8.4 General Agent Conduct, Training and Discipline

Study Focus

Commission limits depend on the class of general business. CPD, production maintenance and conduct requirements are separate obligations.

5. Commission Limits

BNM's Operating Cost Controls policy document (paragraph 10.1) caps the gross commission that may be paid on general business written in Malaysia:

Worked Calculation Example: Commission and Remittance

An agent places two policies with Insurer X and collects both premiums from the clients:

1. Commercial Fire Policy: Gross premium RM 20,000, maximum commission 15%.
2. Fleet Motor Policy: Gross premium RM 30,000, maximum commission 10%.

$$\begin{aligned} \text{Fire Commission} &= \text{RM } 20{,}000 \times 15\% = \text{RM } 3{,}000 \\ \text{Motor Commission} &= \text{RM } 30{,}000 \times 10\% = \text{RM } 3{,}000 \\ \text{Total Maximum Commission} &= \text{RM } 3{,}000 + \text{RM } 3{,}000 = \text{RM } 6{,}000 \\ \text{Total Premiums Collected} &= \text{RM } 20{,}000 + \text{RM } 30{,}000 = \text{RM } 50{,}000 \end{aligned}$$

The agent must remit the premiums in line with the GIARR: the motor premium must have been collected before cover began and must reach Insurer X within 7 working days, while the fire premium must be remitted within 15 calendar days of collection. The agent's commission of up to RM 6,000 is then settled under the agency agreement. If the agency agreement allows the agent to deduct commission before remitting, the net amount remitted would be RM 50,000 − RM 6,000 = RM 44,000.

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6. Prohibited Practices

1. Misrepresentation and Inducing Non-Disclosure

The GIARR forbid an agent from making misleading statements about policies, encouraging a proposer to omit material facts, or inducing a proposer to misrepresent material facts to the insurer. Under the FSA 2013, an agent who makes a misleading, false or deceptive statement, fraudulently conceals a material fact, or uses a sales brochure or illustration not authorised by the insurer to induce a contract commits an offence under Schedule 9, Paragraph 11, punishable under section 129(2) by up to five years' imprisonment, a fine of up to RM10 million, or both. The consumer may rescind the contract.

2. Rebating

Rebating means giving the client part of the commission, a premium discount or any other inducement not stated in the policy to win the business. It breaches industry codes and agency agreements and leads to disciplinary action, including termination and deregistration.

3. Misappropriation of Premiums

Agents must issue the insurer's official receipt for every collection and remit premiums on time. Using premiums for personal purposes is criminal breach of trust, and BNM's policy document requires the insurer to lodge a police report before reporting such misconduct to the association.

4. Multi-Level Marketing and Proxy Selling

Insurers must ensure that their agents do not sell through multi-level marketing (MLM) arrangements (paragraph 13) and do not act as proxies for suspended or terminated agents.

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7. Continuing Professional Development (CPD)

BNM's policy document (paragraph 12.1) sets the minimum CPD for general insurance and general takaful agents:

CPD credit can be earned only once for the same programme in each agency contract, hours earned through one principal count for the other principal, and extra hours cannot be carried forward to the next year. The historical GIARR CPD appendix describes a warning for a first offence, 12-month suspension for a second, and termination with a 12-month re-registration bar for a third, with a four-year counting cycle and expungement after three compliant years. Read these together with the later enforcement change, rather than describing them as automatic current PIAM sanctions.

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8. Discipline and Deregistration

• The historical GIARR describe refusal, suspension, cancellation, inquiry and appeal procedures. Aii’s 10th-edition text expressly records that, following the 2021 constitutional change, PIAM ceased issuing suspension, termination and cancellation of agent registrations for non-compliance with minimum maintenance, CBC and CPD from 8 July 2021. Do not present those old sanctions as automatically imposed by PIAM today. The principal remains responsible for monitoring compliance and applying the current BNM requirements and agency procedures.
• When an agent fails the fit and proper criteria, the insurer must decide on disciplinary action and inform the industry association within 10 working days, including agents who have already left.
• Policyholders served by a terminated or suspended agent must continue to be served by another agent or directly by the insurer.

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Summary Matrix

Corporate Nominees, Changes and Complaints

A corporate agency needs an accountable, qualified corporate nominee; incorporating a company does not allow unqualified people to act as its registered agent. The principal checks the nominee's eligibility and responsibilities. Changes to the nominee, agency address, business identity or principals must be notified through the required registration process, keeping the displayed certificate and insurer records accurate.

Registration and appointment depend on eligibility and conduct; assess any proposed disciplinary step under the currently applicable procedures and the enforcement change explained above. An agent must disclose conflicts and follow fair competition and conduct obligations rather than diverting a client's money or using another principal's confidential information. If a complaint is made, preserve the records, cooperate with the inquiry and respond through the principal's authorised process. A dispute about discipline is distinct from a customer's claim decision; neither permits the agent to invent cover or withhold premiums.

Minimum Maintenance and Corporate Accountability

The syllabus's minimum maintenance requirement is a production measure distinct from training: the historical GIARR specify gross premiums of RM20,000 in the first and second years and RM50,000 from the third year, achieved in either year of the certificate's two-year period. The text's later disclaimer changes the treatment of PIAM-issued sanctions for non-compliance; it does not make production equivalent to CPD or excuse an insurer from its current supervision duties. Check the principal's applicable maintenance terms when advising an actual agent.

A corporate nominee is the principal officer or another officer approved in writing, employed full time in the principal office and of good character and integrity. The syllabus specifies replacement within 30 days when a nominee leaves. The agency must also notify relevant changes and keep its registration records accurate. In a complaint inquiry, preserve the sales material, accounting records and factual explanation. Current BNM duties include communicating disciplinary outcomes and ensuring customers continue to receive service. These practical responsibilities remain important even when a historical association sanction no longer operates as originally described.