Insurance Broker Registration Requirements and Process
Before we discuss the Insurance Broker Registration process and requirements, it’s important to know why you should engage in this business, if there’s any scope, or will this be beneficial for you, etc. Therefore, let us first peep into the market size of Insurance Broker Business so that you can decide whether or not you should jump into it and commence the business.
Market size of Insurance Broker Business
The study says that the government’s policy of ensuring has steadily pushed insurance penetration in India and advancement of insurance schemes.
In the FY18, gross premium written in India touched Rs 5.53 trillion (US$ 94.48 billion) with Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion) from non-life insurance. As a whole, insurance penetration in India touched 3.69% in 2017 from 2.71% in 2001.
However, in FY19, the premium for new life insurance business hiked 3.66% year-on-year to Rs. 1.09 trillion. In FY19, gross direct premiums of non-life insurers touched Rs 962.05 billion (US$ 13.71 billion), displaying a year-on-year growth rate of 12.40%.Data Source: ibai.org
The above numbers portray that the business of insurance broker has always experienced growth, whether steady or fast. Hence, starting an Insurance Broker Company won’t be of risk. But again before we start with the process, let us understand what Insurance Broker is and what its requirements are.
What is Insurance Broker Registration?
Insurance broker registration is the permit issued by the Insurance Regulatory and Development Authority (IRDA). In 2018, the IRDA issued the updated version of the IRDA (Insurance Broker) Regulations according to which Insurance Broker Registration could be done in the following ways:
- Direct Insurance Broker License – the capital requirement of Rs. 75 Lakhs;
- Composite Insurance Broker License – the capital requirement of Rs. 5 crores;
- Reinsurance broker License – the capital requirement of Rs. 4 crores.
What is Insurance Broker?
An insurance broker is a company or person registered as an advisor of insurance or qualified people or firm which acts through its partners/directors or employees with proficient knowledge of insurance based laws. Insurance brokers guide people on their insurance requirement. Furthermore, they offer professional services to its customers and acts as an intermediary between a person and an insurance company seeking to purchase an insurance policy.
Who can be the applicant for Insurance Broker License in India?
Following people or entity could be applicants for insurance broker license in India:
- A company listed under the Companies Act, 2013 or 1956;
- A registered co-operative society created under the Co-operative Societies Act, 1912 or any other similar law;
- An LLP registered under the Limited Liability Partnership Act, 2008;
- Any other individual recognized by the Authority.
Note: If the applicant is a registered LLP, then none of these can be a partner of the same;
- Any individual residing outside India;
- Foreign LLP enrolled under Foreign Country Laws;
- Non-resident entity.
Financial requirements for Insurance Broker License
Minimum Financial Requirement
The minimum financial requirements for Insurance Broker Registration are as follows:
- 75 lakhs for the direct broker;
- 4 crores for the reinsurance broker; and
- 5 crores for the composite broker.
Net worth Requirement
During the course of registration, the insurance broker needs to maintain a minimum net worth of:
- 50 Lakh required for Direct Broker, and
- 50% of the minimum capital requirement for composite and reinsurance Broker.
Checklists for Insurance Broker Registration
It is imperative that you satisfy the following criteria for obtaining Insurance Broker Registration:
- Whether the entity has the word Broking or Broker in its name;
- Memorandum of Association should contain the insurance broking as its principal aim;
- Whether the company satisfies the minimum capital requirement as provided in the regulations;
- It should not hold any foreign capital which exceeds 26% of the total paid-up capital;
- If the fixed deposit of 20% of initial capital is paid in the registered bank;
- The principal officer should hold the fair qualification, should have passed the brokers’ exam, and possess the necessary training;
- The company must engage a minimum of two persons with the obligatory qualification and training;
- The company has the required infrastructure and well-trained workforce to run the business of insurance broking;
- The persons engaged in securing insurance business are qualified and trained.
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What are the documents essential for obtaining Insurance Broker License?
The applicant needs to present the application along with the mandatory documents and information as Form C of Schedule I of the IRDA (Insurance Broker) Regulations, 2018 specifies. The required documents are as follows:
- The Insurance Broker License application, along with the essential information, needs to be submitted in Form B;
- A copy of the MOA (Memorandum of Association) and AOA (Articles of Association) of the applicant company;
- The applicant is supposed to present the information regarding the Principal Officer, and whether they fulfil the fit and proper criteria in Form G of Schedule I. Furthermore, he/she must ensure that they have fulfilled the training compliances before submitting the application;
- A written declaration of the Principle Officer affirming that they along with the directors or partners and other essential managerial personnel don’t suffer from any disqualifications as mentioned in Section 42D of the Act;
- Complete details of all the promoters, directors or partners, and other key managerial personnel;
- List of at least two qualified brokers along with their qualifications;
- Present bank account details;
- Details about the Principal Bankers along with the statutory auditors;
- For the registration process, the applicant must have the required infrastructure. Therefore, the entity needs to submit the details of infrastructure along with the application which may include equipment, IT infra, office space, and the workforce.
- List of all the shareholders of the applicant company, current as well as proposed;
- If the shareholder(s) is company/companies, furnish the Board Resolution passed by them in investing in and promoting the applicant company;
- The balance sheet of the company;
- Other details on request.
Now that we know what documents are essential for the Insurance Broker License, let’s find out how we can get Insurance broker license.
Procedure for obtaining Insurance Broker License
Once you have accumulated all the documents essential for Insurance Broker license, you can follow the below steps to for the registration process:
Step1: Submit the application in Form B
You need to submit the application for Insurance Broker License in Form B as provided in Schedule I of the IRDA regulations with authority. Additionally, you also need to present the non-refundable application fee with the required documents.
Step2: The concerned authority will examine the application
If authority raises any query after the verification of the application for Insurance Broker License, it can demand the applicant for additional documents and information. Moreover, it can order the applicant to comply with any requirements.
Step3: Submission of additional documents, in case of any query
If the authority has asked you to provide any further paper or information, then you are required to submit them within thirty days from the date of such communication.
Step4: In-principle approval for Insurance Broker License
Firstly, the authority will undergo a thorough investigation of the application. If it finds everything valid and accurate, it will, then, issue an in-principle approval for the Insurance Broker license.
Step5: Additional formalities after the issuance of in-principle approval
Once you have got in-principle approval, you need to comply with the extra requirements and submit the license fees with the Authority online.
Step6: Issuance of Registration in Form J
If the authority is convinced with all the requirements prescribed in the regulation and the in-approval certificate, then you will receive a Certificate of Registration in Form J specified in Schedule1.
Fee for Insurance Broker Registration License
The entity needs to submit the application for Insurance Broker License with the mandatory fees as prescribed in Schedule I – Form of these regulations.
Fees for Non-Refundable Application
- 25,000 for Direct Broker;
- 50,000 for Reinsurance Broker; and
- 75,000 for Composition Broker.
Fees for Fresh Registration
- 50,000for Direct Broker;
- 1,50,000 for Reinsurance Broker; and
- 2,50,000 for Composite Broker.
Renewal fees for three years
- 1,00,000 for Direct Broker;
- 3,00,000 for Reinsurance Broker; and
- 5,00,000 for Composite Broker.
Moreover, the Insurance Broker business is an ever-growing business. Therefore, the chances of failure are quite negligible, if you proceed with a great business plan.