Broker License Requirements – IRDAI
The financial and insurance sectors heavily rely on brokers for various endevours like product promotion, risk assessment, specialized advisory, etc. If you want to comprehend the broker license requirements, this guide has your back as it spans all information from the basics of who can be a broker, types of brokers, registration process, to the paperwork required, etc. So, dive straight in without any ado.
Who is an Insurance Broker?
An insurance broker refers to the professionals that fall under the IRDAI’s ambit, catering to a number of services such as promoting insurance products, assisting clients with decision-making, and closing deals on behalf of the insurance company. These brokers can render these services against a fee or remuneration. Brokers are required to follow the norms under the Insurance Brokers Regulations, 2018.
Categories of Insurance Brokers
Technically, there are 5 types of insurance brokers, each adhering to different requirements and services. Here’s the breakdown of what are their area of specialization.
- Direct Broker (Life): Deals with life insurance policies.
- Direct Broker (General): Specializes in non-life insurance products such as health, motor, or home insurance.
- Direct Broker (Life & General): Handles both life and general insurance.
- Reinsurance Broker: Focuses on arranging reinsurance contracts for insurance companies.
- Composite Broker: Offers services for both insurance and reinsurance.
Each category has specific broker license requirements and functions, which we will be discussing in detail later.
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Functions of Different Brokers
Let’s understand what are the roles and responsibilities of different brokers that fall under the IRDAI:
1. Functions of a Direct Broker
Direct brokers primarily assist clients with:
- Understanding insurance products and making an informed decision.
- Submitting insurance quotes and negotiating terms.
- Account creation on the respective portal and submitting premium.
- Claims management and settlement.
2. Functions of a Reinsurance Broker
Reinsurance brokers specialize in:
- Helping insurers oversee diverse risks by negotiating reinsurance contracts.
- Providing insights into global reinsurance markets, enabling firms to expand their footprint.
- Assisting in claims settlement and documenting key processes and records.
- Ensuring compliance with required regulations
3. Functions of a Composite Broker
Composite brokers can plunge into the profile of direct and reinsurance brokers simultaneously, catering to several tasks. They are obligated to comply with IRDAI regulations while providing insurance-related services.
Eligibility Criteria for Broker Registration
To obtain a broker license, applicants must adhere to the following broker license requirements outlined by IRDAI. Here’s a summary:
| Aspect | Requirements |
| Corporate Structure | – Companies under the Companies Act, 2013. |
| – LLPs registered under the LLP Act, 2008. | |
| – Cooperative societies registered under relevant acts. | |
| Capital Requirements | – Direct Broker: ₹75 lakhs. |
| – Reinsurance Broker: ₹4 crores. | |
| – Composite Broker: ₹5 crores. | |
| Net Worth | – Direct Broker: ₹50 lakhs. |
| – Reinsurance/Composite Broker: 50% of the minimum capital required. | |
| Office Infrastructure | Brokers must have adequate office space, trained staff, and IT systems. |
| Professional Qualifications | – At least two qualified personnel must be employed. |
| – A Principal Officer must be responsible for compliance and operations. |
Broker License Application Process
To obtain a license, applicants must follow a structured process:
Step 1: File Online Registration:
Visit the IRDAI official portal and register your application. Create a login in order to access the application form.
Step 2: Submission of Form B:
Complete Form B with the legitimate details. Refer to Schedule I of the Insurance Brokers Regulations for this purpose. Once done, upload the required documents as cited in Form C.
Step 3: Fee Payment:
| Type of Broker | Application Fee | Registration Fee |
| Direct Broker | ₹25,000 | ₹50,000 |
| Reinsurance Broker | ₹50,000 | ₹1,50,000 |
| Composite Broker | ₹75,000 | ₹2,50,000 |
Step 4: In-Principle Approval:
If all requirements are fulfilled, the authority i.e. IRDAI shall issue the in-principle approval, which serves as a pre-registration certification to pursue business operations.
Step 5: Certificate of Registration:
If the applicant firm abides by the in-principal approvals norms and the authority affirms the same, the final license shall be granted to the applicant firm.
Key Requirements for Broker License
1. Professional Indemnity Insurance
All brokers must maintain professional indemnity insurance throughout the license validity period.
2. Deposit Requirements
- Direct Broker: ₹10 lakhs in a scheduled bank.
- Reinsurance/Composite Broker: 10% of the minimum capital contribution.
3. Compliance with IRDAI Regulations
Brokers must ensure that their operations align with the IRDAI guidelines, including reporting financial performance and maintaining ethical standards.
FAQs on Broker License Requirements
1. What are the main types of insurance brokers?
There are five types: Direct Broker (Life), Direct Broker (General), Direct Broker (Life & General), Reinsurance Broker, and Composite Broker.
2. What is the minimum capital required for a Direct Broker license?
The minimum capital required for a Direct Broker license is ₹75 lakhs.
3. Can foreign investors participate in insurance brokerage businesses in India?
Yes, foreign investors can invest in Indian insurance brokerage firms, subject to compliance with IRDAI and FEMA regulations.
4. How long does the registration process take?
The duration varies, but in-principle approval is granted after verifying all requirements.
5. What is the validity of the broker license?
Broker licenses are typically valid for three years and require renewal thereafter.
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Conclusion
Understanding and adhering to broker license requirements is crucial for anyone looking to establish a successful brokerage business. By following the IRDAI norms and maintaining compliance, brokers can reinforce credibility, build trust, ensure seamless operations, etc.
Also Read: IRDAI Health Insurance Regulations: A Comprehensive Guide
