background
Insurance is a financial risk covering, insurance is a contract while insurance companies are in the business of contracting. The insured buys the insurance policy by paying the premium and protects his risk and transfers the risk to the insurance company. Insurance agent is one of the many aspects that occur in the overall insurance system. Those who do not work as regular and permanent employees of the company but work on behalf of the insurer on the basis of service charge or commission. Different scholars have defined insurance agents through different definitions. In which the Oxford dictionary defines an insurance agent as “a person or organiza on that represents an insurance company to sell, solicit, or negate insurance policies.” They act as a representa ve of an insurer, assis ng clients in fi nding coverage, and usually receive compensa on or commission for their services.”
The role of insurance insurance is important in making the insurance business systematic, regulated, competitive and reliable and in the process of providing quality and reliable insurance services to the general public through healthy competition of the insurance business. The Insurance Act, 2079 issued in 2079 BS has defined the insurance agent legally. Section 2 (t) of the Insurance Act defines “insurance agent” as a person or institution licensed to act on a commission basis on behalf of an insurer, other than an employee of the insurer. The Insurance Act, 2079 seems to be more focused on the quality of service delivery rather than the quantitative of the overall insurance. The agent profession has been made regular and dignified by defining the qualifications of the insurance agent, the provision of passing the compulsory examination and the insurance offense. There are about 4,25,000 insurance agents active in the insurance market of Nepal. There is also a significant number of people who are in the insurance agent profession as a direct business and as a source of income.
In the laws related to insurance agents, the legal provisions related to agency in the Insurance Act, 2079, Insurance Rules, 2081 and Chapter 10 of the Civil Code Act, 2074 seem to be directly attracted. According to Section 591 of the Civil Code Act, 2074, any person may appoint a representative to carry on any business on his behalf or to carry on business as an agent or to carry on any transaction with a third person or to represent himself or to such a person or to establish any kind of legal relationship between the person appointing the agent and the third person. It has been defined and placed within the legal framework.
Process of becoming an insurance agent
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As a basic qualification, at least ten plus two or one hundred educational qualifications are required. If you apply to become an agent through one of the life insurance or non-life insurance companies in the past, the company provides mandatory basic training. In the training, basic principles of insurance, sales skills, rules and regulations are taught. After the training, one has to take the examination conducted by the Nepal Insurance Authority. Only after passing the examination is considered eligible for an agent’s license. After passing the exam, you have to get an agent license from the authority. The license allows you to legally sell insurance policies. After getting the license, you can work with the same insurance company. The agent license must be renewed every 3 years.
According to the Insurance Act, 2079, the online examination of life insurance and micro life insurance agent is being conducted by the Insurance Authority as per the provision of issuing license only after conducting examination of insurance intermediaries. In order to systematize the license of insurance agents, the authority conducted the examination of insurance agents. The Insurance Authority has been conducting the examination of insurance agent through online system since Kartik 17, 2080 BS. In order to participate in the examination of the insurance agent, the applicant has to submit the application along with the certified copy of the qualifications provided by the Insurance Act and Insurance Regulations and the proof of the insurance agent’s training and documents through the online portal prepared by the Authority.
With the objective of making the insurance agent examination systematic and dignified, the Insurance Authority of Nepal (BI) has issued a directive regarding the conduct of the examination of the insurance agent and has brought the online examination system into operation. Before the implementation of this system, the insurance companies themselves used to conduct examinations and recommend to the Authority for license. It has been almost 3 years since this system was implemented. Although there were technical difficulties in the initial days, now the work of conducting the examination through online system is being carried out continuously. Although there are some technical challenges in the conduct of the examination, the Authority has started action to identify the irregularities on the part of the examinees and to immediately expel and ban them from the examination under the zero tolerance policy. The authority has been continuously monitoring the examination by developing technology to make the examination dignified and systematic.
Legal system
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To carry out any work under the insurance business in Nepal, a must have obtained a license from the Insurance Authority as per the Insurance Act. According to the Insurance Act, the Insurance Authority has the right to register, renew and cancel the insurance intermediaries, insurance agents, surveyors and brokers. According to Section 2(T) of the Insurance Act, “insurance agent” means a licensed insurance intermediary person or institution acting on a commission basis on behalf of the insurer, other than an employee of the insurer. Similarly, Section 2 (P) defines an insurance intermediary as an insurance agent, insurance surveyor, insurance broker, third party facilitator or other insurance intermediary licensed by the Authority. The Insurance Authority has been granting license to insurance intermediaries as per the provisions of the Insurance Act that the insurance agent should not work without a license. Section 92 of the Insurance Act provides for the qualification of an insurance intermediary or other insurance service provider.
According to sub-section (2) of Section 92 of the Act, the qualification of the insurance intermediary or other insurance service provider submitting the application pursuant to Section 93 shall be as prescribed, and Sub-section (2) states that the insurance intermediary shall have passed the examination as prescribed before obtaining the license.
According to Rule 41 of the Insurance Rules, 2081, a person or institution possessing qualifications under Rule 42 to obtain an insurance agent license pursuant to Section 91 of the Act shall submit an application to the Authority in the format of Schedule-6 along with a copy of the following documents:-
(a) Certificate of Nepalese Citizenship,
(b) Permanent Account Number,
(c) Certificate of Educational Qualification,
(d) Recommendation of the concerned insurer,
(e) Certificate of training of an insurance agent, (f) Certificate of passing the examination of an insurance agent.
Sub-section (2) In the case of an institution desirous of acting as an institutional agent, a copy of the following documents shall be submitted in addition to the documents referred to in Sub-rule (1) of the Director, Chief Executive or any senior manager of such an institution:
(a) Certificate of Registration of Association,
(b) Letter of Association and Articles of Association with the purpose of performing the functions of an insurance agent,
(c) Proof of payment of tax up to the last fiscal year,
(d) Evidence that he is not blacklisted in accordance with the prevailing laws.
Sub-rule (1) of the said Rule 42 of the Insurance Rules states that the following persons shall be eligible for the title of insurance agent:
(a) Nepali citizens,
(b) Having passed ten plus two or proficiency certificate level or equivalent from a recognized institution or board,
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(c) Who has received training on insurance from the Authority, the insurer or an institution recognized by the Authority,
(d) Has passed the examination of an insurance agent pursuant to Rule 63, (e) Has not been blacklisted by the Authority or the insurer, and
(f) Qualified to enter into a contract in accordance with the prevailing laws.
The minimum educational qualification of an insurance agent should be ten plus two passes. Anyone can become an insurance agent, provided that he or she has undergone training as an insurance agent run by an insurer. After this, the insurer has to enter the aforementioned documents in the online portal of the Insurance Authority (IRMIS) system for the license of the insurance agent.
While examining the applications received in this way, the Authority recommends for the examination if the qualifications prescribed for the insurance agent are fulfilled as per the rules. After passing the examination conducted by the Authority, it registers as an insurance agent and collects a fee and provides the license of the insurance agent to the applicant.
Section 92 (2) of the Insurance Act states that the insurance intermediary should have passed the examination as prescribed before obtaining the license. According to the provisions of the same Act, the Insurance Authority has been conducting the examination of insurance agent every day. They will be able to work as an insurance agent only after passing the examination.
Legal Provisions Relating to the Examination of Insurance Agents
With the objective of making the examination of the insurance intermediary (agent) systematic, quality and regular, the Directive on Conducting the Insurance Intermediary Examination, 2079 was issued by the Insurance Authority on November 22, 2022. This directive has been prepared and implemented with the objective of making the examination of insurance agent to be conducted as per the provision of Section 92 Sub-section (2) of the Insurance Act systematic quality and regularization in order to prepare skilled manpower for the development of the insurance business. In line with this guideline, the Insurance Authority has been conducting the Insurance Agent Examination every day from its central office and provincial office.
Insurance Agent’s Course
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The authority has also prepared a curriculum for insurance agent examination and training. The NEA has prepared separate curriculum for life insurance agents and non-life insurance agents. The exam covers topics like Risk and Risk Management, Introduction to Insurance, Insurance Agent, Principles of Insurance, Policies of Insurance, Life Insurance Documents, Insurance Fees and Bonuses, Risk Assessment, Claims, and Marketing of Life Insurance, Insurance Agents and Taxes, Insurance Legal Provisions and Insurance Market.
Similarly, the exam syllabus covers topics like risk and risk management, introduction to insurance, insurance agent, principle of insurance, policy of insurance, documents related to insurance policy, insurance premium and rate of insurance, risk rating, claim, marketing of non-life insurance, insurance agent and tax, legal provisions related to insurance and insurance market, among others.
Examination Fees & Examination Operations
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The schedule of the examination and the same schedule are published on the website of the examination authority. Candidates have to choose the exam date after looking at the information.
Clause 7 of the Insurance Intermediary Examination Conduction Directive, 2079 BS states that the examinees should pay Rs 500 as examination fee in the bank account of the NTA through the electronic payment service provider ‘Online Payment Gateway’ for the examination program they want to attend.
Similarly, after paying the examination fee, the insurance agent will be able to participate in the examination. The examination will be conducted through electronic online medium (Zoom). Candidates will have to turn on the video camera so that they can see the entire face and hear the voice throughout the examination period.
Clause 9 of the directive provides for the marks and timing of the examination. According to this provision, a total of 50 objective questions of 2 marks will be asked in the examination of insurance agent and the duration of the examination will be 1 hour and 30 minutes.
The code of conduct related to the examination has been set to make the examination dignified, disciplined and systematic.
According to Rule 63 of the Insurance Rules, 2081, there is an arrangement to conduct the examination of the insurance agent through the central and provincial offices of the Insurance Authority in order to systematize the license of the insurance intermediary and to prepare skilled human resources for the development of the insurance business. The Insurance Authority has issued a Directive on Conducting Agent Examination 2079 to be conducted as per the provision of Section 92 Sub-section (2) of the Insurance Act to prepare skilled manpower for the development of insurance business.
Clause 8 of the Directive on the Conduct of Insurance Intermediaries (Agents) Examination has the following provisions regarding the conduct of examinations:
(1) The examination of an insurance agent shall be conducted through electronic medium.
(2) The examination candidate shall keep the video camera on in such a way that the full face is visible and voice is heard during the examination period.
(3) The examinee himself shall make alternative arrangements (backup) of electricity and internet during the examination period.
(4) In order to make the examination dignified, disciplined and systematic, the code of conduct relating to the examination shall be as prescribed by the examination committee.
(5) The Chief of the Division looking after the agent license of the Authority may cancel the examination of the examinee who violates the code of conduct pursuant to Sub-section (4). Candidates will have to be informed about the reason for the cancellation of the examination.
(6) A candidate who has canceled the examination pursuant to Sub-section (5) shall not be able to appear in such examination for three months.
According to Sub-Section 4, the Examination Committee has prescribed the following code of conduct related to the examination.
a) Stable internet should be provided.
b) Candidates should use laptop or desktop while taking the examination.
c) Make sure your laptop is fully charged. Electricity supply and internet should not be disrupted.
d) Make sure to turn on your camera and microphone before taking the exam. If not, such an attempt will be considered a misconduct and the exam will be over.
e) All participants are requested not to make any unnecessary noise while taking the examination.
f) Activities will be monitored through audio and video throughout the examination.
g) Everyone will have to show their full face clearly while taking the exam. It is forbidden to take the exam wearing a mask.
(h) Only the concerned candidates will have to appear in the examination. If not, it will be considered a bad behavior and the exam will be over.
i) All browsers or tabs should be closed before starting the online examination.
j) Do not switch any other windows or tabs once the exam starts.
The Chief of the Agent License of the Authority may cancel the examination of the candidates who violate the above-mentioned code of conduct. In this way, the examinees should be informed about the reason for the cancellation of the examination and it is the duty of the insurance agent to make the examination systematic and dignified.
The results of the examination will be published electronically by the Intermediary Management Section of the Authority on the same day. Similarly, the candidates with 50 percent marks in the examination are given a certificate of passing the examination through electronic medium.
Problems and Challenges in Agent Licensing Exam
1. Training Efficacy
During the training of insurance agents, there has been a problem in the training due to the attempt to get an agent license without identifying whether the concerned person wants to become a business agent in the training. The insurer should conduct the training of the agent for a full period according to the approved curriculum with complete honesty. It seems that the training should be managed by including the instructions to be followed during the examination issued by the Authority.
2. Error in exam application
Minor errors on the part of the examinees and insurers while registering examination applications in the Agent License Examination System of the Insurance Authority have created problems in conducting the dignified examination. Uploading a photograph of the examinee on the agent license portal (inserted) a very low quality (lopixel) photo could not accurately ascertain the identity of the examinee. Finally, due to the problem of identifying the candidates during the online examination, the exam itself is on the verge of being canceled. This problem can be solved only if the insurer immediately takes a picture of the candidate and uploads it on the portal while filling the examination application form.
3. Technical aspect
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During the training, the candidates should also be informed about the technical aspects related to participation in the online examination. At the same time, the insurer should also pay attention to making them accustomed to technical preparation and time management for the online exam by participating in the practice test. Otherwise, a minor technical glitch or a minor error on the part of the examinee will lead to disqualification. While conducting the examination, it should be ensured that there is no peace and noise and there is no presence of other people along with the examinees. The office of the insurer has not arranged separate rooms for the examinees while participating in the examination, and proper management of laptop, desktop and web camera has been seen. Also, if more than one candidate from the same office participates in the examination from the same device (laptop or desktop), there is a problem in identifying the candidates and the exam itself may be canceled. After one examinee completes the exam, the device should be completely turned off and another candidate should be placed in the exam.
Therefore, in order to avoid errors in the technical aspect, the insurer should ensure high speed internet, a desktop or laptop with a webcam with updated software, guarantee of continuous power supply, practical knowledge of the technical aspects to the examinees.
4. Non-Examinee Participation
The Insurance Authority (ANI) has developed an examination curriculum to make it easier for those interested in working as a professional agent to work as an agent. A basic knowledge of what insurance is is essential for engaging in a responsible profession. The tendency to participate in the examination without studying the simple curriculum and the course materials prepared for basic knowledge does not give good results. On the other hand, there is also the distortion of helping the examiner by the employees or agents of the insurer or of participating in any other person instead of the examiner. This ultimately harms both the insurer and the examiner. Therefore, the involvement of non-examiners or fake examinees should be discouraged by the insurer itself.
5. Deficiency in the ethical conduct of the insurance agent
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The insurance agent profession is not only related to business income but also to high ethical responsibility. The agent should bear the responsibility of providing accurate information to the insured, not providing false or misleading information, prioritizing the interests of the client and maintaining confidentiality.
An insurance agent should not lose long-term trust in the greed of short-term commissions. The main feature of a professional agent is to analyze the needs of the insured and recommend a suitable policy.
Suggestion
There is a need for coordinated participation of all the three parties in the production of professional agents by making the insurance agent examination dignified.
1. Mandatory National Identity Card
Implementing the provision of mandatory not only the taxpayer certificate but also the national identity card while applying for a license in the online examination system will help in double verifying the identity of the examinees and there will be no compelling to update the details for agent identification in the future. The identity of the candidate can be ensured by establishing access to the insurance authority’s agent examination system in the details of the national identity card through the API (Application Programming Interface). This will make filling out online forms faster and more reliable. Both manpower and time will be saved. As the Government of Nepal has adopted a policy to promote digital technology-based services, it will not be a challenge to implement it in the context of initiatives from the Insurance Authority.
2. Proof of participation in training
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Arrangements should be made to collect and preserve the evidence of the participation of the candidates participating in the agent license examination. The insurer should keep both daily attendance, photos and videos confirming the attendance of the examinees in the case of physical examination. In case of those who have received training through digital medium, it is necessary to make arrangements to confirm participation through OTP every time they log into the digital portal.
3. AI-based identity
The use of Artificial Intelligence (AI) can be effective in ensuring the identity of the candidates when the online examination system is linked to the national identity card. The system will ensure a dignified examination by automatically matching the face shape of the examinee sitting in front of the photo and web-camera included in the national identity card.
4. Biometric Identity & Mobile Number Confirmation{
Biometrics can be used not only to confirm the identity of the agent but also to confirm the identity of the insured. This will ensure customer identification and transparency.
Apart from this, the provision of entering the live photo of the mobile SIM card directly into the examination software system to confirm the ownership of the mobile SIM card should also be implemented gradually. If both of these solutions can be implemented immediately, the agent examination will become more dignified, disciplined, and systematic, and the access of unauthorized people will be controlled.
5. Separate system for examination management {
For the management of the examination system, the examination and results can be automated by taking a computer-based test or e-examination test for the examinee. The quality of an insurance agent can be significantly improved by not only passing the exam to become an insurance agent, but also by gradually implementing provisions such as mandatory training, strict code of conduct and regulation for the renewal of the license for continuous professional development.
Currently, the Insurance Agent Examination is being conducted entirely through online system, which has increased both transparency and accessibility. The digital system has made the examination management efficient, systematic and monitored. However, in our case, the disparity in internet access, digital literacy and technological infrastructure has created a challenge to provide equal opportunities to all candidates. Therefore, adopting a hybrid (online + physical) examination system may be a suitable option in the future.
6. Potential for future improvements
The following measures can be taken to make the insurance agent examination system more effective:
- Extension of AI based proctoring to the examination system
- Evolution of practice system
- Continuous Learning Platform Creation for Agents
- Making digital literacy training compulsory
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Conclusion
An agent is not only a representative of an insurance company, but also an agent who is responsible for advancing the insurance sector and spreading insurance knowledge to the general public. After obtaining the license of the insurance agent, the agent has to work within the scope of his work and duties. The insurance agent has to work as a representative of the insurance company, contact the person who wants to get the insurance company, help the insured to fill up the insurance proposal form, provide necessary insurance counseling to the insured and provide necessary assistance to the insured or the insured’s family at the time of insurance claim payment. In the context of the very low access and expansion of insurance, it is not possible to market the insurance business only through insurance companies and employees, so the service of insurance agent is indispensable. So far, more than 5 lakh agents have been licensed by the authority, and if the environment is created for these agents scattered across the country to remain active, the market of insurance will automatically increase. Also, as per the broad legal provisions of the Insurance Act 2079 BS to the mediator on the basis of license, renewal, liability to the customer and role in the insurance sector, it is clear that the contribution of a good insurance agent will contribute to the national capital formation as the insurance business progresses. To this effect, the Insurance Authority has systematized the Insurance Agent Examination by issuing Directive on Conducting Agent Examination, 2079. Strict monitoring has been made to ensure that the examinees follow the rules of the examination and punish those involved in irregularities. The Authority has been issuing directives from time to time to operate the examination system in a more systematic and dignified manner. It is necessary to control the access of unauthorized persons during the examination period in order to control the access of unauthorized persons in the examination system and to produce competent and qualified insurance intermediaries by making timely modifications and developments in the examination system. The Insurance Agent Examination System has prepared an important foundation to advance the insurance sector of Nepal in a qualitative direction. Legal provisions, digital systems, and the activism of regulatory bodies have made the agent profession dignified and systematic. However, it is not enough to simply tighten the examination system; Equal importance needs to be given to the agent’s behavior, ethics, continuous learning and proper use of technology.
Therefore, the production of competent, credible and professional insurance agents will be possible only through a strong combination of cooperation, transparency and accountability among the insurance authority, insurer and agent.
(The writer is a deputy director at the Insurance Authority) Thapa’s article has been published on the occasion of the 58th anniversary of the NRA. )
