PhonePe is now licensed to serve as a Direct Insurance Broker

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PhonePe is now licensed to serve as a Direct Insurance Broker

PhonePe, one of India’s greatest & most reliable digital payment’s companies, has now stepped into the Insurance sector, as it has been issued the IRDA license to act as a Direct Insurance Broker. Let’s dive into the story and discuss how you too can step into the insurance domain.

When did PhonePe obtain Insurance Broker License?

On the fateful day of August 31th 2021, PhonePe announced that the Insurance Regulatory and Development Authority of India, IRDA, has licensed it with Insurance Broking License. However, it might come as news to people but, PhonePe has been a part of the Insurance domain for a bit longer than this announcement.

Last year, in an effort to step into the insure-tech sector, PhonePe succeeded in gaining the corporate agent license.

What is a Corporate Agent License?

A Corporate Agent or an Insurance Corporate agent is an insurance entity that solicits, procures and services insurance policies of three insurance companies per category. These categories are health insurance broker license, general insurance license , life insurance and composite Insurance license.

Although quite vast for a budding entrepreneur, for a firm as expansive as PhonePe, being a corporate agent is quite minuscule. Ever since then, the company of India’s favourite digital platform has been trying to get into the Insurance brokering domain, trying to penetrate the insurance sector with the best type of insurance entity – the direct insurance broker.

What is a Direct Insurance Broker?

 Direct Insurance is an insurance intermediary that exists between an insurance company and a customer. Well versed in the different aspects of insurance policies and possess a deep understanding of the insurance market, a direct broker provides the insurance customer with:

1.       Advice on the right insurance covers that suit the financial capacity and prospects of that customer.
2. Assistance for payment of policy premiums,
3.  Opening e-insurance accounts and issuing of e-insurance policies, and
4.  Negotiating the insurance cover with an insurer.

With the issuance of an Insurance broker license, Fintech giant PhonePe has stepped up its game as it now possesses the ability to personalize the product recommendations to more than 300 Million users. When asked why PhonePe decided to take a foray into the Insurance domain, the digital payment giant replied by stating that the “overwhelming response” of the insurance products that it was able to get out to the people during its brief stint as a corporate agent motivated it to integrate more insurance products into the digital marketing platform.

How you can become an Insurance Broker in India?

Such success stories of giants like PhonePe might not be as titillating as an underdog finding success considering the fin-tech giant already had a running start and a solid capital ground. However, it does bring to light the question – how to become an insurance broker when you’re just starting.

Thankfully for you, our IRDA consultants have formulated a streamlined procedure that you can follow to become an insurance broker in India and start dispensing insurance services at your leisure.

1. 1.       Step 1: Decide the type of Insurance broker you seek to become – Depending upon your predisposition, you can either choose to penetrate the B2C domain, B2B domain, or both. Here is what it means:

a.   Direct Insurance Broker: As a direct insurance broker, you’ll act as an intermediary between an insurance company and a customer. Your job would be to leverage the knowledge you possess of the insurance market and policies to advise these customers to choose the right one they seek. Depending upon your success. you’d be able to partner up with as many insurance companies as possible.

b.  Reinsurance brokers: if serving the B2B domain is more your cup of tea, you can choose the reinsurance broking market. As an intermediary between a reinsurance company and an insurer, the one who you’ll advise will be the insurance company. You will render its risk management services and help it choose the right reinsurance firm as per the company’s requirements.

c.   Composite broker: If you possess the technical, professional and financial capabilities (more on that below) to serve both B2B and B2C sectors, you can choose to become a composite insurance broker. However, it would require you to have the foresight that surpasses PhonePe. So, if you’re a starter, you should hold off on choosing this category for now.

1. 2.       Step 2: Meet the capital requirements: Starting an insurance broking firm is a cost-intensive venture. Furthermore, IRDA has made sure that only those with robust financial backgrounds come charging into the insurance market. Thus, you need to take care of the following monetary requirements before taking the next step:

a.       Minimum Paid-up capital contribution

                                                               i.      Direct: Rs 75 Lakh

                                                             ii.      Reinsurance: Rs 4 Crores

                                                            iii.      Composite: Rs 5 Crores

b.      Minimum Net worth

                                                               i.      Direct: Rs 50 Lakh

                                                             ii.      Reinsurance: 50% of paid-up capital contribution

                                                            iii.      Composite: 50% of paid-up capital contribution

c.       Deposit Requirement

                                                               i.      Direct: Rs 10 Lakh

                                                             ii.      Reinsurance: 10% of paid-up capital contribution

                                                            iii.      Composite: 10% of paid-up capital contribution

1. 3.   Step 3: Establish an infrastructure that lets you watch over and run your insurance brokering business. When we talk about establishing an infrastructure, we are not merely concerned with the tangible elements like technology, space and architecture; it’s the workforce that forms the foundation of an insurance broker. Thus, to become a Direct Insurance broker or to start any insurance brokering activity, you need to have the right business entity and the right professional:

a.  The right business entity: The IRDA regulations that dictate who can obtain the insurance broking license state that only a company or a cooperative society can apply for the license. In your case, starting a company is a better route because it gives you an edge when it comes to funding in India.

b. The right professional: No one can jump into the insurance domain before proving their mettle and receive proper training. Thus, you need to train a Principle Officer at an Institute that has IRDA accreditation. He is the one who would head the insurance broking activities and ensure that every aspect of your business complies with the IRDA regulations. Other than the principal officer, you’d also need at least two agents trained in matters of insurance brokering

1. 4.  Step 4: Gather the required documents and apply for the Insurance Broking license: After taking the preceding steps that include incorporating your business entity and training your principal officer, all that remains is to obtain the IRDA license that will let you commence your insurance broking activities. To get started, you need to furnish the documents given below and via the online mode, apply for the insurance broker license:

a.       Certificate of incorporation

b.      Memorandum of Association

c.       Articles of Association

d.      Details of the Principle officer

e.      Principal Officer’s insurance brokering examination clearance certificate

f.        List of two agents with the insurance broking qualifications required.

g.       List of shareholders

h.      Company’s Bank Account Details.

i.        Details of the principal banker.

j.        Copy of the board resolution stating that it’s applying for the Insurance broker license.

k.       Audited Balance sheet and net worth certificate of the company.

1. 5.   Step 5: Deal with any errors in the application form: If you’re applying for the IRDA license without the aid of a consultant, you’re bound to come across initial objections from the Authority. When that happens, have the forethought to deal with those issues as quickly as possible. If you do, and IRDA finds your application to be satisfactory, you’ll obtain the IRDA license to become an Insurance broker.

Conclusion

“We envision PhonePe to be the one-stop-shop catering the insurance needs of all the customers” – is a statement that Gunjan Ghai, VP & Head of Insurance at PhonePe, gave when congratulated about the recent issuance of the IRDA license. With so many insurance players on board, it’s high time that you, the underdog also comes and join the fray.

We can help you take the first that first step. Reach out to our IRDA License consultants if you have any queries concerning any detail that you need to know about Insurance Broker License.

People also read: Insurance Broker Types

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