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Insurance Broker License

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INSURANCE BROKER LICENSE

An Insurance Broker is a group of qualified persons, firm or company acting through its directors, promoters, partners or employees. They possess expert knowledge about insurance-related laws and in-depth knowledge about insurance products. An insurance broker serves as professional advisors and they advise insurance-related services. They act as a middleman or broker between an insurance company and an individual requesting insurance service.

TYPES OF INSURANCE BROKER

There are three types of Insurance Broker as following:

  • DIRECT INSURANCE BROKER
    •They procure or solicit the business of insurance and sale the insurance policy to its customers through its website or some computer software. For this, they get the commission from an insurance company for selling their insurance policy.
  • COMPOSITE INSURANCE BROKER
    •They are the insurance agents who hold a valid license. They provide insurance-related services. They offer both types of insurance such as life insurance and general insurance. Licensing of such a broker is selective by the authority.
  • REINSURANCE BROKER
    •They are the insurance broker who can bind the reinsurance on behalf of the insurance company.

INSURANCE BROKER LICENSE

In India, Insurance-related services such as Insurance products, Insurance Broker or Insurance Broker License are governed by the regulations issued by the Insurance Regulatory & Development Authority (IRDA). During the year 2018, for smooth regulation of insurance broker licenses, IRDA has issued IRDA (Insurance Broker) Regulations, 2018.

CAPITAL/FINANCIAL REQUIREMENT TO OBTAIN LICENSE

As per IRDA (Insurance Broker) Regulations, 2018 capital required for different brokers as follows:

  • Direct Insurance BrokerCapital requirementINR 75 Lac
  • Composite Insurance BrokerCapital requirement INR 5 Crore
  • Reinsurance BrokerCapital requirement INR 4 Crore

APPLICATION FOR INSURANCE BROKER LICENSE

An applicant for the Insurance Broker License can be amongst the following:

  • Companies incorporated under the Companies Act, 2013 or old companies already registered under the Companies Act, 1956.
  • Co-operative Societies registered under Co-operative Societies Act, 1912.
  • Registered LLP incorporated under the Limited Liability Partnership Act, 2008.
  • Any other as authorized or recognized by IRDA.

NET WORTH

At the time of obtaining the license or while getting the registration for Insurance Broker License, an applicant should have minimum net worth as follows:

  • Direct Insurance Broker: minimum net worth for applying Direct Insurance Broker License is INR 50 Lac
  • Composite Insurance Broker: Net worth should be 50% of minimum f capital requirement, i.e., 50% of INR 5 Crore which amounts to be INR 2.5 Crore
  • Reinsurance Broker: Net worth should be 50% of minimum capital requirement, i.e., 50% of INR 4 Crore which amounts to be INR 2 Crore

STEP BY STEP FOR INSURANCE BROKER LICENSE

Following are the detailed step for getting the Insurance Broker Registration;

  • SUBMIT THE APPLICATION:
    •As per the regulations of schedule I of IRDA, an applicant has to apply in Form B, along with the prescribed non-refundable fee and necessary documents.
  • SCRUTINY OF APPLICATION:
    •Application is verified by an authority for its correctness. If the application is not complete or require any additional document, the same can be ordered by an authority. An applicant has to comply with the additional requirement as per the orders.
  • SUBMISSION OF ADDITIONAL DOCUMENTS:
    •In case of any query received as above, an applicant needs to submit additional documents, as required, within 30 days of receipt of such communication.
  • IN-PRINCIPLE APPROVAL:
    •If after additional requirements, authority, after thorough and complete investigations founds everything completely, will issue In-Principle approval for the license.
  • CERTIFICATE OF REGISTRATION:
    •As per schedule I, the authority will issue a certificate of registration in Form J, after the authority confirmed the application.

DOCUMENTATION

Following documents are required to be attached to the Form B for applying for Insurance Broker License:

  • Copy of Memorandum of Association & Article of association, if the applicant is a Company.
  • Form G for the detail information of the Principle Officer along with the information whether they fulfilled fit & proper criteria.
  • Principle officer will give the declaration stating that they along with directors or partners are not disqualified as per section 42D.
  • Full details of directors, partners, promoters, and KMP along with the list of current shareholders and proposed shareholders, if any.
  • Bank details along with the current banker details.
  • Latest audited balance sheet

APPLICATION FEES

An applicant needs to pay the fee for getting the Insurance Broker License. Such license fees are as per the table mentioned below:

TYPE OF LICENSE

NON-REFUNDABLE APPLICATION FEES

FRESH REGISTRATION

RENEWAL FEE FOR 3 YEARS

Direct Broker

INR 25,000/-

INR 50,000/-

INR 1,00,000/-

Reinsurance Broker

INR 50,000/-

INR 1,50,000/-

INR 3,00,000/-

Composite Broker

INR 75000/-

INR 250,000/-

INR 5,00,000/-

INSURANCE BROKER LICENSE VALIDITY

Insurance broker license is valid for three years from the date of issuance of a certificate of registration. It has to be applied for renewal by the registered broker. A registered broker will apply for the renewal of an Insurance broker License at least one month before its expiry date.

CONCLUSION

We conclude that getting the License is a mandatory requirement or all the company willing to do the Insurance Broker Business. Thus Insurance Broker Company must get the license from the Insurance Regulatory and Development Authority (IRDA) which is a regulatory and governing authority for the insurance-related matters. Insurance Broker is an ever-growing business that should be conducted without considering chances of failure, which can be negligible. One need is all materialistic profitable business plans.

Frequently Asked Questions

  • 1. What is the difference between Broker & and Agent?

    A broker provides all forms of insurance whereas n agent has a tie-up with one specified company. Thus, Broker is an independent identity that deals with all sorts of Insurance and provides all kinds of insurance.

  • 2. What is the method of paying the broker?

    Brokers are best paid through Commission. The commission is paid by the company to the insurance broker based on policies sold. However certain broker charge fees from companies as per their rate for this service.

  • 3. What are the additional services provided by Insurance Broker to its client?

    Insurance Broker provides additional services also such as Claim consultancy, risk management, risk mitigation, risk advisory, etc.

  • 4. Do existing brokers need to bring any additional equity capital?

    They can transfer its reserve & surplus to share capital by issuing bonus shares.

  • 5. How many Broker Qualified Persons is required to apply for the License?

    Minimum two Broker Qualified persons are required to be in employment for applying for the License.

  • 6. What is the qualification required for being a Principal Officer?

    A person who can perform executive roles and is a Broker Qualified Person can be a principal officer. However, the director cannot be a principle officer but he is designated as Chief Executive officer.

  • 7. Is there any expertise required for shareholders?

    No as such no requirement for shareholders is mentioned by IRDA however, KMP should have knowledge and experience in the field of insurance.

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