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What is an Insurance Broker License?

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 is a professionally qualified person working for insurance or acts through a firm, where Directors, partners or employees have an expert knowledge on laws related to insurance and profound knowledge of the insurance products. These professionals suggest people on their insurance needs.

Therefore, an insurance broker acts as an intermediary between the insurance Company and the clients looking forward to purchase 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

Direct Insurance Broker deals with solicitation and procurement of insurance. 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 the clients who want to take the insurance policy again. Hence, the Reinsurance Broker acts as an intermediary between the primary issuer and the re-insurer.

  • Composite Insurance Broker

Composite Insurance Broker is an agent who provides the services of both- Direct Broker as well as 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 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 Direct Insurance Broker License.
  • A minimum Capital of INR 4 crores is required for Reinsurance Broker License.
  • A minimum Capital of INR 5 crores is required for 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 an 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 to make an Application for Insurance Broker License

In India, the following are eligible to make an Application for Insurance Broker License:

  • An entity registered under Companies Act, 2013 or Companies Act, 1956;
  • An LLP registered under 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 India;
  • LLP which is registered under the laws of a foreign country.

What is the procedure to get Insurance Broker License?

The procedure to get Insurance Broker License is as follows:

  • An Application in Form B provided in Schedule I of IRDA (Insurance Broker) Regulations, 2018 is required to be submitted to 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 comply with required compliance.
  • 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 an obligation to comply with all the additional requirements and submit Insurance Broker License feesa> 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 an 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 Schedule I of IRDA (Insurance Broker) Regulations of 2018:

  • A copy of 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 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 to register.

Validity of Insurance Broker License

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 Certificate of Registration.

How can Certificate of Registration of Insurance Broker be renewed?

It is necessary to hold a valid Certificate of Registration to carry out the functions of the Insurance Broker. If 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 documents and 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 he gets 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 bring them to one platform. However, getting License for insurance broker business is no cakewalk and requires proper compilation of the 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 Broker License with ease.

For more information on Insurance Broker, Certificate of Registration, renewal of the License or related information, apply now.

Frequently Asked Questions (FAQs)

Yes, as per the Insurance Broker Regulations, 2018, the Insurance Broker can provide the clients with additional services in the fields of consultancy, risk management, risk mitigation, risk advisory and charge the clients with fees for the same.

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.

Yes, the business from a single client cannot be more than 50% of the remuneration and the premium as per Broker Regulations 2013.

No, while evaluating the limit of business from a single client, the business from reinsurance and emanating from Government or Public Sector Undertaking will not be considered.

An individual who is a qualified Broker and is capable of taking up the duties and responsibilities of an executive role is eligible to become the Principle Officer of an Insurance Broking Company. Such Officer may not be the Director but shall be elected as the Chief Executive Officer.

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