How to Start a Life Insurance Company in India in 2024
Insurance in India is among the most promising sectors, constituting nearly 4% of the nation’s GDP. In 2020, the sector witnessed an impressive growth rate of almost 11%, illustrating its unparalleled growth potential. This growth is fueled by the dramatic spike in the demand for insurance products all thanks to the higher disposable incomes and changing lifestyles. If you are scouting how to start a life insurance company in India, its norms, potential, paperwork, and process, this guide has your back.
Analyzing the Potential of the Indian Insurance Sector
As per the IRDAI, the Indian insurance sector is witnessing impressive growth and the stats below confirm the same:
- On account of overall premium volumes, the Indian insurance sector is poised at the 10th position globally. Also, it sits at the second position in terms of its stature among all emerging markets, registering an impressive market share of almost 2%.
- 9% growth is expected annually on account of premiums over the next decades, making it the fastest-growing market in the coming years.
- Currently, the insurance market is served by 73 insurers, out of which 27 are general insurers, 26 are life insurers, 7 are health insurers, and 13 are re-insurers.
- The insurance density, which poised at $11.1 in 2001, has gone all the way up to $92 in 2022, with the majority of growth witnessed by life insurance.
- Within a span of 22 years (from 2000 to 2022), insurance penetration has increased by 1.6%.
- The insurance penetration in the life insurance domain was poised at 3%, which is better than the global average.
- In FY 2023, the gross direct premium of life insurance companies saw a YoY growth of almost 13%
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Eligibility to Start a Life Insurance Company
Before delving into how to start a life insurance company, it is paramount to comprehend the norms to make an insurance business operational.
- Corporate Structure: The applicant firm must be registered under the Companies Act, 2013.
- Capital Requirements: An applicant firm must maintain a minimum paid-up equity capital of Rs 100 crore.
- Ownership Norms: The overseas firm cannot have an ownership threshold of more than 49%, the rest must belong to the Indian-owned firm.
- Promoter Credentials: The applicant firm must showcase its financial prowess, professional expertise, and a track record showcasing ethical business practices.
The Insurance Regulatory and Development Authority of India (IRDAI) governs the registration and operational endevours of insurance businesses. The journey to securing a certificate of registration revolves around three stages, namely: R1, R1, and R3. Each stage seeks the applicant to abide by specific requirements.
Stages of Registration with IRDAI
R1: Preliminary Screening
Filing an R1 application is the first step in how to start a life insurance company. This involves sharing mandatory paperwork and adhering to the initial criteria:
- Key Documents:
- Certified copies of charter documents i.e. MoA and AoA.
- Shareholders’ agreements between overseas investors and Indian promoters.
- Five-year business plan sanctioned by the company’s BOD.
- Information relating to the company’s directors, promoters, etc.
- Evaluation Criteria:
The IRDAI vets the firm’s financial standing, resources, infrastructure, rural outreach, and governance structure.
Once the IRDAI stamps their approval, the applicant shall be provided with a clearance letter, approving the applicant to proceed with the next stage.
R2: Registration Application
In the R2 stage, the applicant is required to submit additional dossiers and compliance proof.
- Evidence concerning the paid-up equity capital.
- Affidavits from promoters and overseas investors reflecting compliance with ownership and control norms.
- Actual certificates for policy norms
- Payment proof concerning the non-refundable registration fee of Rs 5 lakh.
The IRDAI profoundly inspects the paperwork, ensuring that the applicant firm is ready to become operational. Approval at this stage marks the entry into the next stage i.e. R3
R3: Certificate of Registration
Securing R3 i.e. certification of registration is the last step in this process. It is paramount to take note of every detail in each phase when scouting how to start a life insurance company. The IRDAI makes sure that all compliances are met to the fullest, eventually ensuring that:
- The applicant is financially sound.
- Business prospects and capital structure are sufficient to carry out insurance business
Grant of the approval shall mark the end of the registration process, officially authorizing the applicant to start a life insurance company.
Essential Documents and Paperwork
Keeping the following document ready is paramount to streamline the process of how to start a life insurance company:
- Certified MOA and AOA.
- Shareholding agreements.
- Business plans for five years.
- Proof of paid-up capital compliance.
- Actuarial certificates for proposed insurance products.
- Chartered Accountant and Company Secretary certifications.
FAQs
1. What is the minimum capital requirement for starting a life insurance company?
The minimum paid-up equity capital required is ₹100 crore. This ensures the financial stability of the company.
2. Can foreign investors hold more than 49% equity in a life insurance company?
No, foreign investors cannot hold more than 49% of the total paid-up equity capital. This ensures Indian ownership and control.
3. How long does it take to obtain a Certificate of Registration (R3)?
The process may take several months, depending on the completeness of submissions and IRDAI’s review timelines.
4. What is the role of Adviso in setting up a life insurance company?
Adviso specializes in helping businesses secure IRDAI approvals. With extensive experience, Adviso ensures smooth navigation of R1, R2, and R3 stages. They handle paperwork, compliance checks, and regulatory consultations.
5. How does IRDAI evaluate the application?
IRDAI examines financial health, governance, rural outreach plans, and public interest alignment. Compliance with the Companies Act, Insurance Act, and other regulations is also verified.
Conclusion
The journey of how to start a life insurance company seeks in-depth planning, strategic execution, and regulatory compliance. By comprehending the eligibility criteria, meeting IRDAI legalities, and preparing pinpoint dossiers, you can get an insurance business up and running. However, doing so can taxing given the ever-changing compliance landscape. That’s why the association of an expert is highly recommended.
Partnering with Adviso will give you an extra edge over complicated norms, letting you navigate the IRDAI compliance seamlessly. As a premier service provider, Adviso can help you with a number of endevours such as compliance drill down, document preparation, application filing, etc. In a nutshell, Adviso’s support is your golden ticket to the corporate world.
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