meeting an accident, a house is
exposed to risk of catching fire, a human is exposed to risk of death/accident. Insurance is
needed because of following reasons:

Social Security Tool

Insurance acts as an important tool providing a sense of security to the society on a whole. It is
the right of every human-being to have basic amenities like food, clothing, housing, medical
care, standard of living necessary for his personal and family's well being, and right to security in
case of unemployment, disability, sickness or any other circumstances out of his control.

In case the bread earner of a family dies, the family suffers from direct financial loss as family's
income ceases. As a result, family's economic condition gets affected unless there are other
arrangements to rescue the family from this situation. Life insurance is one alternate arrangement
that offers some respite to the family from financial distress. Otherwise this family would have
been pushed into the lower strata of the society, which would be an additional cost to the society.
This is because subsidies would have to be given to the family so as to enable it to survive and
enjoy the basic rights at par with other people. Moreover, a poor family is generally seen to have
a large family size with family members being illiterate. This on a whole affects the society and
is a cost to the society. Therefore, insurance compliments the state in social management efforts.

Uncertainty
The basic need of insurance arises as risks are uncertain and unpredictable in nature. Getting
insurance for an asset does not mean that the asset is protected against risks or its exposure to
risk is reduced, but it actually implies that in case the asset suffers any loss in value due to such
risk, the insurance company bears the loss and compensates the insured by making payment to
him.

Economic Development
The premium paid by people to the insurance companies is a part of their savings. Insurance,
thus, acts as a useful instrument in promoting savings and investments, particularly within the
lower-income and middle-income families. These savings are ultimately used as investments
fuelling economic growth.

Advantages of Life Insurance

 Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures
that your loved ones continue to enjoy a good quality of life against any unforeseen
event.
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 Planning for life stage needs - Life Insurance not only provides for financial support in
the event of untimely death but also acts as a long term investment. You can meet your
goals, be it your children's education, their marriage, building your dream home or
planning a relaxed retired life, according to your life stage and risk appetite. Traditional
life insurance policies i.e. traditional endowment plans, offer in-built guarantees and
defined maturity benefits through variety of product options such as Money Back,
Guaranteed Cash Values, Guaranteed Maturity Values.

 Protection against rising health expenses - Life Insurers through riders or stand alone
health insurance plans offer the benefits of protection against critical diseases and
hospitalization expenses. This benefit has assumed critical importance given the
increasing incidence of lifestyle diseases and escalating medical costs.

 Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder,
you have to pay a fixed amount at a defined periodicity. This builds the habit of long-
term savings. Regular savings over a long period ensures that a decent corpus is built to
meet financial needs at various life stages.

 Safe and profitable long-term investment - Life Insurance is a highly regulated sector.
IRDA, the regulatory body, through various rules and regulations ensures that the safety
of the policyholder's money is the primary responsibility of all stakeholders. Life
Insurance being a long-term savings instrument, also ensures that the life insurers focus
on returns over a long-term and do not take risky investment decisions for short term
gains.

 Assured income through annuities - Life Insurance is one of the best instruments for
retirement planning. The money saved during the earning life span is utilized to provide a
steady source of income during the retired phase of life.

 Protection plus savings over a long term - Since traditional policies are viewed both by
the distributors as well as the customers as a long term commitment; these policies help
the policyholders meet the dual need of protection and long term wealth creation
efficiently.

 Growth through dividends - Traditional policies offer an opportunity to participate in

the economic growth without taking the investment risk. The investment income is
distributed among the policyholders through annual announcement of dividends/bonus.

 Facility of loans without affecting the policy benefits - Policyholders have the option
of taking loan against the policy. This helps you meet your unplanned life stage needs
without adversely affecting the benefits of the policy they have bought.

 Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry
and exit under most of the plans.

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 Mortgage Redemption- Insurance acts as an effective tool to cover mortgages and loans
taken by the policyholders so that, in case of any unforeseen event, the burden of
repayment does not fall on the bereaved family

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Distribution channels in insurance and their duties.

An insurance cover is an intangible product evidenced by a written contract known as the
‘policy’. Insurers market various insurance covers either directly or through various distribution
channels—individual agents, corporate agents (including Bancassurance) and Brokers. The
marketer in the distribution network is in direct interface with the prospect and the customer.

Life insurance products are sold through individual agents and many of them have this as their
only career occupation. General insurance products are sold through individual agents, corporate
agents and brokers.

Distribution channels such as agents are licensed by the IRDA. To get an agency licence, one has
to have certain minimum qualifications; practical training in insurance subjects and pass an
examination conducted by the Insurance Institute of India.

IRDA regulations on licensing of agents/brokers lay down the code of conduct for individual
agents, corporate agents and brokers. A separate note on the code of conduct is appended to this
note.

Thus it is seen that the dos and don’ts for these intermediaries are given clearly at the point of
sale as well as in the event of a claim. Service does not end with the customer receiving his
document; it in fact only begins here. After sales service is as important or even more important
– like when a refund has to be made or when a claim has to be made.

One of the issues that is of great concern affecting professionalism in insurance activities is
resorting rebating by intermediaries. Rebating is prohibited as per Section 41 of the Insurance
Act, 1938 and the public are advised not to deal with intermediaries offering rebate of any kind.

Rebating means a share of commission receivable by the agent/broker is given to the

prospect/client. This is done to attract the client in the purchase of insurance contract by offering
cash. Competition among agents/brokers is so cut-throat, some agents indulge in such unethical
practices. Public are advised not to ask for any prohibited rebates in premium since commission
payment to an agent is the only income for some to take care of their families. Similarly, agents
are also advised not to indulge in such practices which could cause them loss of agency income.

Code of Conduct for Intermediaries

I. INSURANCE AGENT

Every insurance agent shall,---

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identify himself and the insurance company of whom he is an insurance agent;

disclose his licence to the prospect on demand;
disseminate the requisite information in respect of insurance products offered for sale by
his insurer and take into account the needs of the prospect while recommending a specific
insurance plan;
disclose the scales of commission in respect of the insurance product offered for sale, if
asked by the prospect;
indicate the premium to be charged by the insurer for the insurance product offered for
sale;
explain to the prospect the nature of information required in the proposal form by the
insurer, and also the importance of disclosure of material information in the purchase of
an insurance contract;
bring to the notice of the insurer any adverse habits or income inconsistency of the
prospect, in the form of a report (called “Insurance Agent’s Confidential Report”) along
with every proposal submitted to the insurer, and any material fact that may adversely
affect the underwriting decision of the insurer as regards acceptance of the proposal, by
making all reasonable enquiries about the prospect;
inform promptly the prospect about the acceptance or rejection of the proposal by the
insurer;
obtain the requisite documents at the time of filing the proposal form with the insurer;
and other documents subsequently asked for by the insurer for completion of the
proposal;
render necessary assistance to the policyholders or claimants or beneficiaries in
complying with the requirements for settlement of claims by the insurer;
advise every individual policyholder to effect nomination or assignment or change of
address or exercise of options, as the case may be, and offer necessary assistance in this
behalf, wherever necessary;

No insurance agent shall,----

solicit or procure insurance business without holding a valid licence;

induce the prospect to omit any material information in the proposal form;
induce the prospect to submit wrong information in the proposal form or documents
submitted to the insurer for acceptance of the proposal;
behave in a discourteous manner with the prospect;
interfere with any proposal introduced by any other insurance agent;
offer different rates, advantages, terms and conditions other than those offered by his
insurer;
demand or receive a share of proceeds from the beneficiary under an insurance contract;
force a policyholder to terminate the existing policy and to effect a new proposal from
him within three years from the date of such termination;
have, in case of a corporate agent, a portfolio of insurance business under which the
premium is in excess of fifty percent of total premium procured, in any year, from one
person (who is not an individual) or one organisation or one group of organisations;

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apply for fresh licence to act as an insurance agent, if his licence was earlier cancelled by
the designated person, and a period of five years has not elapsed from the date of such
cancellation;
become or remain a director of any insurance company;

Every insurance agent shall, with a view to conserve the insurance business already
procured through him, make every attempt to ensure remittance of the premiums by the
policyholders within the stipulated time, by giving notice to the policyholder orally and in
writing;

II. CORPORATE AGENT

Every Licensed Corporate Agent shall abide by the code of conduct specified below:

Every corporate agent shall:

a) be responsible for all acts of omission and commission of its corporate insurance
executive and every specified person;
b) ensure that the corporate insurance executive and all specified persons are properly
trained, skilled and knowledgeable in the insurance products they market;
c) ensure that the corporate insurance executive and the specified person do not make to
the prospect any misrepresentation on policy benefits and returns available under the
policy;
d) ensure that no prospect is forced to buy an insurance product;
e) give adequate pre-sales and post-sales advice to the insured in respect of the insurance
product;
f) extend all possible help and cooperation to an insured in completion of all formalities
and documentation in the event of a claim;
g) give due publicity to the fact that the corporate agent does not underwrite the risk or
act as an insurer;
h) enter into service level agreements with the insurer in which the duties and
responsibilities of both are defined.

Every corporate agent or a corporate insurance executive or a specified person shall also
follow the code of conduct specified below:

(i) Every corporate agent/ corporate insurance executive/ specified person shall,---
(a) identify himself and the insurance company of whom he is a representative;
(b) disclose his licence/ certificate to the prospect on demand;
(c) disseminate the requisite information in respect of insurance products offered for sale
by his insurer and take into account the needs of the prospect while recommending a
specific insurance plan;
(d) disclose the scales of commission in respect of the insurance product offered for sale,
if asked by the prospect;
(e) indicate the premium to be charged by the insurer for the insurance product offered
for sale;

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(f) explain to the prospect the nature of information required in the proposal form by the
insurer, and also the importance of disclosure of material information in the purchase of
an insurance contract;
(g) bring to the notice of the insurer any adverse habits or income inconsistency of the
prospect, in the form of a report (called “Insurance Agent’s Confidential Report”) along
with every proposal submitted to the insurer, and any material fact that may adversely
affect the underwriting decision of the insurer as regards acceptance of the proposal, by
making all reasonable enquiries about the prospect;
(h) inform promptly the prospect about the acceptance or rejection of the proposal by the
insurer;
(i) obtain the requisite documents at the time of filing the proposal form with the insurer;
and other documents subsequently asked for by the insurer for completion of the
proposal;
(j) render necessary assistance to the policyholders or claimants or beneficiaries in
complying with the requirements for settlement of claims by the insurer;
(k) advise every individual policyholder to effect nomination or assignment or change of
address or exercise of options, as the case may be, and offer necessary assistance in this
behalf, wherever necessary;
(ii) No corporate agent/ corporate insurance executive/ specified person shall,----
(a) solicit or procure insurance business without holding a valid licence/ certificate;
(b) induce the prospect to omit any material information in the proposal form;
(c) induce the prospect to submit wrong information in the proposal form or documents
submitted to the insurer for acceptance of the proposal;
(d) behave in a discourteous manner with the prospect;
(e) interfere with any proposal introduced by any other specified person or any insurance
intermediary;
(f) offer different rates, advantages, terms and conditions other than those offered by his
insurer;
(g) demand or receive a share of proceeds from the beneficiary under an insurance
contract;
(h) force a policyholder to terminate the existing policy and to effect a new proposal from
him within three years from the date of such termination;
(i) No corporate agent shall have a portfolio of insurance business from one person or one
organization or one group of organizations under which the premium is in excess of fifty
percent of total premium procured in any year;
(j) apply for fresh licence to act as an insurance agent, if his licence was earlier cancelled
by the designated person, and a period of five years has not elapsed from the date of such
cancellation;
(k) become or remain a director of any insurance company;

(iii) Every corporate agent shall, with a view to conserve the insurance business already
procured through him, make every attempt to ensure remittance of the premiums by the
policyholders within the stipulated time, by giving notice to the policyholder orally and in
writing.

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(iv) No director of a company or a partner of a firm or the chief executive or a corporate

insurance executive or a specified person shall hold similar position with another
corporate agent of any other insurance company.

III. INSURANCE BROKER

Every Insurance Broker shall follow recognised standards of professional conduct and
discharge his functions in the interest of the policyholders.

Conduct in matters relating to clients relationship— Every insurance broker shall:

conduct its dealings with clients with utmost good faith and integrity at all times;

act with care and diligence;

ensure that the client understands his relationship with the broker and on whose behalf
the broker is acting;
treat all information supplied by the prospective clients as completely confidential to
themselves and to the insurer(s) to which the business is being offered;
take appropriate steps to maintain the security of confidential documents in their
possession;
hold specific authority of client to develop terms;
understand the type of client it is dealing with and the extent of the client’s awareness of
risk and insurance;
obtain written mandate from client to represent the client to the insurer and communicate
the grant of a cover to the client after effecting insurance;
obtain written mandate from client to represent the client to the insurer/ reinsurer; and
confirm cover to the insurer after effecting re-insurance, and submit relevant reinsurance
acceptance and placement slips;
avoid conflict of interest.

Conduct in matters relating to Sales practices— Every insurance Broker shall: —

(a) confirm that it is a member of the Insurance Brokers Association of India or such a
body of brokers as approved by the Authority which has a memorandum of
understanding with the Authority;
(b) confirm that he does not employ agents or canvassers to bring in business;
(c) identify itself and explain as soon as possible the degree of choice in the products that
are on offer;
(d) ensure that the client understands the type of service it can offer;
(e) ensure that the policy proposed is suitable to the needs of the prospective client;
(f) give advice only on those matters in which it is knowledgeable and seek or
recommend other specialist for advice when necessary;
(g) not make inaccurate or unfair criticisms of any insurer or any member of the
Insurance Brokers Association of India or member of such body of brokers as approved
by the Authority;

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(h) explain why a policy or policies are proposed and provide comparisons in terms of
price, cover or service where there is a choice of products;
(i) state the period of cover for which the quotation remains valid if the proposed cover is
not effected immediately;
(j) explain when and how the premium is payable and how such premium is to be
collected, where another party is financing all or part of the premium, full details shall be
given to the client including any obligations that the client may owe to that party; and
(k) explain the procedures to follow in the event of a loss.

Conduct in relation to furnishing of information — Every insurance broker shall: —

(a) ensure that the consequences of non-disclosure and inaccuracies are pointed out to the
prospective client;
(b) avoid influencing the prospective client and make it clear that all the answers or
statements given are the latter's -own responsibility. Ask the client to carefully check
details of information given in the documents and request the client to make true, fair and
complete disclosure where it believes that the client has not done so and in case further
disclosure is not forthcoming it should consider declining to act further;
(c) explain to the client the importance of disclosing all subsequent changes that might
affect the insurance throughout the duration of the policy; and
(d) disclose on behalf of its client all material facts within its knowledge and give a fair
presentation of the risk.

Conduct in relation to explanation of insurance contract — Every insurance broker shall:

(a) provide the list of insurer(s) participating under the insurance contract and advise any
subsequent changes thereafter;
(b) explain all the essential provisions of the cover afforded by the policy recommended
by him so that, as far as possible, the prospective client understands what is being
purchased;
(c) quote terms exactly as provided by insurer;
(d) draw attention to any warranty imposed under the policy, major or unusual
restrictions, exclusions under the policy and explain how the contract may be cancelled;
(e) provide the client with prompt written confirmation that insurance has been effected.
If the final policy wording is not included with this confirmation, the same shall be
forwarded as soon as possible;
(f) notify changes to the terms and conditions of any insurance contract and give
reasonable notice before any changes take effect;
(g) advise its clients of any insurance proposed on their behalf which will be effected
with an insurer outside India, where permitted, and, if appropriate, of the possible risks
involved; and

Conduct in relation to renewal of policies — Every insurance broker shall:—

(a) ensure that its client is aware of the expiry date of the insurance even if it chooses not
to offer further cover to the client;

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(b) ensure that renewal notices contain a warning about the duty of disclosure including
the necessity to advise changes affecting the policy, which have occurred since the policy
inception or the last renewal date;
(c) ensure that renewal notices contain a requirement for keeping a record (including
copies of letters) of all information supplied to the insurer for the purpose of renewal of
the contract;
(d) ensure that the client receives the insurer's renewal invitation well in time before the
expiry date.

Conduct in relation to claim by client— Every insurance broker shall: —

(a) explain to its clients their obligation to notify claims promptly and to disclose all
material facts and advise subsequent developments as soon as possible;
(b) request the client to make true, fair and complete disclosure where it believes that the
client has not done so. If further disclosure is not forthcoming it shall consider declining
to act further for the client;
(c) give prompt advice to the client of any requirements concerning the claim;
(d) forward any information received from the client regarding a claim or an incident that
may give rise to a claim without delay, and in any event within three working days;
(e) advise the client without delay of the insurer's decision or otherwise of a claim; and
give all reasonable assistance to the client in pursuing his claim.

Provided that the insurance broker shall not take up recovery assignment on a policy
contract which has not been serviced through him or should not work as a claims
consultant for a policy which has not been serviced through him.

Conduct in relation to receipt of complaints — Every insurance broker shall:—

(a) ensure that letters of instruction, policies and renewal documents contain details of
complaints handling procedures;
(b) accept complaints either by phone or in writing;
(c) acknowledge a complaint within fourteen days from the receipt of correspondence,
advise the member of staff who will be dealing with the complaint and the timetable for
dealing with it;
(d) ensure that response letters are sent and inform the complainant of what he may do if
he is unhappy with the response;
(e) ensure that complaints are dealt with at a suitably senior level;
(f) have in place a system for recording and monitoring complaints.

Conduct in relation to documentation — Every insurance broker shall:—

(a) ensure that any documents issued comply with all statutory or regulatory requirements
from time to time in force;
(b) send policy documentation without avoidable delay,
(c) make available, with policy documentation, advice that the documentation shall be
read carefully and retained by the client;

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Ethics In Insurance Sale

(d) not withhold documentation from its clients without their consent, unless adequate
and justifiable reasons are disclosed in writing and without delay to the client. Where
documentation is withheld, the client must still receive full details of the insurance
contract;
(e) acknowledge receipt of all monies received in connection with an insurance policy;
(f) ensure that they reply is sent promptly or use its best endeavours to obtain a prompt
reply to all correspondence;
(g) ensure that all written terms and conditions are fair in substance and set out, clearly
and in plain language, client's rights and responsibilities; and
(h) subject to the payment of any monies owed to it, make available to any new insurance
broker instructed by the client all documentation to which the client is entitled and which
is necessary for the new insurance broker to act on behalf of the client.

Conduct in matters relating to advertising — Every insurance broker shall conform to the
relevant provisions of the Insurance Regulatory and Development Authority (Insurance
Advertisements and Disclosure) Regulations, 2000, and :—

(a) ensure that statements made are not misleading or extravagant;

(b) where appropriate, distinguish between contractual benefits which the insurance
policy is bound to provide and non-contractual benefits which may be provided;
(c) ensure that advertisements shall not be restricted to the policies of one insurer, except
where the reasons for such restriction are fully explained with the prior approval of that
insurer;
(d) ensure that advertisements contain nothing which is in breach of the law nor omit
anything which the law requires;
(e) ensure that advertisement does not encourage or condone defiance or breach of the
law;
(f) ensure that advertisements contain nothing which is likely, in the light of generally
prevailing standards of decency and propriety, to cause grave or widespread offence or to
cause disharmony;
(g) ensure that advertisements are not so framed as to abuse the trust of clients or exploit
their lack of experience or knowledge;
(h) ensure that all descriptions, claims and comparisons, which relate to matters of
objectively ascertainable fact shall be capable of substantiation.

Conduct in matters relating receipt of remuneration— Every insurance broker shall:—

(a) disclose whether in addition to the remuneration prescribed under these regulations,
he proposes to charge the client, and if so in what manner;
(b) advise the client in writing of the insurance premium and any fees or charges
separately and the purpose of any related services;
(c) if requested by a client, disclose the amount of remuneration or other remuneration it
receives as a result of effecting insurance for that client. This will include any payment
received as a result of securing on behalf of the client any service additional to the
arrangement of the contract of insurance; and

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(d) advise its clients, prior to effecting the insurance, of their intention to make any
deductions from the amount of claim collected for a client, where this is a recognised
practice for the type of insurance concerned.

Conduct in relation to matters relating to training — Every insurance broker shall:

(a) that its staff are aware of and adhere to the standards expected of them by this code;
(b) ensure that staff are competent, suitable and have been given adequate training;
(c) ensure that there is a system in place to monitor the quality of advice given by its
staff;
(d) ensure that members of staff are aware of legal requirements including the law of
agency affecting their activities; and only handle classes of business in which they are
competent;
(e) draw the attention of the client to Section 41 of the Act, which prohibits rebating and
sharing of commission.

Every insurance broker shall display in every office where it is carrying on business and
to which the public have access a notice to the effect that a copy of the code of conduct is
available upon request and that if a member of the public wishes to make a complaint or
requires the assistance of the Authority in resolving a dispute, he may write to the
Authority.

An insurance broker as defined in these regulations shall not act as an insurance agent of
any insurer under section 42 of the Act.

Every insurance broker shall abide by the provisions of the Insurance Act,1938 (4 of
1938), Insurance Regulatory And Development Authority Act 1999(41 of 1999), rules
and regulations made there under which may be applicable and relevant to the activities
carried on by them as insurance brokers.

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Business Ethics

Ethics in business are nothing but the do’s and don’ts by the business users in the
business. In other words it could be referred as set of principles a business man
ought to follow. ”There should be business ethics” means that the business should
be conducted according to certain self recognized moral standards. Few unethical
elements in the present day business are cheating, stealing, lying, bribing,
corrupting etc.
A business man should be aware of the ethics in the business and should follow
them in order to maintain ecological balance in the society.

The main objective of this study is to identify the vital few concerns of business
which influence the ethical status of a business and to identify the necessary
measures.
The study and examination of moral and social responsibility in relation to business
practice and decision making in business is known as “Business Ethics”.

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