IRDAI License and Certification: Procedure and Significance

IRDAI License and Certification: Procedure and Significance
Shivam Narwal
| Updated: Apr 28, 2023 | Category: IRDA Advisory

The supreme authority responsible for approving the insurance industry in India is the Insurance Regulatory and Development Authority of India, or IRDA. Following Pranab Mukherjee’s announcement of the Insurance Laws (Amendment) Ordinance of 2014, the Insurance Regulatory and Development Authority of India Act, 1999, was passed. Now let’s put a limelight on the establishment of IRDAI. The Malhotra Committee’s report contained suggestions that led to the creation of India’s Insurance Regulatory and Development Authority. Former Reserve Bank of India[1] Governor R.N. Malhotra served as the chairman of this committee. When it was ultimately installed, in April 2000, it was in New Delhi. However, in 2001, it was moved to Hyderabad, Telangana. The key suggestion given by this committee was to open the insurance market in India to private sector businesses, foreign promoters, and independent regulatory bodies. The IRDA Licence is issued by IRDAI for the purpose of starting an insurance company. Additionally, it gives the company’s IRDA agent licence. Businesses are able to begin selling insurance products once they have obtained an IRDA licence.

Goals of the IRDA

IRDAI has some specific goals. These goals are discussed below:

  1. To represent the policyholders’ interests.
  2. To guarantee that disputes are resolved as soon as possible.
  3. Preventing and restricting fraud and malpractice.
  4. To guarantee financial market openness and fair behaviour while dealing with insurance.
  5. To support the expansion of the insurance sector.

Why is an IRDAI licence necessary?

An IRDA licence would be necessary for the following reasons:

  • Obtaining an insurance licence ensures that a company complies with all insurance rules.
  • The IRDAI makes sure that the insurance industry is continuously supervised and regulated.
  • Any grievances from policyholders would also be handled by the IRDAI. As a grievance management procedure, this would be addressed.
  • To manage the Indian insurance industry. To protect consumers’ interests, the insurance industry needs to be highly regulated.
  • To make certain that the insurance industry complies with the laws and regulations that are occasionally established by the IRDAI.
  • It also guarantees the public and authorities that relevant laws and regulations, as well as extra care and protection, are followed when doing insurance business.

Regulatory Bodies for IRDAI License

The principal regulatory authority and the statute governing insurance (IRDA Licence) are:

  1. IRDAI (Insurance Regulatory Development Authority of India)
  2. Companies Act 2013
  3. IRDAI regulations 2000 (Registration regulations)
  4. IRDAI regulations 2018 (Reinsurance regulations)
  5. Any other applicable requirements that apply to obtaining an Insurance Licence in India.

Which Insurance companies are eligible for IRDAI License?

The applicant must demonstrate that the promoter or firm meets the following requirements:

  1. The capital required to create an insurance company is 100 crores, and the capital required to start a reinsurance company is 200 crores.
  2. Aside from that, the applicant must guarantee that any earlier application for establishing an insurance company is not denied.
  3. Additional prerequisites for establishing an insurance company include the following:
  4. The term “insurance company” must appear in the company name.
  5. An application to start an insurance company has not been denied in the previous five years.
  6. The IRDAI has not revoked or cancelled the certificate.
  7. The Reserve Bank of India must grant approval for banking companies who seek to enter the insurance market.
  8. When a non-resident Indian or foreign company makes an equity investment, at least 26% of the investment must be held by that entity.

What are the different types of Insurance Companies?

An IRDA licence is necessary for the businesses listed below. The following companies are given IRDA licences:

  • Life Insurance companies
  • Fire Insurance companies
  • Reinsurance company
  • Marine Insurance company
  • Health Insurance company
  • General Insurance company
  • Cyber Liability Insurance company
  • Burglary Insurance company

Process for IRDAI Registration

The procedure for IRDAI Registration is discussed in 5 key points. They are as follows:

  1. Formal Application: To obtain an IRDA licence, a business looking to launch an insurance business must submit Form IRDA/R1 online. The application must be accompanied by all required paperwork, including a certified copy of the articles of incorporation and memorandum of association, the names, addresses, and jobs of the directors and principal officers, a description of the type of insurance business that will be conducted, a list of the sources that will fund the necessary share capital, and any other paperwork specified by the IRDA.
  2. Registration Requirements: A certificate of registration is necessary for each class of insurance-related business, and the firm must be a public limited company under the Companies Act 2013 or the Companies Act 1956. In essence, there will be two certificates of registration: one for the general insurance business and one for the life insurance business.
  3. IRDA/R2 Form: Following the submission of the IRDA/R1 form, the authority will approve the IRDA/R2 form for a certificate of registration. An affidavit signed by the applicant’s principal officer and promoters attesting that the requirements for the paid-up share capital are adequate after deducting any preliminary costs associated with the company’s formation and registration, as well as the deposit made by the company, should be included with the IRDA/R2 application as documentary proof of the making of the deposit required under Section 7 of the Act.
  4. Starting an Insurance Business: If all the requirements are met and the authority determines that the company is reliable and qualified to do insurance business, it will issue the certificate in the form IRDA/R3. The applicant who has been given a certificate of registration should start an insurance company within a year of the registration date. Before the 12-month timeframe expires, the applicant company must request an extension from the authority if it feels it will not be able to start operations within that time frame.
  5. Compliance: The business must adhere to the regulations and rules outlined by the IRDA. It must, among other things, maintain sufficient financial resources, keep accurate records of accounts, ensure fair practises, and promptly disclose important information. Penalties, licence suspension, or cancellation may follow non-compliance. Therefore, it is crucial to maintain adherence to the rules and directives established by the IRDA.

Conclusion

The governing organisation in charge of overseeing the Indian insurance market is the Insurance Regulatory and Development Authority of India, or IRDAI. Its main responsibility is to safeguard the interests of policyholders, stop fraud and malpractice, and promote transparency and fairness in the insurance sector. Companies who want to engage in the insurance industry must get an IRDAI licence in order to accomplish these objectives. The licence ensures adherence to insurance legislation as well as ongoing oversight and supervision of the insurance sector. A business must prove that it complies with conditions before it can be granted an IRDAI licence, including having the necessary capital, never having had an application for an insurance company denied, and complying with all other regulations that may apply.

Read our Article:IRDAI Issues an Insurance Broker License for PhonePe

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Shivam Narwal

Shivam Narwal, a motivated final year BBA LLB law student at Chandigarh University, has started his legal career at Swarit Advisors as a legal researcher. With a strong focus on thorough and accurate research, Shivam is dedicated to delivering exceptional results. Throughout his studies, he has shown a deep understanding of the legal system and a drive to excel in the field of Law. 

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