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What is an Insurance Broker?

An Insurance Broker may be a person or company which is registered as an advisor on matters of insurance. It aids the clients in getting the insurance cover from an insurer. Usually, an insurance broker has professionally qualified people working for it or it acts through a firm, whose directors, partners or employees have expert knowledge on laws related to insurance and profound knowledge of insurance products. These professionals suggest people on their insurance needs.

Therefore, an insurance broker acts as an intermediary between the insurance company and clients looking forward to purchasing an insurance policy. By providing its professional services, the insurance broker helps the clients in taking decision in relation to the most appropriate insurance policy for them.

There are three types of Insurance Brokers:

  • Direct Insurance broker

    The direct insurance broker deals with solicitation and procurement of insurances. It sells insurance policies to the clients through its website/computer software and takes commission from the insurance company whose insurance policy is bought by the client.

  • Reinsurance Broker

    A reinsurance broker is one who connects the insurance company with clients who want to take the insurance policy again. Hence, the reinsurer broker acta as an intermediary between the primary issuer and the re-insurer.

  • Composite Insurance Broker

    Composite Insurance Broker is an agent who provided the services of both- the direct broker as well as the reinsurance broker.

What is Insurance Broker License?

Insurance Regulatory and Development Authority of India (IRDAI) is the governing body for Insurance Brokers in India and licenses issued to them. As per the IRDA (Insurance Broker) Regulations, 2018, the minimum capital required for different types of insurance brokers have been laid down:

  • A minimum Capital of INR 75 lakhs is required for the Direct Insurance Broker License.
  • A minimum Capital of INR 4 crores is required for the Reinsurance Broker License.
  • A minimum Capital of INR 5 crores is required for the Composite Insurance Broker License.

As for the requirements of Net Worth, the insurer broker is required to maintain minimum net worth of INR 50 lakhs if application is made for direct broker and in case of reinsurance and composite broker, the net worth has to be 50% of the minimum capital requirement.

Eligibility Criteria for making an application for Insurance Broker License

In India, the following are eligible for making an application for the Insurance Broker License:

  • An entity registered under the Companies Act, 2013 or the Companies Act, 1956;
  • An LLP registered under the Limited Liability Partnership Act, 2008;
  • Any Registered Co-operative Society that has been formed under the provisions of the Co-operative Societies Act, 1912 or such similar law;
  • any such person that is recognized by the authority.

Note: It is pertinent to mention that if the applicant is an LLP, the following cannot be the partners in the same:

  • A non-resident entity;
  • An individual resident outside of India;
  • An LLP which is registered under the laws of a foreign country.

What is the Procedure for Getting the Insurance Broker License?

The procedure for getting insurance broker license is as follows:

  • An application in Form B provided in Schedule I of the IRDA (Insurance Broker) Regulations, 2018 is required to be submitted to the IRDA, along with the relevant documents and a non-refundable fee.

    The non-refundable fee for direct broker license is INR 25,000, for reinsurance broker license is INR 50,000 and for composite broker is INR 75,000.

  • Once the application and the submitted documents are perused, the Authority, if it deems necessary, can ask for more relevant documents and even direct the applicant to make certain required compliances.
  • The applicant would be required to make the compliances or submit the asked documents/information/clarification, within 30 days of communication.
  • Once the authority is satisfied that the applicant has fulfilled all the necessary conditions, it will issue an in-principle approval for Insurance broker registration to the applicant.
  • Once the in-principle approval has been issued to the applicant, it will be under obligation to comply with all the additional requirements and submit Insurance Broker License fees with the Authority.

    The fresh registration fee for direct broker is INR 50,000, for reinsurance broker is INR 1,50,000 and for composite broker is INR 2,50,000.

  • If the applicant has fulfilled all the requirements pertaining to the rules, regulations, circulars, guidelines, etc., and all the conditions laid down in the in-principle approval certificate, then the authority will issue the Certificate of Registration in Form J of Schedule I of the regulations.

Documents for making application for Certificate of Registration

The following is the list of documents that are to be submitted along with the application form, as mentioned in the Schedule I of IRDA (Insurance Broker) Regulations of 2018:

  • A copy of the Memorandum of Association and Articles of Association of the applicant entity. The objectives stated in these incorporation documents must be in accordance with the regulations and the specified activities undertaken by the insurance broker must not be in violation of the regulations.
  • Information pertaining to the Principal Officer and whether he is eligible to hold the office, in Form G of Schedule I. It should also be ensured that the training compliances are fulfilled prior to submission of the application.
  • A written declaration from the Principle Officer which states that he, along with other directors/partners and the rest of the key managerial personnel do not possess any disqualification mentioned in Section 42D of the Insurance Act.
  • All the details of the partners, directors, promoters and the key managerial personnel of the entity have to be provided.
  • The bank account details of the company.
  • Details of the Principal Bankers, along with the statutory auditors, have to be provided.
  • A list mentioning at least two minimum qualified brokers, along with their educational qualifications.
  • It is important for the applicant to have the necessary infrastructure for getting registered.

Validity of Insurance Broker License

The Certificate of Registration, after issuance, will be valid for a period of three years from the date of issue. In case, the license is suspended or revoked by the authorities within this span of three years, it shall no longer remain valid. It is illegal to carry on the business of Insurance Broker without the Certificate of Registration.

How can the Certificate of Registration of Insurance Broker be renewed?

It is necessary to hold a valid certificate of registration in order to carry out the functions of the Insurance Broker. If the certificate of registration is near expiry, an application should be made to the authority at least 30 days prior to the expiry of the license. The renewal application should be made in Form K of Schedule I and should be accompanied with the relevant documentsand renewal fees.

The renewal fees for Direct Broker is INR 50,000, for Reinsurance Broker is INR 1,50,000 and for Composite Broker is INR 2,50,000.

Expert Opinion

In case anyone wants to run an insurance broker business, it is mandatory that they get the license for the same as only the licensed insurance brokers can display products and price comparisons of the insurer companies. They facilitate product comparison for the potential customers and target them to one platform. However, getting license for insurance broker business is no cakewalk and requires proper compilation of relevant documents along with the duly filled application form. Professional expertise is required for checking the eligibility and the authenticity of all the documents that are attached with the application. Our team of professionals, who have years of experience in the field, can help you in getting the insurance web aggregator license with ease.

For more information on insurance broker, certificate of registration, renewal of the license or related information, contact us.

FAQ

The existing insurance brokers can increase the share capital within 2 years from the date of new regulation. This means that the paid-up capital requirements have to be complied with till January 18, 2020.

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