IRDAI Direct Broker License
IRDAI Direct Broker License– The Covid era has made us understand the importance of having a comprehensive insurance policy for family members. The increasing awareness about being healthy and soaring medical expenses have pushed the demand for insurance to a record-breaking level. This demand has fueled the growth of the insurance sector in India. Insurance companies typically leverage certified brokers to sell their insurance products in India. In a legal parlance, these brokers are referred to as insurance brokers. To serve as a certified insurance broker in India, you are required to apply with IRDAI. Let’s take a walkthrough of the legal implications of becoming a certified insurance broker in India.
Who is an Insurance Broker?
The terms Insurance brokers and agents are often used interchangeably, but they aren’t similar.
The former deals with convincing potential clients to buy the best policy for their budget and requirements. Alternatively, the latter sells insurance policies to clients at a mutually agreed commission rate. Another key difference lies in how they finalized the deal with a client. Whereas the agent has the leverage to wrap up the deal on the company’s behalf, the insurance brokers channel the potential leads toward the insurance company for the final transaction.
Different types of insurance brokers – IRDAI Direct Broker License
Direct insurance brokers
The IRDAI grants license to direct broker licenses to the qualified brokers once they imbibe the right skills and acumen about the insurance product. These brokers serve as an advisor who bolsters clients to choose the best policy for their budget. However, they can’t rely on a voluntary approach when it comes to suggesting the best policies and claim settlement. They have to comply with the client’s guidelines for that matter. Also, they are required to stay abreast of market changes and ever-changing policy features. From the first interaction with the client, recommending the best policy to settle the claim, the broker is liable to offer all-encompassing advisory services on the company’s behalf.
To become an IRDA-certified broker, the adherence to following conditions is pertinent.
- The minimum capital required should not be less than Rs 75 lacs
- The minimum net worth should not be less than Rs 50 lacs.
Reinsurance insurance brokers
- Reinsurance brokers serve as a bridge between the direct insurers and reinsurers for reinsurance, enabling the former to choose bespoke insurance protection for a hassle-free business journey. To avail of such a protection, either party draws a contract boasting mutually agreed terms binding on the reinsurance broker. Notably, these brokers have the right to negotiate such a contract.
To become a reinsurance broker, it is pivotal to satisfy the following conditions:
- The capital threshold limit should not be less than Rs 4 crores.
- The net worth of the company should not be less than Rs 2 crores.
Composite insurance brokers
Composite brokers can serve the role of direct and reinsurance brokers, simultaneously.
To serve the role of composite brokers, the fulfillment of given conditions is mandatory:
- The minimum capital requirement should be equivalent to Rs. 5 crores.
- The net worth should be at least Rs 2.5 crores.
Eligibility to secure an IRDAI Direct Broker License in India
- An applicant entity should belong to the Indian origin and must have registered under the 2013 Companies Act or Co-operative Societies Act of 1912 if the object of the company is to serve charitable objectives.
- Any Limited Liability Partnership (LLP) registered under the LLP Act 2008.
Document consideration for IRDAI Direct Broker License
- Company registration document
- BOD consent (reflecting that all members are ready to venture into the insurance broking business)
- Charter documents such as MoA and AoA
- Directors or partners’ ID and address proof
- Business place proof
- Fit and Proper declaration as per Form G of Schedule I
- The list reflecting the details of managerial officials, including directors and partners
- A declaration affirming that the director is fit to serve the designated position
- Details of key personnel liable for running the company’s operation. Please refer to the Form F of Schedule I to draft such a document.
- Information about principal bankers and statutory auditors.
- Applicant firm’s bank account number.
Procedure for obtaining IRDAI Direct Broker License
The section below breaks down the process of securing an IRDAI Direct Broker License in India:
Step 1: Submission of application
For the Insurance Broker License, you must file the standard application, namely form B with the concerned authority i.e., IRDAI. The said application should go along with mandatory annexures as cited in the erstwhile section.
Step 2: Examination of documents
Upon document submission, the authority commences a vetting process to identify any errors or discrepancies in submitted paperwork. While doing so, the authority can prompt the applicant to provide clarification on certain points or some additional documents. The applicant must respond within the stipulated time frame, which is 30 days in most cases, for swift and seamless application processing.
Step 3: Issue of in-principal approval
If the authority fails to identify any loophole in the paperwork, they will grant the in-principle approval for the IRDAI Direct Broker License.
Step 4: Additional submission
The in-principle approval comes with certain guidelines that the license must follow to their entirety within an advisable timeline. This will help them qualify for the COR i.e., Certificate of Registration.
Step 5: Issue of certificate of registration
This final step involves the grant of COR by the IRDAI and it will only come into effect if the applicant firm is found to be compliant with the norms cited in the IRDA (Insurance Broker Regulations Act), 2018. The grant of COR affirms that the firm is now legally entitled to pursue the business of insurance broking.
Note: Alongside COR, the authority might also grant the same in form J as per Schedule I of the IRDA Regulations.
Once granted, the COR shall remain valid for 3 years from the issuance date. The renewal of the same must be done within the stipulated timeline i.e., 30 days before the expiration date.
Conditions for applicants seeking COR
The grant of COR is only possible if the applicant ensures adherence to the norms of in-approval license as shown below:
- Complying with IRDAI Rules for operation is mandatory.
- An applicant firm must resolve all the clients’ grievances within 14 days of receipt. Besides, they must document the record of the same for auditing purposes.
- The applicant firm cannot leverage any act of solicitation or multi-level marketing for promoting or selling their products.
- The applicant firm cannot fabricate any details or provide misleading information concerning its business.
- Maintaining the books of account consistently is mandatory.
- Validity and renewal of insurance broker license.
Conclusion
Navigating the IRDAI compliances for securing a broker license can be taxing unless you have an adequate understanding of underlying norms devised by IRDAI. If you want to skip the inconvenience of dealing with pre-registration compliances, feel free to get in touch with Adviso’s professionals.
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