After the publication of the Insurance Regulatory and the Development Authority (Insurance Brokers) Regulations, 2002, insurance brokers have started their operation in the Indian market. Until the publication of the brokers' regulation, the Indian insurance market was experiencing the services of insurance agents.
Though insurance agents and brokers are remunerated by the insurers, the agents are related to the insurer, whereas the brokers are the agents (representatives) of the insured. Section 182 of the Indian Contract Act defines an agent as a person employed to do an act for or to represent another called, `principal', in dealing with the third party. The Indian Contract Act governs the rights and duties of an agent and a principal. An agent represents his principal and acts not only for him but also in his place. Hence, the contracts and acts done through an agent have the same legal consequences as if done by the principal in person. In India, field agents, who solicit proposals for insurance, represent general insurance as well as life insurance companies. Normally, in the life insurance branch, an insurance agent can only canvas for proposals and submit to the insurer for consideration. They do not have any binding authority. An agent representing a general insurance company, may have a binding authority by issuing a covering note.
An agent is in a fiduciary position with respect to his principal and should act with due diligence and good faith and not in such a manner which adversely affects the interest of his principal. Wherever an agent has an express authority and acts within that authority, the principal is liable and bound by the act of the agent irrespective of the agent's motive. (Hambro vs. Bunard, 1904
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