Recently, the term "insurance" has been bandied about a lot, especially as the COVID-19 pandemic continues to spread over the globe. The public's awareness of the value of insurance has only grown as a result of the absurdly high rise in medical costs. Additionally, India's insurance industry is expanding steadily, and brokers are easy to find. Most often, these brokers are referred to as insurance brokers. These insurance brokers serve as the link between the public and insurance firms.

Who is an Insurance Broker?

Insurance brokers and agents are frequently mistakenly thought to be the same thing. However, there are a few lines where the two diverge.

A specialist who represents clients and makes sure they have the greatest insurance policy for their needs is an insurance broker. On the other hand, an insurance agent commission-based sells the goods of the insurance business to customers.

It should be remembered, nevertheless, that the insurance agent speaks for the insurance provider. Additionally, the agent has the authority to finalize insurance sales transactions because they are the company's representatives. This is not a right that insurance brokers have; instead, they must turn over the account to the insurance agent or to the organization itself.

Different types of insurance brokers

• Direct insurance brokers

The Insurance Regulatory and Development Authority of India (IRDAI) issues licences to direct brokers, who become familiar with their client's insurance needs in order to explain and make arrangements with an insurer. In relation to the best policy and its associated terms and conditions, a direct broker offers advisory services.

The directions given by the clients are followed by these brokers. Additionally, they must keep up with changes in the insurance markets, keep track of insurance transactions, and help with claim settlement negotiations. The required capital for registration is Rs. 75 lakhs and Rs. 50 lakhs net worth must be maintained.

• Reinsurance insurance brokers

Reinsurance is protection for insurance providers. Reinsurance brokers set up agreements between direct insurers and reinsurers for reinsurance. He/she is bound by both parties' contracts because he/she works for both of them. In addition to locating the finest coverage for each client they represent, these brokers also negotiate contracts. In order to register, you must have at least Rs. 4 crores in the capital as well as maintain a net worth of at least 50% of that amount.

• Composite insurance brokers

Since composite brokers combine direct and reinsurance brokers, they serve a dual purpose. For composite brokers, the minimum capital requirement is at least Rs. 5 crores, and they must also maintain a net worth of at least 50% of that amount.

Eligibility for an insurance broker licence

The following individuals are qualified to apply for an insurance broker licence in India:

• Any business that has been registered in accordance with the 2013 Companies Act
• Any co-operative society that has been legally established in accordance with the Co-operative Societies Act of 1912
• Any Limited Liability Partnership (LLP) that has been authorised by the 2008 Limited Liability Partnership Act.
• Anyone who has been approved by the authority.

The following individuals are not qualified to join a Limited Liability Partnership (LLP Partnership), which is the applicant for an insurance broker licence:

• Entity not residing there.
• Any overseas Limited Liability Partnership that has been registered in accordance with local legal requirements.
• Someone who lives outside of India.

Procedure for obtaining insurance broker licence

The processes necessary to obtain an insurance broker licence in India can be summed up as follows:

• Submission of application

For the Insurance Broker License, the applying company must submit Form B of Schedule I together with the non-refundable application fee. Additionally, send the application form and required documentation to the Insurance Regulatory Development Authority of India (IRDAI).

• Examination of documents

The application and supporting documentation are examined by the Authority. The Authority has the right to ask questions at this point and request more information from the application if it needs more clarification. The Authority also has the authority to request more records.

• Submission of additional documents

Within 30 days of receiving the Authority's notification, the applicant must submit the supplementary papers.

• Issue of in-principal approval

If the Authority determines after reviewing and confirming all the supplied documentation that the applicant satisfies all the requirements, it will provide in-principle approval for the insurance broker licence.

• Additional submission

The applicant company must adhere to all additional conditions and pay the Authority the required licence fees after receiving the in-principle approval.

• Issue of certificate of registration

The IRDAI issues the applicant company with a COR (Certificate of Registration) whenever it is satisfied that all of the requirements outlined in the IRDA (Insurance Broker Regulations Act), 2018, have been met by the applicant company. In accordance with Schedule I of the IRDA Regulations, the COR is additionally issued in Form J.

Documents required for insurance broker licence registration

• Information that the regulations' Form-B of Schedule I deems necessary.
• Photocopy of the charter documents (Memorandum Of Association and Articles Of Association).
• Prescribed costs in accordance with the type of insurance broker.
• Fit and proper declaration in accordance with Schedule I's Form G.
• The form must be completed along with information about Directors/Partners, Promoters, and Key Management Personnel.
• Assurance that the company's chief executive officer and director are not disqualified.
• The information on the qualified individuals to run the business, along with their specific credentials, is contained in Form F of Schedule I.
• Details of the principal bankers and statutory auditors, together with the applicant’s bank account number.
• Specifics of the business's overall infrastructure.

Conditions for issuing the insurance broker licence

Before granting an insurance broker licence, the IRDAI imposes the following conditions:

• The Insurance Broker is required to operate in accordance with IRDAI Rules.
• Within 14 days after receiving the complaint, insurance broker businesses are required to respond to all consumer complaints. The company is required to keep records of the number of client complaints.
• A broker of insurance shouldn't engage in multi-level marketing or solicitation.
• If the insurance broker company has given false or misleading information about the specifics of the business, the Authority should be informed.
• The insurance broker is required to keep books of accounts.

Validity and renewal of insurance broker licence

Beginning on the date of issuance, the certificate of registration for an insurance broker business is good for three years. Additionally, at least one month prior to the license's validity period expiring, the applicant company may submit a renewal application for the insurance broker licence.

Conclusion

A lengthy list of documents must be submitted by the applicant in order to be granted an insurance broker licence in India. You must adhere to the aforementioned advice in the letter if you are ready to make a business decision in this regard. Set up the documents in accordance with the provided laws. If you're having trouble meeting the compliance requirement, don't hesitate to see an expert at Online Legal India. Help seekers can communicate with our professionals via a variety of channels, including online chat.