What does Insurance Broker mean?
An insurance broker has a highly qualified person or company operating through its directors or associates and staff with an expertise of insurance law as an in-depth knowledge of insurance products. They strongly recommend people on their insurance needs. An insurance broker delivers professional services to its customer and functions as a middleman between an insurance company and a consumer looking to purchase an insurance policy. Three categories have been defined which are mentioned below:
Types -
A. Direct Insurance Broker – Application and purchase of insurance business which allows the customer to purchase insurance policies from its platform and computer software and to earn a fee from the insurance company whose plan has been purchased. You can have a detailed overview of the function of a direct insurance broker.
B. Composite Insurance Broker– Is an insurance broker who has a conditional permit to offer insurance coverage to both life and general insurance. Composite insurance broker approval system was rather selective.
C. Reinsurance Broker –Binding reinsurance on behalf of an insurance company is carried out by such insurance broker.
What does Insurance Broker License mean?
Regulation which is issued by the Insurance Regulatory and Development Authority (IRDA) regulates the Insurance Broker License along with their operation and activities. Insurance Broker License can be obtained after fulfilling the below mentioned criteria as per the updated and latest version of IRDA (Insurance Broker) Regulations, 2018 which were issued by the IRDA.
- Direct Insurance Broker License – Rs. 75 Lakhs Capital requirement
- Composite Insurance Broker License – Rs. 5 Crores Capital Requirement
- Reinsurance broker License –Rs. 4 Crores Capital Requirement
Who all are eligible for Insurance Broker License?
Below mentioned people can be the applicant to obtain the Insurance Broker License in India;
- Any company registered under the Companies Act, 2013 or any previous modified version.
- Any registered co-operative society formed as per the provisions of Co-operative Societies Act, 1912 or any other similar law.
- Any LLP registered under Limited Liability Partnership Act, 2008.
- Any other person recognized by the Authority
Note: Where the application for obtaining the Insurance Broker License is applied by the registered LLP then in this case none of the following can be a partner of the same;
- Non-resident entity.
- Foreign LLP registered under foreign country laws.
- Any person resident outside India.
What is the minimum Financial Requirements for Insurance Broker License?
Below mentioned is the minimum capital requirement according to which application for insurance broker license is applied;
- For Direct Broker – Rs. 75 Lakh
- For Reinsurance Broker – Rs. 4 Crore
- For Composite Broker – Rs. 5 Crore
What is the Net worth Requirement?
Below mentioned are the criteria related to net worth which shall be maintained by the applicant seeking for the Insurance Broker License.
- Rs. 50 Lakh for Direct Broker and
- 50% of the Minimum Capital Requirement for reinsurance and composite Broker.
Deposit Requirement
Amount mentioned below shall be deposited by the applicant into the bank before applying for Before Insurance Broker License;
- Rs. 10 Lakh for Direct Broker and
- 10% of the Minimum Capital Requirement for reinsurance and composite Broker.
Insurance Broker License fee
Insurance Broker Licenses’ application as well as prescribed fees as specified in Schedule I – Form D of these regulations shall be submitted.
Non-Refundable Application Fees
- For Direct Broker – Rs. 25,000
- For Reinsurance Broker – Rs. 50,000
- For Composite Broker – Rs. 75,000
Registration Fees for Fresh Registration
- For Direct Broker – Rs. 50,000
- For Reinsurance Broker – Rs. 1,50,000
- For Composite Broker – Rs. 2,50,000
Renewal Fees for a period of 3 years
- For Direct Broker – Rs. 1,00,000
- For Reinsurance Broker – Rs. 3,00,000
- For Composite Broker – Rs. 5,00,000
Which Documents are required to submit for Insurance Broker License?
The application as well as the relevant documents and information is required to be submitted for obtaining the Insurance Broker License. Below mentioned is the list for required documents and information as specified in Form C of Schedule I of the IRDA (Insurance Broker) Regulations, 2018;
- Insurance Broker License’s application along with the information is submitted in Form B.
- Applicant is required to submit Copy of Memorandum of Association and Article of Association. Such incorporation documents must disclose the objective of the company which must be according to the regulations and specify activities undertaken by an insurance broker.
- Data pertaining to the Principal Officer and whether they follow the necessary and acceptable qualifications must be given in Form G of Schedule I to insure that the required training requirements are met before the request is produced..
- A formal statement by the Principle Officer specifying that they, together with the Directors / Partners and other key management staff, are not liable to any disqualifications under Section 42 D of the Act.
- Full details of directors / partners, promoters and other key managerial personnel.
- Atleast 2 qualified brokers’ details along with their qualification. This is critical as they will be accountable for all insurance companies paying for and buying coverage upon enrollment.
- Details of Bank account
- Details of Principal Bankers along with the statutory auditors
- The applicant is required to have the necessary infrastructure for registration. Such reports are therefore to be provided with the request. Infrastructure will include office space, IT infrastructure, equipment and the required qualified personnel.
What is the procedure to obtain the Insurance Broker License?
Below mentioned are the steps for obtaining the Insurance Broker License;
- The applicant is required to submit the application in Form B provided in Schedule I of the regulations along with the non-refundable application fee and relevant and appropriate documents with the authority.
- Additional information, document may be asked by the authority where the authority is not satisfied after the scrutiny of the application and documents provided by the applicant or can even direct them to comply with any requirements.
- Such additional information, document or clarification as the case be is required to be submitted by the applicant within a period of 30 days from the date of such communication.
- In-principle approval for registration of Insurance Broker shall be granted by the authority after being satisfying of the application submitted by the applicant.
- Additional requirements as laid down by the authority and submission of the Insurance Broker License fees is required to be complied by the applicant after receiving the in-principle approval from the authority.
- A Certificate of Registration in Form J prescribed in schedule 1 shall be granted by the authority after satisfying itself that the applicant has complied with all the rules, regulation, guidelines and circulars as mentioned in the in-principle approval certificate
What is the validity and renewal procedure for Insurance broker License?
The certificate of registration under Insurance broker remains valid for a period of 3 years from the date of such issuance. Application regarding the renewal of certificate shall be submitted at least 1 month before the expiry of these 3 years of registration.