In India, the insurance business is heavily regulated by the Insurance Regulatory and Development Authority of India (IRDA). An IRDA Insurance Broker License is required to practise as an insurance broker nationwide. This licence is necessary for people or organisations looking to facilitate the purchase of insurance. This blog will provide a step-by-step walkthrough of the IRDA insurance broker licence application process.
Insurance Broker License- An Overview
A person or business that obtains insurance coverage for clients is known as an insurance broker. Insurance brokers would guarantee a commission from an insurance company for the many kinds of insurance products they offer clients. A business must apply for an insurance broker licence from the Insurance Regulatory Development Authority of India (IRDAI).
In India, various laws must be followed when dealing with insurance brokers. The Insurance Regulatory and Development Authority of India (IRDAI) creates such regulations. The Insurance Regulatory and Development Authority Act of 1999 and the Insurance Regulatory Development Authority of India (Insurance Brokers) Regulations of 2018 are two regulations that apply to insurance brokers.
As a result, after obtaining an insurance broker licence, the applicant must adhere to the aforementioned laws and regulations. Brokers would serve as a liaison between the general public and insurance firms. This is done so that the insurance firm can sell more policies.
Types of Insurance Brokers
Connecting people and companies with insurance providers is made possible in large part by insurance brokers. They support customers in locating the best insurance options for their requirements and price range. Insurance brokers come in various forms, each specialising in a particular sector of insurance. Following are some typical categories of insurance brokers:
Direct Brokers
A direct broker is a business that gathers specific client data for an insurance operation. The direct broker also offers guidance on available products and the right insurance. Additionally, the direct broker gets market data about the insurance industry. The direct broker carries out the client’s requests, such as assisting the client in opening an e-insurance account and helping the client pay the insurance premium.
Reinsurance Broker
A reinsurance broker and a direct broker carry out similar tasks. Reinsurance brokers manage the reinsurance industry. In addition, the reinsurance broker also offers services and goods associated with reinsurance, like foreign insurance. A reinsurance broker also keeps track of the re-insurance marketplaces’ market statistics. Another duty of the reinsurance broker is negotiating on the client’s behalf.
Composite Broker
A composite broker is a company that performs all the duties associated with direct and reinsurance brokers. As a result, this broker form fulfils the dual functions of direct and reinsurance brokers.
Why an Insurance Broker Licence is Required
Individuals and organisations wanting to work as insurance brokers usually need an insurance broker licence. This need is in place for several reasons, chief among them being the protection of consumers and the maintenance of the honesty and competence of the insurance sector. The following are some crucial justifications for needing an insurance broker licence:
- Ensure that the Insurance Business sells a sizable number of insurance products.
- To make sure that all pertinent insurance-related laws and regulations are followed.
- To keep an eye on things and perform market research on things linked to insurance.
- To represent clients’ interests in negotiations for insurance-related products.
- To guarantee that a nodal authority governs the insurance industry.
- A licence for insurance brokers would likewise reassure clients of the brokers’ sincerity.
- To bargain for clients when it comes to policies and premiums.
Who Regulates Insurance Broker Licence
The Insurance Regulatory and Development Authority of India (IRDAI) is the principal regulatory body for the Insurance Broker Licence. The insurance laws are the Insurance Act of 1938 and the Insurance Regulatory and Development Act of 1999. An insurance broker licence is subject to the Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018.
Eligibility Criteria for Insurance Broker License
An insurance broker licence must meet minimal requirements set forth by the government. The broker must also make sure to register with the IRDAI in addition to this.
Corporate Structure
Under the insurance broker licence, the following may be registered:
- a business founded per the Companies Act of 2013 or the earlier Company Law of 1956;
- a partnership recognised by the 2008 Limited Liability Partnership Act;
- Any other person or firm authorised to perform operations linked to an insurance broker, including a cooperative society registered under the Cooperative Society Act of 1912.
Capital Requirements
To be eligible to apply for a broker licence, the candidate must meet the following capital requirements:
- 75 lakhs for direct brokers.
- Reinsurance broker: 4 crore.
- 5 crore for Composite Brokers.
Net Worth Requirements
The candidate must also meet the net worth criteria when applying for a broker licence. The minimum capital requirements for direct brokers are 50 lakh rupees; for re-insurance brokers and composite brokers, the minimum capital requirements are 50% of the contribution or equivalent.
Deposit Requirements
Before beginning the insurance broker company, each insurer (applicant) must confirm that the deposit has been kept with the designated bank. The required deposit amount is as follows:
- 10 lakh rupees is needed for a direct broker, and
- A composite broker with reinsurance needs 10% of the minimum capital or contribution. Fixed deposits may only be released to them with the Authority’s prior written consent.
Office Space/ Facilities
To efficiently carry out its operations, the applicant for an insurance broker licence must have the requisite infrastructure, including enough office space, tools, skilled labour, and IT infrastructure.
Qualification
A minimum of two qualified people with the training required to act as insurance brokers must be present, according to the application. To operate as an insurance broker, this is necessary. The applicant must ensure that the two eligible individuals possess the pertinent and required credentials in both life insurance and general insurance if the applicant plans to conduct an insurance broker business linked to both life insurance and general insurance.
Purpose of the Business
The applicant must ensure that insurance brokerage is the company’s primary goal. The Articles of Association (AOA) and the Memorandum of Association (MOA) must state these in the purposes clause. An insurance broker business is open to investments from foreign investors as well.
Process / Procedure for Applying for an Insurance Broker License
Application for Grant of Certificate of Registration:
- To apply, the applicant must specify the sort of insurance broker business.
- The application for an insurance broker licence must be submitted by the regulations’ FORM B-Schedule I.
- The application must be filed with the supporting materials listed in the regulations’ FORM-C Schedule I.
- An application and the fees listed in FORM D- Schedule I of the Insurance Regulations must be filed to get the registration certificate. The following fees must be paid to apply to become an insurance broker:
- Rs. 25,000 for direct brokers, Rs. 50,000 for re-insurance brokers, and Rs. 75,000 for composite brokers.
- In addition, there are costs that must be paid to fulfil the registration requirements:
- • Direct Broker: Rs. 50,000 after receiving principal permission for a brand-new application. If you want to renew your registration, the cost is Rs 1,000,000 for three years.
- • Reinsurance Broker: Rs. 1,50,000 after in-principle approval is given in cases where the application is brand-new. If registration needs to be renewed, a cost of Rs. 3,000,000 for three years must be paid.
- • In cases when the application is fresh, the composite broker would be paid Rs. 2, 50,000. If registration needs to be renewed, a cost of Rs. 5,00,000 for three years must be paid.
- The required fee would be payable for the registration certificate’s validity.
- Demand drafts (DD) or electronic payments of fees must be made in Hyderabad, India’s Insurance Regulatory and Development Authority.
Clarification/ Further Information
The authorities may request more information from the applicant. If necessary, the applicant must provide these documents within 30 days after receiving the authority’s notification.
Procedure for Issuing Insurance Broker License (registration)
- An in-principle permission for the applicant to meet the requirements relating to the certificate of registration will be given if the authority believes that all the necessary information conforms with the Insurance broker licence.
- The authority will issue the certificate if the applicant has complied with all applicable laws and regulations.
- When the applicant is confident that the code of conduct will be followed, the certificate of registration as an insurance broker licence will be issued.
- The broker who requests a certificate of registration can ask for any further IRDA registrations. Only after granting the certificate of registration for the first time would the applicant be eligible for this additional registration.
- If the certificate of registration has been revoked or repealed owing to a change in the law or if it has been upheld by the Securities Appellate Tribunal or another court of law, the applicant may submit a new application. A request under this can only be made to the relevant authority after a year.
Rejection
- If the governing body believes the applicant still needs to meet the conditions, the application to open an insurance company may be accepted.
- Within 30 days of communicating the denial, the authority must communicate its decision to deny the application for a licence as an insurance broker.
- After a year since the application was rejected, the applicant may submit a new application.
Conditions for Granting the Insurance Broker License
Before issuing the insurance brokerage licence, the IRDAI imposes the following requirements:
- The insurance broker is required to operate by IRDAI regulations.
- The authority must be informed if the insurance broker company needs to give accurate or accurate information about the specifics of the business.
- Insurance broker businesses must resolve all client complaints within 14 days of receiving the complaint. The company is required to keep records of the amount of client complaints.
- Under the guidelines established by the IRDAI, insurance brokers must reasonably conduct their business.
- The insurance broker is required to keep accounting records.
- A broker of insurance should refrain from engaging in multi-level marketing or solicitation.
Conclusion
The detailed procedure of obtaining an IRDA insurance broker licence necessitates diligence, financial security, and in-depth insurance market knowledge. However, once accepted, this licence opens the door to a lucrative career in insurance broking and aids in securing the financial future of individuals and businesses through proper insurance coverage. Retaining the highest levels of professionalism and integrity in the insurance broking industry is critical while keeping up with the changing regulatory landscape.
