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IRDAI Broker License

Narendra Kumar

| Updated: Mar 09, 2018 | Category: IRDA License

IRDAI Broker License

The Insurance Regulatory and Development Authority of India (IRDAI), published through its official gazette, the IRDA (Insurance Brokers) Regulations, 2018, on January 12th, 2018 with the purpose to supervise and monitor the registration, renewals, and operations of the Insurance Brokers as the insurance intermediary. The aforesaid publication superseded the IRDAI Broker License (Insurance Brokers) Regulations, 2013, with effect from such date.

Glossary:

  1. Broker Qualified Person: To be stated as IRDAI Broker License Qualified Person, following conditions shall be satisfied-
    • the individual shall be the employee or director of the insurance broker firm;
    • the individual shall be engaged in the solicitation and procurement of the business of insurance;
    • The individual shall have undergone training and have passed the examination as specified by IRDAI.
  2. Composite Broker: It is a type of insurance IRDAI Broker License who solicits and arranges insurance and/or reinsurance for its clients with insurers and/or reinsurers located in India and/or abroad, in exchange for a remuneration or fees, and also provides the following services:
    • Claim Consultancy;
    • Risk Management Services;
    • Other allied insurance services
  3. Direct Broker: It is a type of insurance broker who solicits and arranges insurance and/or reinsurance for its clients with insurers and/or reinsurers located only in India, in exchange for remuneration or fees, and also provides the following services:
    • Claim Consultancy;
    • Risk Management Services;
    • Other allied insurance services
  4. Re-insurance Broker: It is a type of insurance IRDAI Broker License who solicits and arranges re-insurance for its clients with insurers and/or reinsurers located in India and/or abroad, in exchange for remuneration or fees, and also provides the following services:
    • Claim Consultancy;
    • Risk Management Services;
    • Other allied insurance services
  5. Insurance Broker: As per the aforesaid regulations, the term insurance broker may include:
    • Direct Broker;
    • Reinsurance Broker;
    • Composite Broker.

 As authorized by the IRDAI.

Who can be the Applicants for the IRDAI Broker License Registration?

The following can apply to the IRDAI Broker License for the grant of a Certificate of Registration of the Insurance broker:

  • A Private Company registered under the Companies Act, 2013;
  • A co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the registration of co-operative societies;
  • A Limited Liability Partnership formed under the Limited Liability Partnership Act, 2008;
  • Any other person recognized by IRDAI Broker License to act as an insurance broker.
  • For an applicant or its related entities, there shall be granted a single certificate of registration.

Functions of a different category of brokers

Functions of a Direct Broker

(a) Obtaining detailed information about the business and risk management philosophy of the client;

(b) Familiarizing with the client’s business and underwriting information so as to be explained to an insurer and others;

(c) Advising on appropriate insurance cover and terms;

(d) Maintaining detailed knowledge about the available insurance markets, as may be applicable;

(e) Submission of quotation received from insurer/s for consideration of a client;

(f) Providing requisite underwriting information so as to help an insurer in assessing the risk pertaining to a policy;

(g) To act promptly on instructions received from a client and providing him written acknowledgments and progress reports;

(h) Assisting clients in paying a premium under section 64VB of Insurance Act, 1938 (4 of 1938);

(i) Making negotiations of the claims;

(j) Maintenance of proper records of claims;

(k) Providing assistance in the opening of e-insurance accounts;

(l) Providing assistance in issuing e-insurance policies; and

(m) Any other function specified by IRDAI Broker License.

Functions of a Re-insurance Broker

(a) Getting familiarized with the client‘s business and risk retention philosophy;

(b) Maintenance of clear records of the insurer’s business;

(c) Advising on technical data on the reinsurance covers available in the international insurance and the reinsurance markets;

(d) Maintenance of a database of available reinsurance markets, including solvency ratings of individual reinsurers;

(e) Providing risk management services for reinsurance;

(f) Selecting and recommending a reinsurer or a group of reinsurers;

(g) Making negotiations with a reinsurer on the client‘s behalf;

(h) Providing assistance in commutation of reinsurance contracts placed by them;

(i) To act promptly on instructions received from a client and providing him written acknowledgments and progress reports;

(j) Collecting and remitting premiums and claims/refunds within such time as agreed upon;

(k) Making negotiations of the claims;

(l) Maintenance of proper records of claims;

(m)  Any other function specified by IRDAI Broker License.

Functions of Composite Broker

The composite broker carries on all of the functions as mentioned in the case of direct IRDAI Broker License and Re-insurance broker.

Application for Registration

A duly filled in application in Form B of the aforesaid regulations shall be submitted along with the requisite documentation and fees to the Authority.

Mandatory Documents for Registration

The following are the mandatory documents to be submitted to the Authority along with the application for registration-

  • A printed copy of Memorandum and Articles of Association whose main objects should be as per Regulations;
  • Compliance with the training requirements as specified in the Regulations;
  • Data in respect of the Principal Officer to be appointed along with the document stating his fit and proper criteria;
  • Declaration by the Principal Officer that the applicants(Directors, Principal officers, KMPs) are not the persons disqualified under the regulations;
  • Details of Directors/ Partners, Promoter, and Key Management Personnel;
  • List of broker qualified persons responsible for soliciting and procuring insurance business along with their qualification certificates;
  • Details of statutory auditors of the applicant;
  • Details of Principal Bankers along with the Bank Account Number of the applicant;
  • Details of infrastructure including IT infrastructure along with supporting documents like ownership/ lease agreement papers;
  • Business Plan/Projection Report for three years;
  • Detailed organizational chart including IT, underwriting, risk assessment, claims settlement, marketing, accounts, back office etc.
  • List of Personnel inducted from Insurance background along with their CVs, Qualification Certificates and Experience Certificates;
  • Any other information asked for by the Authority.

Incomplete or Defective Application

An application which is not complete in any respect or does not conform to the instructions as specified in the regulation is liable to be rejected by the Authority.

But before rejecting any such application, the Authority shall give an opportunity of being heard to the applicant.

Furnishing of information, clarification and personal representation

An applicant may be required to furnish any further information and/or clarification as it may be deemed necessary for the purpose of disposal of the application. The applicant shall be given an opportunity to submit the requirements/ clarifications/ additional information within a period of 30 days from the date of receipt of the communication from the Authority.

The applicant along with their principal officer may also be required to appear before the Authority for a personal representative in connection with the application.

Factors Predominant for Consideration in the Application

While considering an application, the following matters are taken into account by the Authority-

  • The applicant shall be suffering from any of the disqualifications as mentioned in the regulations;
  • The applicant shall have the necessary infrastructure, such as adequate office space, equipment, trained manpower and IT infrastructure for the effective discharge of its activities;
  • The applicant shall have in their employment a minimum of two broker qualified persons having the necessary qualifications and experience to conduct the business of insurance broker and in case of the applicant has certain branch offices, one broker qualified person per branch office having the necessary qualifications shall be present;
  • No person, directly or indirectly connected with the applicant, shall have been refused the grant of a certificate of registration or license by the Authority;
  • The applicant shall fulfill the Capital and Net worth requirement as specified in the regulations as follow:
    • Capital Requirement
    • Direct Broker- 75 Laces;
    • Re-insurance Broker- 4 Crores;
    • Composite Broker- 5 Crores.
    • Net worth Requirement
    • Direct Broker- 50 laces;

Reinsurance- Composite Brokers- At least 50% of the capital requirement mentioned above

  • The principal officer of the applicant shall possess the required qualification, must have undergone requisite training, passed the examination, possesses the necessary certificate and fulfills other requirements as specified in the regulations;
  • The Principal Officer shall fulfill the fit and proper criteria and shall be a suitable person to conduct an insurance business;
  • The applicant shall not be involved in any other activity apart from the one mentioned in its MOA/AOA;
  • the promoters/ investors/ foreign investors/ partners of the applicant shall be of sound financial position to make an investment in the applicant entity;
  • the applicant shall not have withdrawn any previous application during the preceding financial year;
  • No foreign investor should have existed for any reason at any time during the preceding two financial years from the date of application;
  • The certificate of registration shall be granted in the interest of the policyholders.

Issuance of Certificate of Registration

Once the authority is satisfied that the applicant fulfills all the conditions as specified above which is necessary for the issuance of Certificate of Registration, there shall be first issued an in-principle approval to the applicant for compliance of requirements for issuance of Certificate of Registration.

The Certificate of Registration shall be issued subject to the insurance broker adhering to the conditions and the code of conduct as specified by the IRDAI from time to time.

If an applicant has been granted a certificate of registration under one category, he may apply for registration under any other category subject to the lapse of one year from the grant of first registration.

The validity of Certificate of Registration

The Certificate of Registration once issued shall be valid for a period of three years from the date of issue, unless the same is suspended or canceled by the Authority.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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