Overview of Insurance Marketing Firm Licence Insurance marketing firm is a new form of business and distribution channel in the insurance sector. This was brought out by one of the insurance committees in 2007. A group of companies were set up to market the products related to insurance and mutual funds sales. Apart from this, the main plan was to sell stocks, pension plans, and financial services. Insurance Marketing Firms conduct similar services related to an insurance distribution firm. An entity to operate as an insurance marketing firm should secure an insurance marketing firm licence. Insurance marketing firms have collaborations with insurance companies to market their products. To obtain an insurance marketing firm licence the applicant has to be a company/ LLP/ cooperative society/ any other recognised entity. An individual cannot be an insurance marketing firm. These firms are free to sell insurance products on behalf of different insurance companies. However, specific guidelines have to be followed by an insurance marketing firm in dealing with clients. Marketing firms have to show transparency and prudence in their dealings with clients. Insurance marketing firms do not have any contract of exclusivity with one insurer. They can work for different insurance companies. Insurance marketing firms hire Insurance Sales Persons (ISP) who carry out marketing and soliciting activities on behalf of the Insurance Marketing Firm. A financial executive is also appointed by Insurance Marketing Firm known as a Financial Service Executive (FSE). These executives are responsible for soliciting and marketing non-insurance products which are regulated by other authorities. Applicable Acts/ Rules/ Regulations regulating the Insurance Marketing Firm Licence The Activities of an Insurance Marketing Firm are governed by the following acts, rules and regulations: Insurance Regulatory and Development Authority of India (Registration of Insurance Marketing Firm) Regulations, 2015 Insurance Act, 1938 Insurance Regulatory and Development Authority Act, 1999 The primary regulatory authority for the Insurance Marketing Firm Licence is the Insurance Regulatory and Development Authority of India (IRDAI). Insurance Marketing Firm license is also regulated by the Reserve Bank of India, Securities Exchange Board of India, Pension Fund Regulatory and Development Authority and Department of Posts. Eligibility criteria for obtaining the Insurance Marketing Firm Licence The following eligibility criteria have to be followed by an applicant: Corporate Structure According to Regulation 2.2 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant for an insurance marketing firm license can be: Company that is established under the Companies Act 2013 or the previous Company Law 1956; A partnership that is registered under the Limited Liability Partnership Act, 2008; A co-operative society which is registered under the Co-operative society act 1912; and Any other individual or company that is allowed to conduct the business related to an Insurance Marketing Firm. Capital Requirements According to Regulation 6 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant has to meet the following capital requirements to apply for an insurance marketing firm license: Net Worth – Net Worth of the applicant must not be less than Rs 10 lakhs. If the applicant is applying to act as an Insurance Marketing Firm in a particular district, then the applicant's net worth must be at least Rs 5 lakhs. The applicant has to ensure that the net worth of the company is maintained at all times. For this purpose, a certificate must be submitted, which is certified by a chartered accountant within 3 months of the closing of the financial year. Foreign Holding Aggregate holdings of equity shares/ contribution in the firm by foreign investors (including portfolio investors) should not exceed 49% of contribution/ paid up equity capital of Insurance marketing firm at any time. Principal Officer The insurance marketing firm must have a principal officer with specific qualifications. A principal officer must be responsible for all the activities of the insurance marketing firm. The principal officer must meet the following criteria: Associate/Fellow of the Insurance Institute of India, Mumbai; or Associate/Fellow of the Institute of Actuaries of India; or Associate/Fellow of Chartered Insurance Institute, London; or Postgraduate qualification of the Institute of Insurance and Risk Management, Hyderabad; or Graduate with Insurance experience of five years preceding the year in which the application is made; or Graduate with ten years of experience in the financial services sector preceding the year in which the application is made. Apart from this, the principal officer must satisfy training requirements as per the rules and regulations of the authority. The directors, principal officers, and shareholders of the insurance marketing firm must not be disqualified under any law in force. They must also satisfy the criteria of the FIT and PROPER test. The Principal Officers must also meet the prescribed General Eligibility Criterion prescribed for them. Name of the Business The Insurance marketing firm must have in its name the following words ' Insurance Marketing Firm. Office Space/ Facilities The applicant applying for an Insurance Marketing Firm Licence must also satisfy necessary infrastructure such as adequate office space, equipment, trained manpower, and IT infrastructure to effectively discharge its activities. Purpose of the Business The applicant should ensure that the main objects of the business are insurance marketing. These must be mentioned in the objects clause of the Articles of Association (AOA) and the Memorandum of Association (MOA). To secure the insurance marketing firm's licence, activities must be according to the set of activities approved by the authority. No refusal of application The applicant must not be refused an application in the past for an Insurance Marketing Firm Licence. Certification Requirements of ISP and FSE The ISP and the FSE has to satisfy the certification and training requirements as required by the authority. ISP that are engaged by the insurance firm has to market insurance products related to life insurance, general insurance, and health insurance should have a valid certificate according to the requirements of the authority. FSE must have an independent financial licence from financial authorities. ISP must have undergone insurance marketing firm training, which is prescribed by the authority and passed the examination conducted by the authority. ISP for an insurance marketing firm should have the same training requirements as the Principal Officer. FSE must fulfil the necessary training requirements when appointed by the Insurance Marketing Firm. Services offered by an Insurance Marketing Firm Marketing of Insurance Products According to IRDAI, Insurance Marketing Firms are permitted to market and solicit products related to insurance. The types of products that can be solicited are health insurance, general insurance and life insurance products. The Insurance Marketing Firm has been permitted to represent a maximum of two life insurance companies, two health insurance companies and two general insurance companies at any point of time. Insurance marketing firms can only market individual line of products related to health, motor, householders, personal accident and other such products. They cannot market commercial products in the market. Insurance Servicing Activities As per the regulations of the Insurance Regulatory and Development Authority of India (IRDAI), marketing firms can carry out insurance servicing activities on behalf of insurance firms which include undertaking back-end activities of insurers as permitted in the Guidelines on Outsourcing Activities by Insurance Companies issued by the IRDAI. Additionally, Insurance Marketing Firms can become an approved person of Insurance repositories. Apart from this, marketing firms can carry out surveys and access the amount of loss during the incident. Marketing firms have the authority to appoint licensed surveyors and loss assessors for this role. Any other activity can be carried out by an Insurance Marketing Firm as per the requirements laid down by IRDAI. Marketing of Financial Services Insurance marketing firms also carry out marketing of other financial products such as Mutual Funds of MF companies that are regulated the Securities and Exchange Board of India (SEBI), Pension products regulated by PFRDA, products distributed by SEBI licensed Investment Advisors, Banking/financial products of banks/ NBFCs regulated by SEBI, Non-insurance products offered by Department of Posts, Government Of India and any other financial product or activity permitted by IRDAI from time to time. Scope of Insurance Marketing Firm Licence The insurance marketing firm engages an independent ISP for procuring and marketing insurance-based products. Insurance marketing firms hire ISP to solicit and procure two Life, two General, and two Health Insurance companies. However, this will be regulated by the authority. When it comes to general insurance, insurance marketing firms are only allowed to handle retail lines of insurance-related products. They have to follow certain guidelines related to motor, health, personal accident, householders, shopkeepers, and such other insurance products which are approved by the authority. Prior approval is required from the authority regarding any form of change in the engagement with the insurance company. Insurance marketing firms are allowed to deal with shares, stocks, mutual and pension funds. The activities carried out by an Insurance Marketing Firm are related not only to insurance but also to other products. Conditions for Granting the Insurance Marketing Firm Licence According to Regulation 11 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant has to satisfy the following conditions to be granted registration of insurance marketing firm: The Insurance marketing firm must be allowed to solicit insurance products of two life, two general and two health insurance companies only. The insurance marketing firm must inform the authorities if there is any form of change in the business structure. The insurance marketing firm must redress all grievances of customers within 15 days of receipt of the complaint. The insurance marketing firm must reasonably conduct their business under the rules laid down by the IRDAI. Insurance marketing firm should not conduct multi-level marketing or solicitation. The insurance marketing firm must ensure compliance with the code of conduct related to FSE and ISP. Insurance marketing firm shall secure policies commensurate to their business and the number of ISP recruited. The insurance marketing firm must comply with the requirements of other authorities also. Documents /Paperwork required for Insurance Marketing Firm Licence According to Annexure 2 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant has to submit the following documents at the time of registration of insurance marketing firm: Submission of relevant information as required in the FORM A. Remittance of requisite fee by demand draft payable at Hyderabad. Submission of charter documents of the applicant MOA and AOA (Memorandum and Articles of Association). The company Bye Laws have to also be submitted. Declaration of Fit & Proper criteria from Principal Officer, Directors, and Managing Partners (separately for each person) to be provided in the 'Fit and Proper Form.' Details of infrastructure, supporting evidence thereof like ownership/lease agreement papers for the office space/equipment/trained manpower for the registered office and the branch offices at various locations. Projections of administrative expenses, salaries and wages, and other expenses, draw the revenue account, the profit and loss account and the balance sheet for the next three years. Organization chart giving a complete picture of the company's activities like IT, risk assessment, claims settlement, marketing, accounts and back office. Any other information relevant to the nature of services rendered by the applicant for the growth and promotion of insurance business. Any other requirements as deemed necessary by the authority. Two directors are required to sign on the application form. Procedure for applying for Insurance Marketing Firm Licence According to Regulation 4 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant has to submit the following documents at the time of registration of insurance marketing firm: Application for Certificate of Registration for Insurance Marketing Firm Licence The applicant should make an application in Form-A regarding the Insurance Marketing Firm Licence. A non-refundable fee of Rs. 5000/- plus service tax (GST) has to be paid to the authority. All the necessary documents have to be submitted along with Form-A. A declaration has to be provided by all the principal officers and directors regarding the FIT and PROPER criteria that are sufficed by the directors/ principal officers of the Insurance Marketing Firm. Along with the Application, the exam pass certificate of the Insurance Marketing Firm must be submitted. The exam pass certificate will relate to the principal officers and the directors of the insurance marketing firm. Apart from this, a copy of the surveyor, loss assessor license of the individual who is employed by the Insurance marketing firm should be submitted to the authority. Approved Person Certificate Copy also has to be submitted to the authority. Licenses of all the registered individuals must be submitted to the authority by the insurance marketing firm. This would also include the licences under IRDAI, SEBI, RBI, PFRDA, and Post Office. The application must confirm according to the requirements of the authority Granting Registration of Insurance Marketing Firm Licence If the authority feels that all the requisite information complies with the Insurance Marketing firm Licence, then the authority shall grant a certificate of registration in Form- B. The Insurance marketing firm applying for a certificate of registration can also apply for any other categories under the IRDAI. Rejection of the Insurance Marketing Firm Licence 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 to grant the application for an Insurance marketing firm within 30 days of communication of the rejection. An applicant can appeal such rejection to the Chairman of the authority within 30 days to consider the decision. The Chairman of the authority will review the application and reconsider the decision within 60 days of the appeal's receipt. A further appeal can be made to the Securities Appellate Tribunal (SAT) within 45 days of receipt. Where the SAT rejects the appeal, the fresh application can be made by the applicant after 1 year only. Validity and Renewal of Insurance Marketing Firm Licence The license for an insurance marketing firm is valid for three years. An insurance marketing firm cannot conduct activities with an expired certificate. Rejection of the Insurance Marketing Firm Licence 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 to grant the application for an Insurance marketing firm within 30 days of communication of the rejection. An applicant can appeal such rejection to the Chairman of the authority within 30 days to consider the decision. The Chairman of the authority will review the application and reconsider the decision within 60 days of the appeal's receipt. A further appeal can be made to the Securities Appellate Tribunal (SAT) within 45 days of receipt. Where the SAT rejects the appeal, the fresh application can be made by the applicant after 1 year only Renewal of Insurance Marketing Firm Licence According to Chapter III of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, an applicant has to following the given procedure for the renewal of Registration of insurance marketing firm: Applications for renewing an insurance marketing licence must be made to the relevant authority 30 days before the licence expiry. The application must be made in FORM AA. However, an application for renewal can be made 90 days before the expiry of the licence. Documents, along with Form AA, must be submitted with the renewal fee of Rs. 2000/- plus service tax (GST). 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. The authority will only consider an application for renewal of certificate for an insurance marketing firm that is received after 60 days after one year. During the interim period, the applicant cannot conduct the business of an Insurance Marketing Firm. Principal Officer and the ISP have to complete a minimum of 25 hours of practical training before renewing the certificate. Before renewing the application, the authority can ask the applicant to furnish further information. The insurance marketing firm has to submit this information 21 days from receiving such information. The authority will grant the certificate in Form-D for a certificate of renewal of registration. Enterslice has a proven track record of obtaining Insurance Marketing Firm Licence for our clients. We are a team of licensing professionals experts. We also provide end-to-end consultancy for our partners. We offer legal consultancy services too.