Insurance agents

1.     Introduction

Section 54 of the Argentine Insurance Law allows insurance companies to appoint insurance agents, i. e. agents with powers to represent or act in the name of the insurance companies. The relationship between an insurance company and its insurance agent is governed by the rules of the commercial mandate, so the powers of an agent depend on those conferred by each insurance company in each particular case.

The insurance agent concept permitted companies such as banks, supermarkets and car manufacturers to offer to their clients different types of insurance products on behalf of the insurance companies. For the insurance contracts executed through an insurance agent, the insurance company pays a commission or retribution normally in proportion to the premiums accrued or collected under such insurance contracts.

Following a request by the Argentine Association of Insurance Brokers on March 7, 2005 the ASI enacted Resolution No 30,418 that, unless amended, could severally affect the activities of insurance agents.

2.     Information on insurance agents

The resolution requires that within 60 days from the day it comes into force, (it came into force on March 23, 2005), insurance companies must report the following to the ASI:the name of theinsurance agents with powers to execute insurance contracts, date of registration and entry number in the Public Registry of Commerce of the document by which the insurance agent was appointed. This information must be also kept available at the insurer’s offices. Every three months any news must be reported to the ASI.

The Resolution distinguishes insurance agents with powers to execute insurance contracts from those who do not have such powers.Argentine Insurance Law (Law 17,418) does not establish that an insurance agent must have powers to execute insurance contracts on behalf of an insurer.Argentine Insurance Law states that: “When an insurance company appoints an agent with powers to act in its name, the rules of the mandate are to be applied. The power to execute an insurance contract also allows to agree on amendments or extensions, to receive notifications and to rescind, unless there is an express limitation.” In light of the above, each insurance company may agree with each insurance agent on the extension of its mandate.

Although the resolution does not state why insurers are required to provide information on agents with or without the power to execute insurance contracts, it might be a starting point to set limits to those insurance agents that participate in the execution of insurance contracts but that have no power to represent the insurance company in the execution of such contracts. Some legal authors argue that from the date that the Argentine Insurance Brokers Law No 22,400 came into force insurance agents that have no power to execute the insurance contracts could not be allowed to market insurance contracts because in that case they would not be acting in representation of the insurance company, but acting as mere intermediaries and this can only be done by insurance brokers registered with the ASI.

Based on Section 36.4 of the Commercial Code, the ASI also requires that the document by which an insurance company confers powers to its agent must be registered with the Public Registry of Commerce. These documents are not always registered with the Public Registry of Commerce. Section 36 states that the powers to manage, run or administrate a business must be registered and it is unusual that powers conferred to insurance agents are so wide.

3.     Insurance agents’ remuneration

Insurance agents are often paid commissions in proportion to the premiums accrued or collected under the insurance policies executed through such agents.

The Resolution provides that insurance companies “…must observe the prohibition to pay insurance agents in proportion to the gross or net production, total or for one line of insurance…” The Resolution purports to encompass on agent’s remuneration within the prohibitions set by Section 10 of the Insurance Companies Law No 20,091 only with respect to the retributions paid to directors, in-house statutory controllers and employees of an insurance company.

Regardless of the obscurity of the text it is contended whether the ASI can broaden the scope of the prohibitions of Section 10 of the Insurance Companies Law No 20,091 and whether it may set limits concerning the way insurance companies pay their insurance agents, when the Insurance Law provides that their relationship is governed by the rules of the mandate, a contract governed by the Commercial Code.

4.     Final remarks

The Resolution is intent on clarifying to the insureds’ benefit certain situations where the role of the insurance agent, as an entity different from the insurance company, is not always clear.

The Resolution has been enacted at a time when who may market insurance contracts is still contested.

The Resolution has been criticized not only for the interests it affects, but also because the ASI‘s powers to set such limitations on the activity of the insurance agents has been put into question.