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 who 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. The applicant then is bounded by these laws after the IBL is obtained for insurance solicitation and procurement.
A potential insurance broker can be anyone of the following:
- A registered company defined under the Companies Act of 2013,
- A cooperative society registered under the Co-operative Societies Act of 1912 or any law for the registration of co-operative 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 and/or provides claim consultancy, Risk Management services, or other similar services as permitted under the IRDAI (Insurance Brokers) Regulations of 2018 for remuneration and/or a fee.
Duties of a Direct Insurance Broker (DIB)
- Gather the relevant data about the client’s business and his/her 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 his/her insurers.
- Advise his/her customers regarding appropriate insurance cover and terms according to their needs.
- Maintain a database of current insurance products and services to have a detailed knowledge of current trends in insurance markets.
- Submit the quotation received from the insurer for clients to consider.
- Act promptly on instructions from a client and provide him/her 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 the negotiation of the claims and maintain proper records of such claims.
According to the IRDAI regulations, the Direct Insurance Brokers can be further classified into three categories:
- Life Insurance Direct Brokers: They are the most sought-after insurance brokers in India. 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, licenses such as auto insurance broker license and health insurance broker license are issued under this kind of broker license.
- Direct Broker (Life & General): This kind of broker insurance certificate is issued to engage in both life and general insurance policies.
A reinsurance broker is a type of insurance broker, registered under the Authority, who solicits and arranges re-insurance for its clients with insurers or reinsurers with reinsurers and/or insurers 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 Reinsurance Broker (RB)
- Get acquainted with the client’s business and his/her risk retention philosophy.
- Create a database to maintain records of the insurer’s business relating to his/her 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 cannon, for extending recommendations to his or her clients.
- Carry out negotiations with insurers on the behalf of your client.
- Assist in 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 at the time of selection of insurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services.
A composite broker is a type of insurance broker, registered under the Authority, who solicits and arranges the insurance and/or re-insurance 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.
The following documents are required to be submitted along with the new application form for different types of insurance broker certificates of registration.
Memorandum of Association (MoA) and Article of Association (AoA)
- Certified copy of Memorandum of Association (MoA) and Article of Association (AoA).
- If the applicant has applied for the direct broker license, the main object of the applicant is “To act as a Direct Broker under the IRDA (Insurance Brokers) Regulations, 2018 as amended from time to time”.
- If the applicant has applied for the reinsurance broker license, the main object of the applicant is “To act as a Reinsurance Broker under the IRDA (Insurance Brokers) Regulations, 2018 as amended from time to time”.
- If the applicant has applied for the composite broker license, the main object of the applicant is “To act as a Composite Broker under the IRDA (Insurance Brokers) Regulations, 2018 as amended from time to time”.
- The AoA of the entity should not provide for
- Issuance of shares of any type other than equity and/or with differential voting rights.
- Allotment of shares in consideration other than cash.
In case, the AoA of an entity provides for any of the above it is advised to kindly amend it suitably.
- Certified copy of shareholders agreement (if applicable).
- If the applicant entity is a Private Limited Company, a certificate issued by the Chartered Accountant on the overall shareholding structure of the applicant entity certifying the
- Names of all the shareholders
- Date/s of allotments of shares made to each of them
- Date-wise numbers of shares allotted
- Total numbers of shares held by each of the shareholders
- Percentage of the total shareholding of the entity
- Share certificate numbers and folio numbers along with the authorized
- Paid-up capital of the applicant entity
- If the applicant entity is a Limited Liability Partnership, a certificate issued by the chartered accountant on the overall partnership structure of the applicant entity certifying the
- Names of member-partners in the LLP
- Percentage of contribution in the total partnership of the entity along with the authorized
- Paid-up capital of the applicant entity.
- If the promoter is a company,
- A copy of the Board Resolution permitting the company to invest in the applicant entity
- Last three years' annual reports
- Net worth certificate of the promoting company.
- If the shareholder is an individual,
- Copy of the last three years' Income Tax Returns and their computation
- The net worth certificate just before investing in the applicant entity with its computation should be issued by a Chartered Accountant.
- A self-declaration in respect of promoters/shareholders/partners that the funds being invested as equity capital are out of their earnings or savings and not out of borrowings.
- Form F & G of IRDAI (Insurance Brokers) Regulations of 2018, about directors, principal officer, and key management person of the applicant company.
- Principal Officer to submit a declaration that the applicant (directors/partners, principal officer, and key management personnel of the company) are not suffering from any of the disqualifications specified under section 42 D of the Act.
- Details of the infrastructure including IT infrastructure along with supporting evidence thereof like ownership/lease agreement papers about the office space/equipment/trained manpower, etc. for the registered office with the photographs of premises and the future planning for opening a branch office at various locations in the country and the estimated time frame.
- Projection of administrative expenses, salaries, wages, and other expenses, draw the revenue account, the profit & loss account, and the balance sheet for the projected 3 years.
- An organization chart giving a complete picture of the company’s activities like IT, underwriting, risk assessment, claims settlement, marketing, accounts, back office, etc.
- List of experienced personnel inducted from insurance background with good knowledge and experience of working in the areas of risk assessment, underwriting, claims management, etc. A detailed CV, copies of educational qualifications along with their appointment/joining letters of the people, so selected.
- Form O of IRDAI (Insurance Brokers) Regulations, 2018.
- Any other information, which is relevant to the nature of services rendered by the applicant entity for the growth and promotion of the insurance business.
- Any other requirement as deemed necessary by the Authority.
Registration processing fee for Insurance Broker license registration
The application fee for license registration of
- A direct insurance broker is 25 thousand rupees.
- A reinsurance insurance broker is 50 thousand rupees.
- A composite insurance broker is 75 thousand rupees.
Paid-up capital Requirement for Insurance Broker license registration
- The capital requirement for the registration of
- A direct broker license is 75 lakhs rupees.
- A reinsurance broker license is 4 crores rupees.
- A composite broker license is 5 crores rupees.
Net worth Recruitment for Insurance Broker license registration
- The net worth requirement for registration of a Direct broker license is 50 lakh rupees.
- The net worth requirement for registration of a Reinsurance broker license is 2 crores rupees.
- The net worth requirement for registration of a Composite broker license is 2.5 crores rupees.
Deposit Requirements for Insurance Broker license registration
- Every direct insurance broker shall keep the deposit of 10 lakh rupees with any scheduled bank and the deposit shall have a lien with the authority.
- Every reinsurance broker or a composite broker shall keep 10 percent of the minimum capital/contribution for reinsurance or composite broker in fixed deposit, which shall not be released to them without the prior written permission of the Authority.
Get your Insurance Broker license with Registrationwala
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