Types of Insurance Brokers in India

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Types of Insurance Brokers in India

As per the Insurance Brokers regulations issued by the IRDAI (Insurance Regulatory and Development Authority of India in 2018, an Insurance Broker is defined as a business entity that implements their skills and knowledge about the insurance industry and acts as an intermediary between the seeking insurance policy seeking clients and insurance companies, to become an insurance broker, you must have a license to operate in the insurance market.

An insurance Broker License or IBL is formally defined as the legal approval issued by the IRDAI, which formulates laws for any business entity to become an insurance broker in India. These laws bound the applicant after obtaining the IBL for insurance solicitation and procurement.

Who can be an Insurance Broker in India?

• A registered company defined under the Companies Act of 2013,
• A cooperative society registered under the Cooperative Societies Act of 1912 or any law for the registration of cooperative societies,
• An LLP formed under the Limited Liability Partnership (LLP) Act of 2008 with no partner being a non-resident entity or a person resident outside India as defined in the Foreign Exchange Management Act of 1999 and not being a foreign Limited Liability Partnership registered thereunder.

An Insurance Brokerage Firm must contain the terms' Insurance Broker',' Insurance Brokers', or 'Insurance Broking' in its registered name. The words reflect their line of activity and enable the public to differentiate insurance brokers registered with the Insurance Regulatory and Development Authority of India (IRDAI) from other non-registered insurance-related entities.

Types of Insurance Brokers

There are three categories of insurance brokers mentioned below: 

• Direct Insurance Broker (Life, General, Life & General both)
• Reinsurance Broker 
• Composite Broker

Direct Insurance Broker 

A direct broker is a type of Insurance Broker registered under the IRDAI who solicits and arranges insurance business for its clients with insurers located in India or provides claim consultancy, Risk Management services, or other similar services as permitted under the IRDAI (Insurance Brokers) Regulations of 2018 for remuneration or a fee. 

Duties of a Direct Insurance Broker (DIB)

• Gather the relevant data about the client's business and risk management strategy.
• Get acquainted with the insurance business and its underwriting information in assessing the risk to decide pricing terms and conditions for cover to explain it to their insurers.
• Advise their customers regarding appropriate insurance coverage and terms according to their needs.
• Maintain a database of current insurance products and services for a detailed knowledge of current market trends.
• Submit the quotation received from the insurer for clients to consider.
• Act promptly on instructions from a client and provide them with written acknowledgments and progress reports.
• Assist clients in paying their premiums. Let them know about the current trends.
• Provide insurance consultancy and risk management advisory services.
• Assist in negotiating the claims and maintain proper records of such claims.

According to the IRDAI regulations, Direct Insurance Brokers can be further classified into three categories:

• Life Insurance Direct Brokers:  They are India's most sought-after insurance brokers. They provide Insurance and risk management services to clients seeking life insurance policies in the country.
• General Direct Broker: This kind of broker license is issued to a property insurance broker. Also, auto insurance and health Insurance Broker licenses are issued under this kind of broker license.
• Direct Broker (Life & General):  This broker insurance certificate is issued to engage in life and general insurance policies.

Reinsurance Broker

A reinsurance broker is a type of insurance Broker registered under the Authority who solicits and arranges reinsurance for its clients with insurers or reinsurers with reinsurers or insurers located in India or abroad; and/or provides claims consultancy, Risk Management services, or other similar services as permitted under IRDAI (Insurance Brokers) Regulations of 2018 for remuneration and/or a fee. 

Duties of a Reinsurance Broker (RB)

• Get acquainted with the client's business and risk retention philosophy
• Create a database to maintain records of the insurer's business relating to insurance products and services
• Advice the in-need insurers regarding the reinsurance cover available in the international insurance and reinsurance markets
• Maintain a database of insurance products and services available in the reinsurance markets, with the solvency ratings of individual insurers
• Provide insurance consultancy and risk management services for reinsurance to potential customers
• Keep multiple insurers in your canon for extending recommendations to their clients.
• Carry out negotiations with insurers on behalf of your client
• Assist in the case of commutation of reinsurance contracts placed with them
• Act promptly on instructions from a client and providing it written acknowledgments and progress reports
• Collect and remit the premiums and claims within an agreed-upon time
• Assist in the negotiation and settlement of claims on behalf of your customers
• Maintain proper records of your claims
• Exercise due care and diligence when selecting insurers and international insurance brokers regarding their respective security ratings and establishing responsibilities when engaging their services

Composite Broker 

A composite broker is a type of insurance broker, registered under the Authority, who solicits and arranges the Insurance and/or reinsurance for its clients with insurers and/or reinsurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or other similar services as permitted under IRDAI (Insurance Brokers) Regulations of 2018 for remuneration and/or a fee. 

Duties of a Composite Broker (CB)

A composite broker can carry out any of the duties mentioned in the direct broker or the reinsurance broker dutied list above.

To know more about the type of Insurance Broker licenses in India, connect with the IRDAI experts at Registrationwala.

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