Legalities of Insurance Broker License in India
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When the wind is about insurance broker license then surely the name of IRDAI (Insurance Regulatory Development Authority of India would appear in bold. The reason being that it is the governing and regulatory authority.
An insurance broker can be an individual or a company that works in the direction of securing, mainly policies for the customers. They very well retain commission from the insurance companies in relation to policies provided by them to its clients.
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The insurance broker has to swear by certain rules and regulations and all his actions must be backed by some law in place, well for that matter we can outline the related laws like Insurance Regulatory and Development Authority Act, 1999 and the other law is Insurance Regulatory Development Authority of India (Insurance Brokers) Regulations, 2018.
An insurance broker plays a role of a middleman that facilitates all the activities between the public at large and the insurance companies.
Insurance Brokers: Major Types
Major type of insurance brokers can be listed below:
- Direct brokers: These brokers, in short, help the insurance companies with providing information about clients. They also serve to extend advice on available insurance related policies. The market related details about Insurance business is collected by the insurance broker. Insurance brokers through subtle ways help its clients extensively like initiating an account of e- insurance.
- Reinsurance broker: This category of broker performs functions in much similar manner as the direct broker. This broker also works through selling products in relation to reinsurance, to exemplify we can say international insurance.
- Composite broker: A composite broker is the one that simultaneously carries out the functions of both direct and reinsurance brokers.
Insurance broker license: what's the need?
- This license ensures that the insurance products are readily sold that too in huge numbers.
- It ensures that laws are being complied to well within the grasp
- It helps in keeping a keen eye on research in relation to market
- It acts in an instrumental manner in acting on behalf of customers, in order to carry out negotiations in relation to the products that are insurance based
- To assure that the nodal authority monitors and regulates insurance business activities
- It provides guarantee to the clients that the insurance broker is genuine.
Insurance Broker License: What is the Eligibility Criteria?
The broker has to abide by certain requirements as prescribed by the government which are enumerated below:
- The below mentioned entities can acquire registration for insurance broker license.
- A company as given under the companies Act
- Any partnership as given the partnership Act
- Any cooperative society
- Any other company that entails the permission to carry out the activities of a business broker.
- The given below are the requisite Requirements of the capital that must be adhered to
- In case of direct broker: it stands to 75 lakh
- In case of reinsurance broker: it stands to 4 crore
- In case of composite brokers: it stands to 5 crore.
- For fetching the insurance broker license the requirement related to net worth must also be fulfilled.
- In case of the direct broker, the net worth must not entail a fall below 50 lakh
- In case of the reinsurance and composite broker, the net worth must not entail a fall below minimum capital's 50%.
- Every willing applicant needs to make sure that a sum must be deposited with the bank as scheduled.
- In case of direct broker, the sum that needs to be deposited must be 10 Lakh
- In case of reinsurance or composite broker, minimum capital's 10% must be deposited
- It is indeed a crucial element that the applicant must be equipped with infrastructure having adequate working space, competent human resources etc which shall ensure that activities are being carried out efficiently.
- It is the duty of the applicant to make sure that there should be presence of qualified individuals, the minimum requirement being two who shall hold the responsibility of functioning as insurance brokers. Apart from this, it is a necessity that the principal officer should also be qualified enough to hold the insurance broker related activities.
Insurance Broker License: Procedure to Apply
While applying for the insurance broker license following things needs to be kept in mind:
- Insurance broker business can be broken down into types, therefore it must be taken note of by the applicant which type he has to select.
- Form B as mentioned in the schedule if the regulations is used in making application in this regard
- Together with the application, certain documents are to be attached in accordance with the need as mentioned in the Form C.
- As specified by the Form D, the application has to be submitted together with the requisite fees which is as follows:
- In case of the direct broker, the fees stands to twenty five thousand
- In the case of reinsurance broker, the fees stand at fifty thousand.
- In case of composite broker, the fees stands to seventy five thousand
- Mandatory fees is also required to be paid
- The fees can be paid via two modes either electronically or through demand draft.
Insurance Broker License: Grant of Certificate of Registration
In case it is deemed appropriate to the requisite authority that the information is true and complies uth the conditions, then in that case, in principle approval is given to the applicant.
Further, the certificate of registration would be granted on complete satisfaction of the authority.
In the nutshell it can be concluded that the insurance broker license not only assures the clients of the genuineness but also makes it mandatory for all the insurance brokers to work within the framework of laws.