Insurance Broker License Requirements
Insurance broker plays a vital role in helping grappling firms to cope with stiff competition. They undertake various functions such as lead generation, service conceptualization, client assistance, risk management, etc, helping insurance firms elevate their sales and market reach. They fill the gap between the firms and potential audiences, ensuring two-way benefits. From the customer’s standpoint, they serve as a boon since they help them easily understand policy’s benefits, norms, and legalities.
Hiring an insurance broker license is vital for companies who are either struggling with their sales or seeking to boost their presence. If you or your firm wish to engage in broking endeavors, securing an Insurance Broker License is paramount. With that being said, let’s take a deep dive into Insurance Broker License Requirements and legalities.
Understanding Who Are Insurance Brokers and Their Types
Before understanding the Insurance Broker License Requirements, let’s delve into some basics first:
An insurance broker refers to a field expert specialized in insurance products and promotion. The Insurance Regulatory and Development Authority of India (IRDAI) governs the regulatory aspects of such brokers, including registration and operation. The IRDAI approval is paramount to becoming a registered insurance broker in India. The brokers perform a range of functions, such as:
- Soliciting and arranging insurance policies,
- Offering claims consultancy
- Advising on risk management.
IRDAI has classified insurance brokers into three major types, each adhering to distinct norms and serving different functions. These include:
- Direct Brokers
- Reinsurance Brokers
- Composite Brokers
Direct Brokers, as per IRDAI guidelines, undertake functions like soliciting and arranging insurance policies directly with insurers for clients. They can extend the scope of their work beyond soliciting and arranging insurance policies to perform tasks like claims consultancy and risk management services.
Reinsurance Brokers, as the name suggests, emphasize arranging reinsurance policies with insurers and reinsurers. They offer professional assistance in:
- Negotiating and securing reinsurance coverage
- Managing risks
- Providing technical advice in the reinsurance market.
Composite Brokers can act as direct brokers as well as reinsurance brokers based on the requirements.
Insurance Broker License Requirements: Explained
The table below reflects the Insurance Broker License Requirements in detail, helping you prepare for the license accordingly:
| Criteria | Details |
| Registration with IRDAI | Must register with the Insurance Regulatory and Development Authority of India (IRDAI). |
| Application Submission | The application must be submitted online through the IRDAI portal. |
| Eligible Entities | Only registered entities adhering to active legislation can apply for the broker license |
| Minimum Capital Requirements | Direct Broker: INR 75 Lakhs. Reinsurance Broker: INR 4 Crores. Composite Broker: INR 5 Crores. |
| Net Worth Requirements | Direct Broker: INR 50 Lakhs. Reinsurance Broker: 50% of capital requirements. Composite Broker: 50% of capital requirements. |
| Deposit Requirements | Direct Broker: INR 10 Lakhs. Reinsurance/Composite Broker: 10% of the minimum capital requirements. |
| Office Space and Facilities | Adequate office space, equipment, trained staff, and IT infrastructure. |
| Qualified Persons | At least two individuals with relevant qualifications and training. |
| Principal Officer | Principal Officer must have the necessary qualifications and experience. |
| Professional Indemnity Insurance | Maintain professional indemnity insurance throughout the validity of the registration certificate. |
Documents Required for Insurance Broker License
Documents are the key when understanding the Insurance Broker License Requirements. Arrange the following paperwork for registration:
- Copy of Memorandum and Articles of Association.
- Fee remittance receipt.
- Training details for employees.
- Principal Officer’s data (Schedule I- Form F).
- Fit and Proper certification (Schedule I- Form G).
- Details of Directors, Partners, and Key Management Personnel.
- Statutory auditors’ and principal bankers’ details.
- Infrastructure details with supporting evidence.
Requirements Concerning Fees, Validity, Capital, Networth, and Renewal
Keeping given numbers in mind is vital while delving into the Insurance Broker License Requirements. Doing so will help you navigate the license’s legalities with ease
| Category | Direct Broker (Life) | Direct Broker (General) | Direct Broker (Life & General) | Reinsurance Broker | Composite Broker |
| Capital Requirement | ₹75 Lakhs | ₹75 Lakhs | ₹75 Lakhs | ₹4 Crore | ₹5 Crore |
| Net Worth Requirement | ₹50 Lakhs | ₹50 Lakhs | ₹50 Lakhs | ₹2 Crore | ₹2.5 Crore |
| Deposit Requirement | ₹10 Lakhs | ₹10 Lakhs | ₹10 Lakhs | 10% of the minimum capital requirement | 10% of the minimum capital requirement |
| Fees for New Registration | ₹25,000 | ₹25,000 | ₹25,000 | ₹50,000 | ₹75,000 |
| Fees After In-principal Approval | ₹50,000 (New), ₹1,00,000 (Renewal for 3 years) | ₹50,000 (New), ₹1,00,000 (Renewal for 3 years) | ₹50,000 (New), ₹1,00,000 (Renewal for 3 years) | ₹1,50,000 (New), ₹3,00,000 (Renewal for 3 years) | ₹2,50,000 (New), ₹5,00,000 (Renewal for 3 years) |
| Professional Indemnity Insurance | Required, to be maintained at all times during the validity of the Certificate of Registration. | Same as Direct Broker (Life) | Same as Direct Broker (Life) | Required, to be maintained at all times during the validity of the Certificate of Registration. | Required, to be maintained at all times during the validity of the Certificate of Registration. |
| Validity of Certificate | 3 years | 3 years | 3 years | 3 years | 3 years |
| Application for Renewal | Form K, 30 days before expiry, Rs. 100/- if late but before expiry, Rs. 750/- if within 60 days after expiry | Same as Direct Broker (Life) | Same as Direct Broker (Life) | Form K, 30 days before expiry, Rs. 100/- if late but before expiry, Rs. 750/- if within 60 days after expiry | Form K, 30 days before expiry, Rs. 100/- if late but before expiry, Rs. 750/- if within 60 days after expiry |
Conclusion
An Insurance Broker License is mandatory for those who want to plunge into the insurance broking business while making significant contributions to clients and insurance-seekers. Adhering to the Insurance Broker License Requirements is an absolute necessity to secure the authority’s approval.
Since such licenses attract stringent inspections and paperwork, the likelihood of being revoked is quite high. That is why it is advisable to approach professionally. At Adviso, we understand this hurdle and help clients secure licenses in one go irrespective of legalities.
Read Our Article: A Complete Guide To Insurance Broker License Renewal
