In India to become an insurance broker, one must have the Insurance broker license which is issued by the IRDA (Insurance Regulatory and Development Authority of India). The Insurance Regulatory and Development Authority Act, 1999 with the Authority and the Advisory Committee makes the rules and regulations for the insurance broker license.  Basically, the insurance brokers are guided by this authority in our country, and recently in 2018, the IRDA has issued an updated version of regulations for insurance broker registration.

The insurance brokers are professionals who act as a bridge between the customers and the insurance companies but they are not insurance agents. They are expert who has knowledge about the insurance industry and using this knowledge they act as an intermediary between the one who sells the policies and the one who seeks them.  The insurance broker can be an individual or a company. The insurance brokers just ensure that the customer gets the best insurance policies that suit his needs.

Eligibility for the license

As per the regulation, these are requirements for the license:

Corporate Requirements:

  1. Any company incorporated under the provisions of Companies Act, 2013 or under the previous 1956 Act.
  2. Any co-operative society registered under the Co-operative Society Act, 1912 or under any other similar law.
  3. Any Partnership (LLP) registered under Limited Liability Partnership Act, 2008, provided they do not have a partner who is:

a)     Non-resident entity

b)     Any foreign LLP registered under any foreign law

c)     Any person who resides outside India.

  1. Any individual or company approved by the IRDA.

Capital Requirements:

The per-capita contributions by different types of brokers:

Serial no.

Type of insurance broker

Per-capita requirement
  1.  

Direct insurance broker

Rs 75 Lakh
  1.  

Reinsurance broker

Rs 4 crores
  1.  

Composite broker

Rs 5 crores

Net-worth Requirements:

Insurance broker needs to maintain the net-worth for

  1. Rs 50 Lakh for Direct insurance broker
  2. For the reinsurance and composite insurance broker, 50% of the minimum capital requirement.

Deposit Requirements:

They are needed to deposit a certain amount before applying for the registration and during the course:

  1. The direct broker should deposit Rs 10 lakh
  2. The reinsurance and composite broker need to deposit 10% of the minimum capital requirement, the fixed deposit shall be released to be them only by the prior written permission by the Authority.

Infrastructural requirements:

  1. Adequate space to render the service.
  2. Adequate manpower as per their policies.

Qualifications:

  1. The principal officer must have the knowledge, had undergone training, and must have cleared the broker’s exam.
  2. The company must have 2 persons with qualifications.
  3. The principal officer should be the main personnel for the management of the entity.
  4. The insurance salesperson should also have adequate qualifications.

Document Requirements:

It is necessary to submit all the required documents and information to obtain the license as

  1. The application for a license with the requisite information as per the demand of Form-B of schedule I.
  2. The certificate of incorporation under Companies Act, 2018 or 1956 Act.
  3. A copy of the Memorandum of Association (MOA) and Article of Association (AOA) of the applicant company. The MOA should contain insurance booking as the main motive of the company.
  4.  All information related to the principal officer to prove that he fits under the criteria of Form-G of schedule I.
  5. A duly written declaration by the principal officer to show cause that they are not falling under the list of disqualifications as mentioned under Section 42D of the Act.
  6. Details of all the directors, partners, promoters, and managerial team.
  7. Details of at least two qualified brokers with their appropriate qualifications as per Form F of schedule I.
  8. All audited/unaudited financial details along with a net-worth certificate of the company. The balance sheet of the applicant company. All bank details of the applicant company and details of the principal banker.
  9.  Details of infrastructure, office space, equipment, and manpower.
  10. Business plan of at least three years. Organization chat with accountability and responsibility of the head of the department.
  11. List of all proposed and current shareholders of the company. If any shareholder is a company, then furnish board resolution and the details of investment of such company in the applicant company.
  12. The undertaking of non-violation of code of conduct. The undertaking of non-holding of any employment in any other insurance company and non-holding of any insurance license by any of the members of the applicant company. Undertaking that no person has been ever denied for the license.

Fee-structure

Non-refundable application fee

  1. Direct broker – Rs 25K
  2. Reinsurance broker – Rs 50K
  3. Composite broker – Rs 75K
Registration fee
  1. Direct broker- Rs 50K
  2. Reinsurance broker- Rs 150K
  3. Composite broker- Rs 250K
Renewal fee
  1. Direct broker- Rs 1 lakh
  2. Reinsurance broker- Rs 3 lakh
  3. Composite broker – Rs 5 lakh

Other Requirements

  1. The insurance broker conducts business as per the guidelines issued by the IRDA and must comply with the code of conduct provided by the same.
  2. The insurance company must have broking or broker in its name.
  3. The insurance company should not hold any foreign investment which has exceeded the limit of a minimum 26% of total paid-up capital.
  4. The applicant company needs to deposit 20% of the initial capital with the registered bank.
  5. Must not be involved in multi-marketing services.

Procedure for obtaining the license

The following procedure should be adhered to by the applicant in order to obtain the insurance broker license:

  1. Complete the qualifications required for the license.
  2. Filing the online application in Form B of Schedule I of the guidelines, provided on the IRDA portal.
  3. Submission of all documents.
  4. Submission of required non-refundable application fee.

After this, the Authority examines the documents submitted and can ask for further documents if needed. At this stage, the authority can raise queries and ask for any further details from the applicant.  Applicant should submit additional documents within 30days of the said communication.

After examining and verifying all the submitted documents the authority issues the in-principle approval for insurance broker license but only if it is of opinion that the applicant has satisfied the requirements.

After acquiring this approval, the applicant needs to fulfill all further requirements and submit the prescribed license fee. 

Then the IRDA if satisfied that the applicant has fulfilled all the requirements of the IRDA regulations, 2018 and the in-principle approval, grants the Certificate of Registration, commonly called COR. This COR is issued as per Form J in Schedule I of the said regulation. Finally, the applicant gets the commercial insurance broker license from the Authority.

The authority can reject the application for a license if it feels that the applicant is not satisfying the requisites for the same and this rejection should be communicated within 30 days. The applicant is free to fill out the application form after one year of rejection.

This insurance broker license is granted for three years from the date of its issuance and the application for its renewal should be filed at least one month prior to the expiration of these three years.


About the Author: This Legal Article is prepared by Shambhavi Suyesha , Legal Researcher at Enterslice. She can be reached at sh.suyesha17@gmail.com

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