Insurance Broker License

Are you seeking to become an Insurance Broker in India? Choose Enterslice for expert guidance to apply for an Insurance Broker license.

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Overview of Insurance Broker License

An insurance broker is an individual or company that secures policies for the customer. Insurance brokers would secure a commission from an insurance company on the different types of policies they provide to customers. A company wanting to become an insurance broker would have to apply to the IRDAI for an insurance broker license.

Hence, once the applicant secures an insurance broker license, they must comply with the requirements of the above laws and rules. Brokers act as a middleman between insurance companies and the public, selling a greater number of policies on behalf of the insurance company.

Who is an Insurance Broker?

An insurance broker can be considered the person or entity for the company registered by the Insurance Regulatory & Development Authority of India to act as either a direct broker, a reinsurance broker or a composite broker. In India, we have only 665 registered insurance brokers and also India’s 95% population uninsured with almost 73% of the total population lacking health coverage policies.

Why is an Insurance Broker License Required?

An insurance broker license is needed to safeguard investors, guarantee brokers' skills and expertise, and uphold compliance with the industry's legal and ethical guidelines. It also establishes a structure for responsibility and legal permission to operate, ultimately building trust and encouraging a fair, competitive market.

There are certain reasons behind the requirement for the insurance broker license, as mentioned below for your better understanding:

  • To ensure that a significant number of insurance products are sold on behalf of the Insurance Business.
  • To ensure that there is compliance with relevant laws and regulations related to insurance products.
  • To monitor activities and conduct market research on insurance-related products.
  • To act on behalf of clients to negotiate for insurance-related products.
  • To ensure that a nodal authority regulates the insurance business.
  • An insurance broker License would also assure clients regarding the genuineness of the broker.

What is the Market Size of Insurance in India?

India is anticipated to see a rise in its insurance penetration rate to approximately 10% by 2040, up from the current 3.7%, and the insurance market is forecasted to exceed $500 billion in value. Market growth will be fuelled by initiatives from the government, increasing awareness, and innovative products on offer.

What are the Types of Insurance Brokers?

There are five Types of insurance brokers in India such as direct broker for life, direct broker for general, direct broker for life & general, reinsurance broker and composite broker. Majorly we can cover three categories, and the rest three can be clubbed and considered as one that is direct brokers discussed below:

1. Direct Brokers

The direct broker has been bifurcated under other three heads direct broker for life who focuses on life insurance products, direct broker for general who focuses on general insurance products, direct broker for both life & general who focuses on handling both life and general insurance products.

A direct broker is an institution that gets detailed information regarding the clients for an insurance business. Apart from this, the direct broker renders advice on the appropriate insurance and the policies available. The direct broker also obtains market information on the insurance business.

2. Reinsurance Broker

A reinsurance broker performs similar functions to a direct broker. They manage the business of reinsurance. Apart from this, the re-insurance broker sells products related to re-insurance, such as international insurance. They also maintain the market statistics of re-insurance markets.

3. Composite Broker

A composite broker is an institution that carries out all the functions of a direct broker and a re-insurance broker. Therefore, this form of broker carries out the combined role of a direct broker and a re-insurance broker.

Who Regulates Insurance Broker License?

The Insurance Act 1938 as well as the Insurance Regulatory and Development Act 1999 are the regulations behind Insurance law. Apart from this, IRDAI (Insurance Brokers) Regulations, 2018, apply to an insurance broker license.

Conditions for Granting an Insurance Broker License

The IRDAI makes certain conditions before granting the insurance broker license:

  • The insurance broker must conduct the business according to the rules of the IRDAI.
  • If the insurance broker business has provided false or misleading information regarding the particulars of the business, then the same must be intimated to the authority.
  • The insurance broker business must handle all grievance procedures of clients within 14 days of receiving the complaint. The business must keep information regarding the number of complaints received from customers.
  • Insurance brokers must reasonably conduct their business under the rules laid down by the IRDAI.
  • The insurance broker must maintain books of accounts.
  • Insurance brokers should not conduct multi-level marketing or solicitation.

Eligibility Criteria for an Insurance Broker License

The Government has prescribed minimum requirements for securing an insurance broker license. Apart from this, the broker has to ensure to get registered with the IRDAI

1. Corporate Structure

The following can be registered under the insurance broker license:

  • A company formed under the Companies Act.
  • A partnership that is registered under the LLP Act, of 2008
  • A cooperative society is registered under the Co-operative Society Act 1912
  • Any other individual or company that is allowed to conduct business-related activities.

2. Capital Requirements

The applicant must satisfy the capital requirements for applying for an insurance broker license:

  • Direct Broker- 75 Lakhs.
  • Re-insurance Broker- 4 Crore.
  • Composite Broker-5 Crore.

3. Net Worth Requirements

The applicant must also satisfy the net worth requirement for applying for a broker License:

  • Not below 50 lakh Rupees for a Direct broker;
  • 50% of the minimum capital requirements or contribution or equivalent for a re-insurance broker and composite broker.

4. Deposit Requirements

Every insurer (applicant), before the commencement of the insurance broker business, must ensure that the deposit has been maintained with the scheduled bank. The sum which has to be deposited is as follows:

  • 10 Lakh Rupees for a Direct Broker; and
  • 10% of the minimum capital or contribution is required for re-insurance / composite broker. Fixed deposit shall not be released to them without the prior written permission of the Authority.

5. Office Space/ Facilities

The applicant for an Insurance Broker License must also satisfy the necessary infrastructure, such as adequate office space, equipment, trained manpower, and IT infrastructure, to effectively discharge its activities.

6. Qualifications

The applicant must also satisfy the necessary qualifications to apply for a broker License:

  • Not less than two qualified persons are present who have the necessary training to function as insurance brokers.
  • The principal officer of the business must undergo training and pass the examination organized by the National Insurance Academy, Pune. He must also pass the exam with 50% marks.
  • The principal officer must be a key management executive of the company, full-time director, partner, or office, with requisite experience.
  • Insurance brokers must maintain professional indemnity insurance throughout the validity of their registration, with new brokers allowed 12 months to secure a policy.

7. Purpose of Business

The applicant should ensure that the main object of the business is insurance brokering. These must be mentioned in the objects clause of the AoA & MoA. Foreign investors are also allowed to invest in an insurance broker's business.

What Documents are Required for an Insurance Broker License?

There are necessary documents required for an insurance broker license mentioned below for your reference:

  • Submission of relevant information in Schedule-I of Form-B of the regulations.
  • Copy of the MoA and AoA.
  • Remittance of the Fee for the particular category of Insurance broker License.
  • Fit and Proper declaration as per Form-G of Schedule-I of Regulation.
  • Declaration submitted by a key management executive, principal officer, or director of the company that they do not have any form of disqualification under the Act.
  • Details of Directors/ Partners, Promoter and Key Management Personnel are to be provided in the Form.
  • Schedule I- Form F- List of qualified persons responsible for managing and procuring brokerage business along with their qualifications.
  • Details of statutory auditors and Principal Bankers along with the Bank Account Number of the applicant.
  • Details of the infrastructure of the business.

Procedure for Applying for an Insurance Broker License

There are certain procedures for issuing insurance broker licenses discussed below for your better understanding:

1. Application for Issuance of Registration Certificate

The form specified in Schedule I, Form B of the IRDAI (Insurance Brokers) Regulations must be used for the application, and the type of insurance broker business should be indicated. The application should be accompanied by the documents listed in Schedule I – Form C of the IRDAI (Insurance Brokers) Regulations.

2. Issue of Insurance Broker License

The approval-in-principle depends largely on whether the authorities believe that the information provided is complete in every aspect. The registration certificate will only be issued if specific additional requirements are fulfilled. The certificate of registration will be provided in Form J from Schedule I.

3. On Rejection of Application

If the applicant does not meet the required formalities, the application will be denied. Furthermore, the authority must inform the applicant of the denial of their application within 30 days of the rejection mentioned above.

If an application is declined, the applicant must wait one year before submitting a new application.

Can the Insurance Business License be Rejected?

An application for starting an insurance business can be rejected if the authority feels that the applicant has not fulfilled the requirements. The authority must communicate the refusal of the grant of the application for an insurance broker license within 30 days from the date of communication of the rejection.

An applicant can make a new application after one year of rejection of the application.

What is the Validity of CoR for an Insurance Broker License?

The validity of the certificate of registration for the insurance broker license is mentioned below such as:

  • A certificate granted by the IRDAI would be valid for three years from the date of issue. This would be subject to the order from the authority.
  • An insurance broker would not be permitted to do the Insurance Broker business without possessing a proper certificate and being registered with the authority.

How is the Insurance Broker License Renewed in India?

The renewal process for the insurance broker license in India is discussed below in pointers for your better understanding:

  • Applications for renewing an insurance broker License must be made to the relevant authority 30 days before the expiry of the License. The application must be made in FORM K of Schedule –I of the regulations.
  • If an application is made after the expiry of the above period but before the actual expiry of the certificate, then a payment of Rs. 100/- must be made with the application.
  • If there is a delay in making an application for renewal of registration, then the same must be made by the applicant. If this is within 60 days of the expiry of the certificate of registration, the applicant would have to pay Rs. 750/-.
  • Any application that is received after the expiry of 60 days is considered only after 1 year. In the one year, the insurer must not conduct any business or solicit any form of business.
  • An Insurance broker cannot apply for renewal after 90 from the expiry of the certificate.
  • Insurance brokers cannot do business with brokering after the expiry of the certificate except to serve existing policyholders.
  • The application for renewal of the certificate for broker insurance would be the same as the new application.
  • If the application or renewal is rejected, the same has to be notified to the applicant.

Fee Structure for Insurance Broker License

For granting the certificate of registration, an application must be submitted along with the fees specified in FORM D- Schedule I of the Insurance Regulations.

The fees are payable as the mandatory fees are to be made through electronic means or demand draft payable in favour of the IRDAI, Hyderabad, till the validity period of the certificate of registration.

1. Direct Broker- Rs.25,000 (Application Fees) + Rs. 50,000/-after granting of an in-principal approval where the application is new. In case of renewal of registration, the fees will be Rs 100,000/- for 3 years;

2. Re-insurance Broker- Rs.50,000 (Application Fees) + Rs.150,000/- after granting an in-principal approval where the application is new. If there is a renewal of registration, then the fee to be paid for renewal is Rs. 300,000/- for 3 years;

3. Composite Broker- Rs.75,000 (Application fees) + Rs.250,000/- after granting an in-principal approval where the application is new. If there is a renewal of registration, the fee to be paid for renewal is Rs. 500,000/- for 3 years.

Timeline for Obtaining an Insurance Broker License

After the completion of the training program and passing the examination. Then, you can apply for an insurance broker license from the IRDAI. The application process usually takes 1 to 2 weeks. The whole process of obtaining an insurance broker license will take up to 12 months.

How will Enterslice help you Get an Insurance Broker License?

We are here to make the process of obtaining an insurance broker license easier by providing guidance and support at every step.

Below we have discussed how we will help you:

1. Regulatory Roadmap

We are capable of providing detailed guidance on directing the application procedure for acquiring an insurance broker license. This may involve specifying the necessary paperwork, submission, and any associated costs.

2. Application Filing

Our platform can lead users through the complete application process, offering thorough instructions and explanations for every step. We could also provide users with interactive tools to assist in accurately completing forms and gathering all required documents.

3. Doc Management

We offer a centralized platform where you can upload and manage all the required documents for the license application. This will help you ensure that you have completed all necessary items before submitting your application.

4. Compliance of Regulations

We will keep you updated about any change in the regulatory guidelines for insurance broker licensing and also make sure that your application follows all the regulatory processes and standards.

5. Reminders & Checklist

Our platform could provide checklists and reminders to assist you in staying organized while going through the application process. This may involve specific dates by which documents must be submitted, or steps must be completed.

Frequently Asked Questions

These are the categories of insurance broker license such a direct broker (Life Insurance), direct broker (General Insurance), direct Broker (Life Insurance & General Insurance), re-insurance Broker, and composite broker.

A principal officer is a person who has a higher role in the business. He can usually be a shareholder, director, chief executive officer, managing director, or a whole-time director.

A broker is an individual having the necessary education and experience for handling an insurance brokerage business.

A director can also be a broker for an insurance business as long as the director has the requisite qualifications for managing the insurance business.

Non-resident entity, an individual resident outside of India as well as a foreign partnership i.e. registered under the laws of the foreign country.

No, an insurance broker is not permitted to carry out another business apart from the insurance brokerage business. The business must carry out the objectives mentioned in the AoA & MoA.

Foreign direct investment (FDI) is allowed through the automatic route and government route. However, the maximum amount of permissible limit for foreign direct investment in the insurance brokerage business is 100%.

The validity of the insurance broker license is for three years from the date of issuance of the license.

The estimated profit margin for insurance brokers can be between 2% to 10% as average profit.

The individual has to be at least 18 years old to be eligible to become an insurance agent in India and to sell life insurance or any general insurance policy of any of the insurance companies.

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