Compliances play a vital role in fencing the accountability and operation of entities, compelling them to operate as ethically and transparently as possible. All the insurance brokers, regardless of business footprint or type, are bound to abide by IRDAI’s norms, which aim to protect the stakeholders’ and policyholders’ interests. Understanding insurance broker compliances is paramount for those planning to leap into the insurance broking business. This write-up aims to unearth what these compliances are all about, their implications on business operations, etc.
Who Are Insurance Brokers?
Insurance brokers serve as registered intermediaries who work on the insurer’s behalf, catering to a number of acitvities within the IRDAI’s framework. Some of the endeavors served by the broker include claim settlement, product promotion, client assistance, risk assessment, etc. The brokers’ income is generated via a mutually agreed brokerage fee, which comes to life whenever a policy is sold out. Brokers are bound to operate as per the IRDAI norms, maintaining transparency and accountability.
Why Are Insurance Broker Compliances Important?
Insurance broker compliances constitute a holistic framework that:
- Safeguard client interests.
- Ensure ethical practices.
- Enhance transparency in insurance dealings.
- Facilitate effective grievance redressal mechanisms.
Non-compliance can incur severe consequences such as monetary fines, reputational damage, and license suspension, underscoring the key role of adhering to insurance broker compliances.
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General Compliances for Insurance Brokers
Insurance brokers are mandated to follow an array of regulations. Some of the key norms include:
1. Exclusive Business Activity
Insurance brokers cannot deal with business activities that do not belong to insurance broking. Doing otherwise can incur strict penalties.
2. Grievance Redressal
14 days is the standard timeline for resolving the policyholder’s grievance. The insurer must maintain an efficient grievance redressal system for swift and hassle-free resolution.
3. Code of Conduct
Adherence to the IRDAI-recommended code of conduct elevates operational transparency and credibility. These codes help protect policyholders’ interests when it matters the most.
4. Record Keeping
Detailed records of all policies promoted and sold by the assigned broker. The info should be segregated based on date, amount, premium, tenure, and an assigned broker. The format for such records should not deviate from what is advised by the IRDAI.
5. Board-Approved Policies
Registered brokers must have extensive policies (approved by the BOD) concerning product solicitation, grievance mechanisms, reporting norms, and operational strategies. The board is obligated to review such policies once every three years.
Specific Reporting Requirements
Insurance brokers must foster a robust operational framework to ensure compliance, projecting focus on given areas:
1. Internal Audit and Compliance Officer
Reinsurance and composite brokers must have a certified compliance professional and a sound audit system proportionate to business size and complexity.
2. Financial Reporting
Insurance brokers must:
- Prepare a yearly balance sheet, P&L account, and cash flow statement.
- Submit audit financial statements to the concerned authority within 30 days of the Annual General Meeting or by Sep 30, whichever is earlier.
- Review feedback and address pitfalls identified by the auditor within 90 days.
3. Document Retention
All books and documents concerning insurance broking must be preserved for at least seven years with apt upkeep. Documents relating to pending cases and unresolved claims should remain intact until the matter is resolved.
Filing of Returns
Filing accurate and timely returns is a vital component of insurance broker compliances. Brokers must share auditor-certified documents by April 30 and Oct 31 each year.
submit several certificates to the IRDAI, certified by auditors, by April 30 and October 31 each year. These include:
- Capital and Net Worth Certificate: It confirms that the broker complies with the norms relating to capital and net worth.
- Deposit Certificate: It affirms compliance with deposit requirements under regulation.
- Professional Indemnity Policy Certificate: It reflects that the broker holds legitimate indemnity insurance.
- Remuneration Compliance Certificate: It confirms that the broker complies with the remuneration limits set under regulation 26.
- Insurance Bank Account Certificate: This is required by the reinsurance and composite brokers, affirming that the funds are used for specified purposes.
Additionally, brokers must use the prescribed format for filing periodic returns, providing comprehensive operational data.
Penal Actions for Non-Compliance
Not complying with insurance broker compliances can attract serious penalties, including:
- Financial fines.
- Suspension or revocation of licenses.
- Legal actions for false certifications or concealment of facts.
Any discrepancy detected shall be shared with the applicant by the authority for a resolution, which must come to life within 15 days of intimation.
How Adviso Can Assist with Compliance
Transversing the intricate labyrinth of insurance broker compliances can be overwhelming. Thus, it is a good idea to leverage the services of professional firms like Adviso to atop the ups and downs of IRDAI norms. From regulations monitoring to complying with event-based norms, Adviso can get the job done with authority when it matters the most. Here’s what you can expect from Adviso:
- Tracking and monitoring compliance deadlines.
- Preparing and filing statutory returns.
- Ensuring adherence to IRDAI regulations through audits and advisory support.
Conclusion
Compliance is just a set of laws to be followed; it is the backbone of the insurance broking industry, helping reinforce accountability, transparency, and credibility. Though adhering to insurance broker compliances may seem like a troublesome affair, it can help build a long-lasting reputation and credibility, allowing the firm to reap unprecedented growth with time. When things go wayward with compliances, it is better to avail of the support of a professional firm like Adviso- your trusted regulatory partner.
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