An Extensive Guide to IRDA Broking License in India

IRDA Broking License

Insurance brokering is among the potential business models in India. The success of this business model stems from the evolving customer lifestyle and growing demand for diverse insurance products.  Being an insurance broker is not just about facilitating services to the end-users; it is also about elevating transparency and inclusivity for the insurance sector. IRDA Broking License enables entities to join forces with insurance companies and facilitate different services, including solicitation, claim processing, etc. However, no entities can perform such endevours unless they have IRDAI approval. With that being said, let’s delve into the legalities tied to the IRDA broking license.

Categories of Insurance Brokers

As per the IRDAI, the following categories of insurance brokers exist, each serving different areas of interest and adhering to unique compliances. Only these broker types can apply for an IRDA Broking License.

1. Direct Broker (Life): These brokers extensively deal with life insurance products after joining hands with an insurer via a legal agreement.
2. Direct Broker (General): These primarily focus on general insurance products.
3. Direct Broker (Life & General): Direct brokers address the wider area of interest unlike the above. From life insurance to general insurance, direct brokers are qualified to deal with more than one insurance type, enabling insurers to streamline and grow.
4. Reinsurance Broker: These fill the gap between reinsurers and insurers seeking a robust policy to cover losses tied to insurance products.
5. Composite Broker: Composite brokers address a wider area of services by facilitating the endevours served by direct and reinsurance brokers.

How are Brokers Transforming the Insurance Sector?

Since brokers serve as an intermediaries and have IRDAI approval, they are qualified to render services that not only ease the blow for policy seekers but also aid insurers in streamlining operations. In a nutshell, brokers can offer specialized advisory regarding:

• Product Marketing
• Client assistance including helping policy seekers select ideal policies
• Claim settlement
• Risk assessment

All these tasks constitute the 60% of the insurer’s operation. Hence, by handing them over to qualified brokers, companies can focus on other areas that matter. From a client’s standpoint, a broker is not just a certified professional; they are experts helping them navigate complex claim settlement, product selection, etc.

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Key Requirements for IRDA Broking License

Eligibility Criteria

The IRDAI has penned down explicit eligibility criteria to become a registered broker in India. These criteria can be understood as the legalities for securing an IRDA Broking License. Below are some notable considerations:

• The applicant firm should be registered under the recognized legislations viz. Companies Act, 2013, or a partnership registered under the LLP Act, 2008.
• Co-operative societies operating under the ambit of the Co-operative Societies Act, of 1912 stand eligible to apply.
• Foreign direct investment (FDI) is permissible, provided it complies with IRDAI regulations.

Capital and Net Worth Requirements

• Direct Broker: The capital and net worth of the firm seeking to operate as a direct broker should not be less than Rs 75 Lakhs and Rs. 50 Lakhs, respectively.
• Reinsurance Broker: Firms applying for a Reinsurance broker must maintain a capital of at least Rs 4 crores. The threshold for net worth has been capped at Rs 2 crores.
• Composite Broker: Since the composite broker has a wider business scope, their requirement for maintaining capital and net worth is a bit stiff, amounting to Rs. 5 crores and Rs 2.5 crores, respectively.

Deposit and Infrastructure Needs

• Deposit: The minimum deposit of Rs 10 lakh is mandatory for direct brokers. Meanwhile, the Reinsurance and Composite Brokers are mandated to maintain a deposit equivalent to 10% of the capital.
• Office Space: An apt IT infrastructure boasting the latest systems, skilled professionals, etc is mandatory. 
• Personnel: The top management must entail at least two qualified personnel and a Principal officer (PO) with the required qualifications and experience.

Procedure to Apply for an IRDA Broking License

1. The first step involves heading to the official portal viz. IRDAI BAP
2. Fill out the prescribed application viz. Form B (Schedule I)
3. Attached are the documents as cited in the  Form C (Schedule I)
4. Next, proceed with the fee submission. Based on the type of broker chosen, the following fee shall apply for application and registration.

• Direct Broker: Rs. 25,000 (application fee) and Rs. 50,000 (registration fee).
• Reinsurance Broker: Rs. 50,000 (application fee) and Rs. 100,000 (registration fee).
• Composite Broker: Rs. 75,000 (application fee) and Rs. 150,000 (registration fee).

IRDAI vets the documents to find potential non-conformity. If no issue is found, approval shall be granted to the applicant.

Renewal and Compliance Concerning IRDA Broking License

The IRDA Broking License stays valid for three years and can be renewed before the expiration. Brokers must

• Adhere to the IRDAI regulations when pursuing operations and addressing diverse endevours, be it claim settlement, promoting insurance products, or conducting internal audits.
• Address event-based compliance and annual reporting to reinforce legitimacy and transparency.
• Secure professional indemnity insurance coverage within a year of commencement.
• Conduct regular training for employees.
• IRDAI and FEMA norms for foreign direct investment.

FAQs on IRDA Broking License

1. What is the validity period of the IRDA Broking License?

• The license is valid for three years and requires renewal.

2. Can foreign investors invest in an insurance brokering business?

• Yes, foreign investors are allowed, subject to compliance with IRDAI guidelines.

3. What are the capital requirements for a Composite Broker?

• A Composite Broker must have a minimum capital of Rs. 5 crores.

4. What is the role of a Principal Officer?

• The Principal Officer oversees the brokering functions and ensures compliance with IRDAI regulations.

5. How is the application for an IRDA Broking License submitted?

• Applications must be submitted online through the IRDAI portal.

Conclusion

IRDA Broking License is paramount for insurance brokering endevours in India. Brokering business in insurance is booming and is yet to reach to culmination of growth. Thus, it is the right time to leap into this business model. However, one must know the way to seamlessly navigate the intricate landscape of IRDAI compliances before setting the plan of setting up a business in motion. If possible, join forces with a trusted agency like Adviso for steadfast and reliable support. This way you do not have to face the legalities on your own. All you need is to join hands with Adviso and leave the rest to professionals.

Also Read: Know Everything About an Insurance Broker Registration