In most cases, starting a business is far from simple. There are several requirements to fulfill, many of which are specific to the nature and type of business being established. An Insurance Marketing Firm has its own set of requirements, particularly in relation to the appointment of key managerial personnel, documentation, net worth, and other regulatory compliances.
In this blog post, we will discuss the key requirements for setting up an Insurance Marketing Firm in India. If you are planning to file an application with IRDAI for securing IMF registration, we recommend that you read this post.
An insurance marketing firm (IMF) is one of the prominent entities operating in the insurance sector. Like insurance brokers, corporate agents, and other insurance intermediaries, an IMF is registered with the IRDAI too. However, it is different from other insurance intermediaries in the sense that it is engaged in the solicitation and distribution of insurance products.
This means it only acts as a link between insurance companies and customers. It is not an underwriter or an insurer that issues insurance policies. Apart from insurance services, an IMF can also offer certain financial services. This allows an IMF to provide a wider range of services rather than sticking to a single insurance-related activity.
The key requirements for opening an insurance marketing firm in India are stated below:-
One of the primary requirements relates to the legal structure of the applicant. An entity seeking to secure IMF registration must be registered as a private limited company, cooperative society or limited liability partnership. Other structures like sole proprietorship or traditional partnership firm are ineligible for this registration.
Another important requirement for setting up an IMF is the name of the business. In the entity’s official name, the words ‘Insurance Marketing Firm’ must be contained. The “IMF” abbreviation can also be used in place of the full name.
This requirement set forth by IRDAI helps identify the nature of entity and distinguishes an IMF from other businesses in insurance and financial services sector. To put it simply, the name should make it clear that the entity is an Insurance Marketing Firm.
The IMF applicant must also meet prescribed financial requirement. It must maintain a minimum net worth of Rs. 5 lakhs for a single branch or Rs. 10 lakh for multiple branches. This requirement set forth by IRDAI ensures that the entity has the required financial capacity to carry out business activities.
Therefore, the applicant must make sure that it fulfils the prescribed net worth requirement while applying for IMF registration and continues to maintain the required net worth after registration to remain compliant.
The appointment of appropriate personnel is yet another important requirement for an IMF entity. The key personnel associated with an IMF include the Principal Officer, Insurance Sales Persons, Financial Service Executives and Field Staff.
The Principal Officer (PO) appointed by an IMF is responsible for overseeing the insurance-related activities of the IMF and ensuring that the firm carries out its activities in accordance with applicable regulatory requirements. They serve as the primary point of contact between the IMF and the insurance companies it has tie-ups with, as well as the regulatory authorities.
The PO must be a graduate, complete the prescribed IRDAI training and examination requirements and satisfy IRDAI fit and proper criteria. The IMF license applicant should therefore ensure that the proposed Principal Officer fulfils required eligibility and certification conditions before applying for registration.
Insurance Sales Persons are involved in the solicitation and distribution of insurance products on behalf of IMF. Since they directly participate in insurance-related activities, they are required to fulfil prescribed eligibility, training and examination requirements.
ISPs must meet the applicable educational requirements, complete mandatory training and pass the required examination before they can begin to solicit the insurance policies for an IMF.
An IMF may also undertake certain permitted financial service activities in addition to insurance-related activities. For this purpose, the firm may have Financial Service Executives (FSEs) as part of its personnel. FSEs must fulfil the applicable qualification, training and certification requirements for carrying out the financial services permitted to an IMF.
The IMF may also have field staff so as to support its insurance marketing and customer-related activities. Such personnel can assist the entity in carrying out its activities on ground and dealing with customers. The IMF should ensure that its staff members operate within the scope of authorized activities.
An entity registered as an IMF with IRDAI cannot enter into unlimited arrangements with insurance companies. There are prescribed limits on the number of insurers with which such an entity can have tie-ups. It can have tie-ups with a maximum of 6 insurers in each insurance category at any given time.
This means that an IMF can have a tie-up with up to 6 life insurers, 6 general insurers and 6 health insurers simultaneously. An IMF must take all of these prescribed limits into account when deciding which insurance companies it intends to work with.
To carry out business activities in an effective manner, an IMF must also have adequate infrastructure. This includes having a suitable office space as well as the necessary IT systems among other infrastructure required for its operations.
The office and technology infrastructure should be adequate to manage customer information, maintain records and support the daily activities of the firm. Having proper infrastructure is an important part of establishing as well as operating an IMF business.
Professional indemnity insurance refers to a type of insurance that provides protection against certain professional risks and liabilities that may arise while carrying out business activities.
Purchasing this insurance is another crucial requirement that an IMF needs to fulfill after obtaining IMF license registration. The professional indemnity insurance policy must be secured by IMF within 12 months of receiving its IMF certificate of registration.
Also Read: Is Starting an Insurance Marketing Firm Profitable in India?
Starting an IMF isn’t a cakewalk. It requires businesses to comply with a number of regulatory and operational requirements. These requirements range from selecting the suitable entity structure, to fulfilling the stipulated net worth and personnel criteria. There are also requirements pertaining to tie-ups with insurers, infrastructure and professional indemnity insurance.
As the IMF registration process includes several compliances, professional help can be quite beneficial. At Registrationwala, we can assist businesses with the entire process. This involves understanding the requirements, and preparing and filing the required application with IRDAI.
Q1. Is it mandatory for an IMF entity to purchase a professional indemnity insurance policy?
A. Yes. It is mandatory for an IMF entity to purchase a professional indemnity insurance policy. The entity must obtain such a policy within 12 months of receiving its registration.
Q2. What is the net worth requirement for an IMF?
A. The net worth requirement for an IMF is Rs. 5 lakh for a single branch and Rs. 10 lakh for multiple branches.
Q3. Do IMFs always need to employ FSEs?
A. No. IMFs only need to employ FSEs when they undertake activities involving the marketing or distribution of permitted financial products other than insurance products.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, finance and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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