The significance of insurance has come to the forefront, especially during the ongoing COVID-19 pandemic, where medical bills have skyrocketed, leading to an increased awareness among the general public. In India, the insurance sector is experiencing steady growth, making insurance brokers essential in connecting insurance companies with customers. This article will provide a comprehensive guide to understanding the role of insurance brokers, the types of brokers, the eligibility criteria for obtaining an insurance broker license, and the application process involved.
What is an Insurance Broker?
Insurance brokers are professionals who act on behalf of clients, helping them find the most suitable insurance policies for their needs. They differ from insurance agents, who primarily represent specific insurance companies and sell their products for a commission. Brokers provide a more personalized service, ensuring that clients receive unbiased advice tailored to their individual requirements.
Types of Insurance Brokers
In India, insurance brokers can be categorized into three main types:
- Direct Brokers: Licensed by the Insurance Regulatory and Development Authority of India (IRDAI), direct brokers familiarize themselves with the insurance needs of their clients. They offer advisory services, negotiate claims, and maintain insurance records. The minimum capital requirement for registration is Rs. 75 lakhs.
- Reinsurance Brokers: These brokers deal with reinsurance, essentially insurance for insurance companies. They arrange contracts between direct insurers and reinsurers, negotiating terms to ensure the best outcomes for both parties. The minimum capital requirement for reinsurance brokers is Rs. 4 crore.
- Composite Brokers: Combining the roles of both direct and reinsurance brokers, composite brokers have a dual responsibility. The minimum capital requirement for registration is Rs. 5 crore.
Eligibility Criteria for Insurance Brokers
To become an insurance broker in India, certain eligibility criteria must be met:
- Registered partnerships under the Limited Liability Partnership Act, 2008.
- Co-operative societies registered under the Co-operative Society Act, 1912.
- Companies established under the Companies Act, 2013 or previous company laws.
- Individuals recognized by the IRDAI to conduct insurance broker business.
Documents Needed for Insurance Broker Registration
- Application Form: Completed Form-B of Schedule I.
- Charter Documents: Memorandum of Association and Articles of Association.
- Application Fees: As per the category of the insurance broker.
- Fit and Proper Declaration: As per Form G of Schedule I.
- Management Details: Information about Directors, Partners, and Key Management Personnel.
- Disqualification Declaration: Certifying no disqualifications from the principal officer or directors.
- Auditor and Banker Details: Information about statutory auditors and principal bankers.
Procedure to Apply for Insurance Broker Registration
Application for Grant of Registration Certificate
To obtain an insurance broker registration certificate, applicants must follow a specific procedure outlined in the regulations:
- Application Submission:
- The application must be made using Schedule I – Form B, which specifies the type of insurance broker business being pursued.
- Document Requirements:
- Accompanying documents must be submitted as per Schedule I – Form C of the regulations.
Fee Structure
The application process involves different fees based on the type of broker. The fees are structured as follows:
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Particulars
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Application Fee
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On Grant of In-Principle Approval
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For Renewal (3-Year Validity)
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Direct Broker
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Rs. 25,000
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Rs. 50,000
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Rs. 1,00,000
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Reinsurance Broker
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Rs. 50,000
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Rs. 1,50,000
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Rs. 3,00,000
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Composite Broker
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Rs. 75,000
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Rs. 2,50,000
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Rs. 5,00,000
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- Issuance of Insurance Broker License
The issuance of the registration certificate is contingent upon the following:
- In-Principle Approval: The authorities will grant in-principle approval based on a thorough evaluation of the information provided in the application.
- Additional Compliance: The registration certificate will be issued only after fulfilling certain additional requirements. The certificate will be formalized in Form J of Schedule I.
- Rejection of Application
In cases where an applicant does not meet the necessary requirements:
- The application will be deemed rejected, and the authorities are obligated to inform the applicant of the refusal within 30 days.
- If an application is rejected, the applicant may reapply only after one year from the date of rejection.
Validity and Renewal of Insurance Broker License
License Validity
The Certificate of Registration (CoR) granted by the IRDAI is valid for three years. Brokers must possess this certificate to conduct business legally.
Renewal Process
- Application for Renewal: Applications for renewing an insurance broker license must be submitted 30 days prior to the license expiry. Late applications are subject to additional fees.
- Late Fees:
- If submitted after the expiry period but before the actual expiry: Rs. 100.
- If within 60 days of expiry: Rs. 750.
- Applications received after 60 days are considered only after one year.
- Prohibition on Business: Brokers cannot conduct business during the renewal wait period unless serving existing policyholders.
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