Prohibition of cessation of commission to Agents who have served for 5 years :

An insurance agent is paid commission for every premium received till death or maturity or the premium paying period, on the policies sourced by him on behalf of an insurance company. However, where the Agent is terminated, the commission on the premiums paid subsequent to the date of termination stands normally forfeited. However, Section 44 of the Insurance Act gives protection to Agents who have served the insurance company for atleast 5 years.

Therefore, where the services of an insurance agent is terminated after the Agent has served the insurer continually for a period of 5 years, the insurer is required to pay renewal commission on premiums received subsequent to termination on policies sourced prior to termination, if the following conditions are satisfied:

(a) That the Agent has not been terminated on the grounds of fraud

(b) That policies amounting to not less than `50,000 of Sum Assured sourced by the terminated Agent were in force on a date one year before his ceasing to act as an agent for the insurance company

(c) That the commission on renewal premiums due to him shall not exceed 4%

Where the Agent has served 10 years, the renewal commission after termination shall be payable only if the Agent does not directly or indirectly solicit or procure insurance business for any other person. However, the conditions (b) and (c) above are not applicable for an Agent who has served for 10 years.

The renewal commission upon termination after 5 years or 10 years as above, shall be payable to the legal heirs of the Agent after his death after serving for 5 years or 10 years, as the case may be, so long as such commission would have been payable had such insurance agent been alive.

The above provisions are not applicable to an Insurance Broker.