Which License is Required to Start an Insurance Company?

An insurance business is one of the most sought-after businesses in India. To start an insurance business in India, you require approval from the Insurance Regulatory and Development Authority of India (IRDAI). This approval is granted in the form of an IRDAI-issued insurance license. The exact license depends on the type of insurance business. 

Types of Insurance Businesses and Required Licenses

There are various types of insurance businesses in India. All of them require an IRDAI-issued license:

1. Life Insurance Business

Description: This kind of insurance business covers risks related to life and death of individuals. Life insurance policies can be term-based, endowment plans, whole life or unit-linked insurance plans.

Required License: Life Insurance Company License issued by IRDAI.

2. General Insurance Business

Description: It provides non-life insurance policies related to health, home, travel, motor and property insurance.

Required License: General Insurance Company License granted by IRDAI.

3. Health Insurance Business

Description: A health insurance business offers coverage for medical and surgical expenses. It is a kind of general insurance business. However, some companies solely focus on health coverage.

Required License: Standalone Health Insurance Company License granted by IRDAI.

4. Reinsurance Business

Description: A reinsurance business provides financial protection to insurance companies by transferring some of their risk to another insurer (the reinsurer).

Required License: Reinsurance Company License provided by IRDAI.

5. Insurance Surveyor Business

Description: In an insurance surveyor and loss assessor business, surveyors are hired to assess and evaluate the extent of loss when claims are made under insurance policies.

Required License: To start an insurance surveyor business, you require a Surveyor and Loss Assessor License.

6. Insurance Broker Business

Description: Brokers act as intermediaries between policyholders and insurance companies. They help clients to pick the most suitable insurance products across multiple insurers.

Required License: Insurance Broker License. It has different categories including (i) Direct Broker license, (ii) Composite Broker license and (iii) Reinsurance Broker license.

7. Insurance Marketing Firm

Description: IMFs are IRDAI-registered entities permitted to sell and market insurance products from one life insurer, one general insurer and one health insurer.

Required License: Insurance Marketing Firm License issued by IRDAI is mandatory to start an IMF business in India.

8. Third-Party Administrators

Description: TPAs are businesses that are engaged in handling claim processing, customer service and administrative functions for health insurance companies.

Required License: TPA License is necessary for providing services as a third party administrator.

Eligibility Criteria for Obtaining Insurance License

Here is the eligibility criteria for obtaining insurance license from the Insurance Regulatory and Development Authority of India:

• Entity must be a company registered under Companies Act of 2013 or Limited Liability Partnership under LLP Act of 2008.

• If an individual is applying (e.g. for surveyor or broker license), they must be at least 18 years of age.

• Brokers must maintain professional indemnity insurance and have a minimum of two qualified individuals.

• Senior management and directors must pass a fit and proper criteria that assesses their past business practices, integrity and financial stability.

• Professional indemnity insurance, which protects from legal liability resulting from mistakes or carelessness in their professional activity, is mandatory for insurance brokers and surveyors. Throughout the surveyor license's validity, this insurance must be kept up to date.

• Before issuing a license, IRDAI may conduct an operational readiness inspection, particularly for TPAs, brokers and insurance companies.

• Candidates need to have a spotless legal and financial history. A person may be disqualified if they have a history of financial fraud, criminal proceedings or regulatory violations.

• Capital Requirements: Different insurance business types require different minimum capital investments:

• Life Insurance Company: Rs. 100 crore

• General Insurance Company: Rs. 100 crore

• Standalone Health Insurance Company: Rs. 100 crore

• Reinsurance Company: Rs. 200 crore

• Insurance Broker: Ranges from Rs. 75 lakh (for Direct Broker) to Rs. 5 crore (for Composite Broker)

• TPA (Third Party Administrator): Rs. 4 crore

• Insurance Marketing Firm (IMF): Rs. 5 - 10 lakhs.

How to get an Insurance License?

To get an insurance license in India, you need to complete the following steps:

Step 1: Preparing Documents

First and foremost, you must prepare all the required documents. The exact documents depend on the license you want to apply for. After collecting all the documents, you can proceed to the next step. 

Step 2: Application Filing

Once you have all the documents ready, you must file an application with IRDAI. You must do it via official IRDAI portal. Along with the application, you must pay the prescribed application filing fee.

Step 3: Application Review by IRDAI

After IRDAI receives your application, it’ll carefully examine it. If your application meets all the requirements, IRDAI will approve it. However, if anything is missing, unclear or non-compliant, IRDAI may ask for clarifications or additional information.

Step 4: Issuance of Insurance License

Once IRDAI is satisfied with the application, it’ll issue the business an insurance company license. After receiving this license, the business can provide insurance services as permitted by the license.

Conclusion

To start an insurance company in India, it is mandatory to seek approval of the Insurance Regulatory and Development Authority of India (IRDAI). IRDAI issues approval in the form of an IRDAI license. To secure this license in a smooth and hassle-free manner, connect with Registrationwala’s IRDAI consultants for existence.

Frequently Asked Questions (FAQs)

Q1. Which authority’s approval is required to start an insurance firm in India?

A. The approval of the Insurance Regulatory and Development Authority of India (IRDAI) is required to start an insurance firm in India.

Q2. Which license do I need to secure to start an insurance marketing firm?

A. To start an insurance marketing firm, you need to secure an IMF license from IRDAI. 

Q3. What is the capital requirement to start a life insurance company?

A. To start a life insurance company in India, you need a minimum capital requirement of Rs. 100 crore.

Q4. What is the capital requirement to start a general insurance company?

A. The minimum capital requirement to start a general insurance company in India is Rs. 100 crore.

Author: Dushyant Sharma

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, telecom, 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.