Banking and Insurance - Laws and Practice · Concept of Insurance

Section 48A of the Insurance Act, 1938: Agents and Intermediaries as Directors

Updated 11 October 2026 · Fact-checked

Section 48A of the Insurance Act, 1938 says no insurance agent, intermediary or insurance intermediary can be or remain a director in an insurance company. The only exception is permission from the Authority (IRDAI), which may allow it on conditions that protect policyholders or avoid conflict of interest.

Understand Insurance Act, 1938 and Insurance Intermediaries under Section 48A

The Insurance Act, 1938 is the main law on how insurers and the people who sell insurance are regulated in India. It deals with insurers' business, loans, commission, registration of intermediaries, and penalties. Many of its powers are exercised by the Authority, that is, IRDAI.

An insurance intermediary sits between the insurer and the customer. Think of agents and similar distributors. They earn commission for bringing business. This is why the Act controls them: they can be paid to push policies, and the insurer must protect policyholders.

Section 48A deals with a conflict of interest. If the same person is a director of the insurer and also an agent or intermediary, he can influence the insurer's decisions, such as commission terms, in his own favour. So the section bars such a person from being a director, or from remaining one.

The section has two provisos. The first gave directors holding office when the Insurance Laws (Amendment) Act, 2015 commenced six months from that commencement before they became ineligible. The second lets the Authority permit an agent, intermediary or insurance intermediary to sit on the Board, subject to conditions or restrictions it imposes to protect policyholders or avoid conflict of interest.

Read 48A with its neighbours. Section 40 controls commission, section 42D requires registration of intermediaries, and section 29 restricts loans by insurers to directors, officers and agents. Together they show one theme: keep insurers' management and sales channel honest.

Key rules to remember

Section 48A: general bar: Insurance agent / intermediary / insurance intermediary → not eligible to be or remain a director in an insurance company; The bar covers both becoming a director and continuing as one.
Section 48A: first proviso: Existing director at commencement of the 2015 Amendment Act → not ineligible until six months from commencement; A transitional relief only. It is not a continuing exemption.
Section 48A: second proviso: Authority may permit an agent or intermediary on the Board, with conditions or restrictions; Purpose of conditions: protect policyholders or avoid conflict of interest.
Section 40: commission: Remuneration for procuring business → only to an insurance agent or intermediary or insurance intermediary, as per regulations; penalty up to ₹1,00,000 on contravening intermediary; Sub-section (3) is without prejudice to section 102.
Section 42D: registration: Registration valid 3 years; renewal application at least 30 days before expiry; unregistered intermediary: penalty up to ₹10,00,000; appointing one or transacting business through one: up to ₹1,00,00,000; Officers knowingly party in a company or firm face a penalty up to ₹10,00,000.
Section 29: loans: Advance to an agent ≤ renewal commission earned in the preceding year (aggregate); loan wrongly given must be repaid within 3 months of the event; On default, the person ceases to hold office or act for the insurer after three months.

How to solve Insurance Act, 1938 and Insurance Intermediaries under Section 48A questions

Use this method for any case-based question on section 48A or the intermediaries framework.

1Identify who the person is: insurance agent, intermediary or insurance intermediary, and whether he is a director of an insurance company (not of any other company).
2State the rule of section 48A in plain words: such a person is not eligible to be or remain a director.
3Check the facts for the first proviso: was he a director when the 2015 Amendment Act commenced, and has the six-month period ended?
4Check the second proviso: has the Authority permitted him, and on what conditions?
5Apply the rule to the facts and state the conclusion: ineligible, or permitted subject to conditions.
6Add the practical step for the company secretary: board disclosure, check of registration under section 42D, and filing or seeking IRDAI permission.
7Mention linked sections only if the facts raise them, for example commission under section 40 or loans under section 29.

Quickest way: Three-question test for section 48A

When to use it: When time is short and the question asks if someone can sit on an insurer's board.

Is the person an agent, intermediary or insurance intermediary? If no, section 48A does not apply.
Is the company an insurance company? If yes, he is ineligible to be or remain a director.
Did the Authority permit him with conditions? If yes, he may stay subject to those conditions. Otherwise, he must go.

Common mistakes in Insurance Act, 1938 and Insurance Intermediaries under Section 48A

Saying the bar applies to directors of any company
Students remember 'agent cannot be director' and drop the context.
Fix: Write 'director in an insurance company'. The section protects insurers and policyholders.
Treating the bar as absolute
The second proviso is skipped.
Fix: Always mention that the Authority may permit such a person on the Board, with conditions or restrictions.
Treating the six-month relief in the first proviso as permanent
Students overlook that it was a transitional protection for directors at the commencement of the 2015 Amendment Act.
Fix: State that the protection lasted only until six months from commencement.
Mixing section 48A with section 42D
Both deal with intermediaries.
Fix: Section 48A is about board eligibility. Section 42D is about registration, its three-year validity, renewal and penalties.
Quoting wrong penalties
Several figures appear in different sections.
Fix: Remember: section 40(3) up to ₹1 lakh; section 42D(8) up to ₹10 lakh for acting unregistered and up to ₹1 crore for appointing or dealing through an unregistered person.

Worked examples

Example 1

Mr. Rao Pillai is a registered insurance agent. Shield Life Insurance Company Ltd. wants to appoint him as a director. Advise the company.

Show the solution

Rule: section 48A says no insurance agent or intermediary or insurance intermediary is eligible to be or remain a director in an insurance company.
Facts: Mr. Pillai is an insurance agent, and Shield Life is an insurance company.
Analysis: he is ineligible. The risk is conflict of interest, as he could influence commission and business terms.
Exception: under the second proviso, the Authority may permit him on the Board, with conditions or restrictions to protect policyholders or avoid conflict of interest. Nothing in the facts says it has done so.
Practical point: the company should not appoint him unless IRDAI's permission is obtained first.

Answer: The appointment is barred under section 48A unless the Authority permits it, subject to its conditions.

Example 2

Meera Sharma, an insurance intermediary, has been a director of Apex General Insurance Ltd. for several years. The Insurance Laws (Amendment) Act, 2015 commenced long ago. She has no permission from the Authority. Is she eligible to continue?

Show the solution

Rule: section 48A bars an intermediary from being or remaining a director in an insurance company.
First proviso: a director holding office at commencement of the 2015 Amendment Act was protected only until six months from that commencement.
Facts: that period has long expired, so the proviso does not help her.
Second proviso: only the Authority's permission with conditions could save her position, and she has none.
Action: she should resign as director, or the company should seek the Authority's permission if it wishes to keep her.

Answer: No. She is ineligible to remain a director because the transitional period has ended and there is no permission from the Authority.

Exam tips

Quote the key words of section 48A: 'eligible to be or remain a director in insurance company'.
Always mention both provisos. Examiners often test the Authority's permission.
Do not give section numbers you are unsure about. Safe ones here are 29, 40, 42D and 48A.
In a case question, write in order: provision, facts, conclusion, then the compliance step for the company secretary.
Use a short list to compare sections 40, 42D and 29 when asked for important provisions of the Act.

Practice questions from Concept of Insurance

Insurance Act, 1938 and Insurance Intermediaries under Section 48A in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalInsurance Intermediaries: Meaning and Role

Insurance Act, 1938 and Insurance Intermediaries under Section 48A: frequently asked questions

What does section 48A of the Insurance Act, 1938 say?

It says no insurance agent, intermediary or insurance intermediary is eligible to be or remain a director in an insurance company. It has two provisos: a six-month transitional relief and the Authority's power to permit such a person on the Board on conditions.

Can IRDAI allow an intermediary to be on an insurer's board?

Yes. The second proviso lets the Authority permit an agent, intermediary or insurance intermediary to be on the Board. It may impose conditions or restrictions to protect policyholders or avoid conflict of interest.

Why does the Act bar agents from being directors?

A director shapes the insurer's decisions, including commission and distribution. If he is also paid as an agent, his interest may clash with the insurer's and policyholders' interest.

Is registration needed to act as an insurance intermediary?

Yes. Section 42D provides for registration, valid for three years and renewable. Acting without registration attracts a penalty up to ₹10 lakh, and appointing or dealing through an unregistered person attracts a penalty up to ₹1 crore.