What is Insurance Broker?
An Insurance broker has professionally qualified people or firm acting thru its directors or Partners or employees with expert knowledge of insurance-related laws as depth knowledge of insurance products. They advise people on their insurance need. An insurance broker provides professional services to its client and working as middlemen between an insurance company and a person who is looking for purchasing an insurance policy. A further Insurance broker can be categorized in there (3) Types -
A. Direct Insurance Broker – solicitation and procurement of the business of insurance and Allows its client to buy an insurance policy from its website or Computer software and earns commission from the insurance company whose policy has been sold. You can have a detailed view of the function of Direct insurance broker
B. Composite Insurance Broker – is an insurance agent and hold valid license to offer insurance related services for both lives as well as general insurance. Composite insurance broker licensing process is very selective by the authority.
C. Reinsurance Broker – A company who has the Power to bind reinsurance on the behalf of an insurance company
What is Insurance Broker License?
In India Insurance Broker License as well as their operations is regulated by regulations issued by the Insurance Regulatory and Development Authority (IRDA). In 2018, an updated version of IRDA (Insurance Broker) Regulations, 2018 were issued by the IRDA. As per these regulations Insurance Broker License can be done in any of the following categories:
- Direct Insurance Broker License – Capital required Rs 75 Lac
- Composite Insurance Broker License – Capital required Rs 5 Cr
- Reinsurance broker License – Capital required 4 Cr
Who can be an Applicant for Insurance Broker License?
Following people can be an applicant for Insurance Broker License in India;
- Any company registered under the Companies Act, 2013 or any previous variant.
- 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: If the applicant of Insurance Broker License application is a registered LLP then 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.
Minimum Financial Requirements for Insurance Broker License
Paid-up Capital/ Contribution Requirement
Following is the minimum capital requirement in order to apply for insurance broker registration;
- For Direct Broker – Rs. 75 Lakh
- For Reinsurance Broker – Rs. 4 Crore
- For Composite Broker – Rs. 5 Crore
Net worth Requirement
At the time of registration and during the course of Insurance Broker License the insurance broker is required to maintain minimum net worth of
- Rs. 50 Lakh for Direct Broker and
- 50% of the Minimum Capital Requirement for reinsurance and composite Broker.
Before filing the application for registration and during the course of Insurance Broker License the applicant is required to deposit with the scheduled bank an amount of;
- Rs. 10 Lakh for Direct Broker and
- 10% of the Minimum Capital Requirement for reinsurance and composite Broker.
Insurance Broker License fee
Application for Insurance Broker Licenses shall is submitted along with the requisite fees as specified in Schedule I – Form D of these regulations.
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
Documents Required for Insurance Broker License
The application for Insurance Broker License is required to be submitted along with all the required documents and information. Following is a list of such documents and information specified in Form C of Schedule I of the IRDA (Insurance Broker) Regulations, 2018;
- Application for Insurance Broker License is submitted in Form B along with the information required.
- Copy of MOA and AOA of the applicant. The main objects stated in such incorporation document must be as per regulations and specify activities undertaken by an insurance broker.
- Information relating to Principal Officer and whether they satisfy the fit and proper criteria must be presented in Form G of Schedule I. And make sure that required training compliances are fulfilled before the application is submitted.
- A written declaration from the Principle officer stating that they along with directors/partners and other key managerial personnel are not suffering from any disqualifications stated in section 42 D of the Act.
- Complete details of directors/partners, promoters and other key managerial personnel.
- List of a minimum of two qualified brokers with their qualifications. This is important as they will be responsible for all the soliciting and procuring insurance business after registration.
- Bank account details
- Details of Principal Bankers along with the statutory auditors
- For registration, the applicant is required to have requisite infrastructure. thus these details are to be submitted with the application. Infrastructure will include office space, IT infrastructure, equipment, and requisite qualified manpower.
Insurance Broker License Procedure
Finally, we will discuss the process of submission of an application for Insurance Broker Registration. Following are the steps involved in the Insurance Broker License procedure;
- A duly filled Insurance Broker License application in Form B provided in Schedule I of the regulations is to be submitted by the applicant with the authority along with the non-refundable application fee and required documents.
- After scrutiny of the application for Insurance Broker License if the Authority has any queries it can ask the applicant for information, document or can even direct them to comply with any requirements.
- Within 30 days from the date of such communication the applicant is required to submit such information, document or clarification as the case be.
- If after due consideration of the application for Insurance Broker License and being satisfied that the applicant fulfills all the above-mentioned conditions then the Authority will issue an in-principle approval for Insurance Broker Registration.
- After the issue of in-principle approval, the applicant is required to comply with the additional requirements and submit Insurance Broker License fees with the Authority either online.
- If the Authority is satisfied that all the requirements stated in the Act, regulations, Rules, guidelines, circulars etc. are satisfied by the applicant along with the conditions stated in the in-principle approval certificate, then it will issue a Certificate of Registration in Form J prescribed in schedule 1
Insurance broker License Validity & Renewal
Insurance broker Certificate of Registration issued for three years from the date of such issuance. The registered insurance broker is required to submit an application for renewal of Insurance Broker License at least one month before the expiry of these three years of registration.