Who is Insurance Broker :

“Insurance Broker" means a person who is a direct broker, a reinsurance broker or a composite broker for the time being registered by the Authority, as the case may be, unless expressly stated to the contrary.

Categories of insurance broker:

There are five categories of insurance broker which are

• Direct Broker (Life),
• Direct Broker (General),
• Direct Broker (Life & General),
• Reinsurance Broker and
• Composite Broker.

“Direct Broker” means an Insurance Broker, registered by the Authority, who for a remuneration and/or a Fee, solicits and arranges insurance business for its clients with insurers located in India and/or provides claims consultancy, Risk Management services or other similar services, permitted under Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018.

“Reinsurance Broker” means an Insurance Broker, registered by the Authority who for a remuneration and/or a Fee, solicits and arranges re-insurance for its clients with insurers and/or reinsurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or other similar services, permitted under Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018.

“Composite Broker” means an Insurance Broker, registered by the Authority who for a remuneration and/or a fee, solicits and arranges insurance and/or re-insurance for its clients with insurers and/or reinsurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or other similar services, permitted under Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018.

Key persons :

“Broker Qualified Person” means an individual who is an employee or director of the insurance broker engaged in solicitation and procurement of insurance business and who has undergone training and passed the examination specified for them;

“Key Management Person” includes Chief Executive Officer, Chief Marketing Officer, Chief Finance Officer, Chief Technical Officer/ Head-IT, Head-Reinsurance and Compliance Officer:;

“Person”means─ (i) A company formed under the Companies Act, 2013 (18 of 2013); or (ii) A co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the registration of co-operative societies; or (iii)A limited liability partnership formed under the Limited Liability Partnership Act, 2008(6 of 2009) with no partner being a non-resident entity/ person resident outside India as defined in clause(w) of section 2 of the Foreign Exchange Management Act, 1999(42 of 1999) (FEMA), and not being a foreign limited liability partnership registered thereunder; or (iv) Any other person as may be recognized by the Authority to act as an insurance broker;

"Principal Officer" means - an officer in an executive role designated as such for the purpose of performing the duties and responsibilities as specified in these regulations to carry out 3 the functions of an insurance broker and who shall be the chief executive officer or a whole-time director or managing director, managing partner or a managing trustee or such individual appointed / engaged exclusively to carry out the functions of an insurance broker;

Functions of Direct broker / Reinsurance broker / Composite Broker

1. Functions of a direct broker — The functions of a direct broker shall include the following:

• Obtaining detailed information of the client's business and risk management philosophy;
• Familiarizing himself with the client's business and underwriting information so that this can be explained to an insurer and others;
• Rendering advice on appropriate insurance cover and terms;
• Maintaining detailed knowledge of available insurance markets, as may be applicable;
• Submitting quotation received from insurer/s for consideration of a client;
• Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover;
• Acting promptly on instructions from a client and providing him written acknowledgements and progress reports;
• Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938);
• Assisting in the negotiation of the claims;
• Maintaining proper records of claims;
• Assisting in opening of e-insurance accounts;
• Assisting in issuing e-insurance policies; and
• Any other function which the Authority may specify.

2. Functions of a re-insurance broker – The functions of a re-insurance broker shall include the following:

• Familiarizing himself with the client’s business and risk retention philosophy;
• Maintaining clear records of the insurer's business to assist the reinsurer(s) or others;
• Rendering advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets;
• Maintaining a database of available reinsurance markets, including solvency ratings of individual reinsurers;
• Rendering risk management services for reinsurance;
• Selecting and recommending a reinsurer or a group of reinsurers;
• Negotiating with a reinsurer on the client’s behalf;
• Assisting in case of commutation of reinsurance contracts placed by them;
• Acting promptly on instructions from a client and providing it written acknowledgements and progress reports;
• Collecting and remitting premiums and claims/refunds within such time as agreed upon;
• Assisting in the negotiation and settlement of claims;
• Maintaining proper records of claims;
• Exercising due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services;
• Creation of market capacity and facility for new, stressed, emerging and existing business and asset class for and from both direct insurers and reinsurers;
• Render preliminary loss advice (PLA) within reasonable time;
• Given the nature of business, separate norms need to be followed for Inward and Outward business
  • Inward business
    • Broker to have adequate specific knowledge of the country whose business is being offered like: political stability, economic position, local regulations, tax laws, etc.
    • Introduce new business/ products depending on the reinsurers business plan and risk appetite
  • Outward business
    • Rating and market credibility of the reinsurer
• To ensure prompt collection and remittance of funds, follow up for funds to be initiated sufficiently before the due dates for settlement from cedant to reinsurer and from reinsurer to cedant as relevant;
• To comply with the laws and other requirements of the local jurisdiction while arranging insurance/ reinsurance for clients/ insurance companies based outside India; and
• Any other function which the Authority may specify.

3. Functions of composite broker-

• A composite broker shall carry out the functions mentioned in clause 1 and 2 above.
• In case a composite broker is appointed by a client to act as direct insurance broker he shall not influence the insurer concerned to appoint him as reinsurance broker for arranging reinsurance on the same contract. However, after following a due and transparent process if the insurer appoints the composite broker as a reinsurance broker for arranging reinsurance on the same risk on which the composite broker acted as a direct broker, the composite broker shall ensure that there are proper systems and controls in place to see that the interests of the client and the insurer are not prejudiced.

How can I get registered as a Broker

Eligibility Criteria :

The Government has prescribed minimum requirements for securing an Insurance broker license as mentioned below. Apart from this, the broker has to ensure to get registered with the IRDAI where in applicant is required to register in the portal and username and password would be generated by the system and sent to the user in the registered email id. Subsequently, an application can be submitted online by accessing the website www.irdabap.org.in  The application for new broker’s registration shall be accepted only through on-line mode.

Corporate Structure

The following can be registered under the Insurance Broker License:

• Company that is established under the Companies Act 2013 or the previous Company Law 1956;
• A partnership that is registered under the Limited Liability Partnership Act, 2008;
• A cooperative society which is registered under the Co-operative society act 1912; and
• Any other individual or company that is allowed to conduct the business related to an Insurance Broker.

Capital Requirements

The applicant must satisfy the capital requirements for applying for a Broker’s License:

• Direct Broker- 75 Lakhs.
• Re-insurance Broker- 4 Crore.
• Composite Broker-5 Crore.

Net Worth Requirements

Explanation: For the purposes of these regulations, “net worth” shall have the meaning assigned to it in the Companies Act 2013 and as amended from to time

50 Lakhs/200 Lakhs/250 Lakhs for Direct/Reinsurance/Composite Brokers

• The net-worth of an Insurance Broker shall at no time during the period of certificate of registration fall below:
  • rupees fifty lakh for direct broker;
  • 50% of the minimum capital requirements or contribution or equivalent specified under Regulation 19(1) for reinsurance / composite broker.
• In case of non-compliance of sub-regulation (1) above, the Insurance Broker shall immediately restore the net worth to the limits given in (1) above and report compliance of the same.
• The Insurance Broker shall submit to the Authority a net worth certificate duly certified by an Auditor every half-year.; Net worth requirement after Registration

Deposit Requirements

Every insurer (applicant) before the commencement of the insurance broker business must ensure that the deposit has been maintained with the scheduled bank. The sum which has to be deposited is as follows:

• 10 Lakh Rupees for a Direct Broker; and
• 10% of the minimum capital/ contribution is required for re-insurance / composite broker. Fixed deposit shall not be released to them without the prior written permission of the Authority.

Office Space/ Facilities

• The applicant applying for an Insurance Broker License must also satisfy necessary infrastructure such as adequate office space, equipment, trained manpower, and IT infrastructure to effectively discharge its activities.

Qualification

• The applicant must ensure that at least two qualified persons are present who have the necessary training to function as insurance brokers. This is required to conduct the business of the insurance broker. If the applicant is carrying out insurance broker business related to life insurance and general insurance, then the applicant has to make sure that the two qualified individuals have relevant and necessary qualifications in both life and general insurance.
• The principal officer of the business must also have requisite qualifications. He must possess the necessary certificate and skills for carrying out the insurance broker business.
• Principal Officer must be a key management executive of the company, whole-time director, partner, or office, which requisite experience.

Purpose of the Business

• The applicant should ensure that the main objects of the business is insurance brokering. These must be mentioned in the objects clause of the Articles of Association (AOA) and the Memorandum of Association (MOA).
• Foreign investors are also allowed to invest in an insurance brokers business.

Professional indemnity insurance

• Every insurance broker shall take out and maintain at all times a professional indemnity insurance cover throughout the validity of the period of the Certificate of Registration issued to them by the Authority, as specified in Schedule II – Form S of the IRDAI (Insurance Brokers) regulations.
• Provided that the Authority shall in appropriate cases allow a newly registered insurance broker to produce such a policy within twelve months from the date of issue of certificate of registration..

Procedure for Applying for an Insurance Broker License

Application for Grant of Certificate of Registration:

• The applicant should make an application regarding the type of insurance broker business.
• The application for an Insurance Broker License must be made in FORM B- Schedule I of the IRDAI(Insurance Brokers) regulations.
• The application must be submitted with documents mentioned in FORM-C Schedule I of the IRDAI(Insurance Brokers) regulations.
• For granting the certificate of registration, an application must be submitted along with the fees specified in FORM D- Schedule I of the IRDAI(Insurance Brokers) Regulations. The fees that has to be paid for application for an insurance broker is as follows:
  • Direct broker Rs.25,000.
  • Re-insurance broker Rs.50,000.
  • Composite broker Rs.75,000.
• Apart from this, there are mandatory fees that has to be paid for the registration requirements:
  • Direct Broker- Rs. 50,000/- after granting of an in-principal approval where the application is new. In case of renewal of registration, the fees will be Rs 1,00,000/- for a period of 3 years.
  • Re-insurance Broker- Rs. 1, 50,000/- after granting of an in-principal approval where the application is new. If there is a renewal of registration, then the fee to be paid for renewal is Rs. 3,00,000/- for 3 years.
  • Composite Broker- Rs.2, 50,000/- after granting of an in-principal approval where the application is new. If there is a renewal of registration, then the fee to be paid for renewal is Rs. 5,00,000/- for 3 years.
• The fee payable as the mandatory fee would be for the validity period of the certificate of registration.
• Fees must be paid through electronic means or demand draft (DD) payable in favor of the Insurance Regulatory and Development Authority of India, Hyderabad.

Clarification/ Further Information

• The applicant can be asked to furnish further information by the authority
• If required, the applicant has to submit these documents within 30 days from receiving the intimation from the authority.

Procedure for Issuing Insurance Broker License (registration)

• If the authority feels that all the requisite information complies with the Insurance broker license, then an in-principal approval would be provided to the applicant for complying with the requirements related to the certificate of registration.
• The authority will grant the certificate if the applicant has complied with the laws and regulations.
• The certificate of registration as an Insurance Broker License would be given to the applicant when the applicant satisfies that the code of conduct would be adhered to.
• The broker applying for a certificate of registration can also apply for any other registrations under the IRDAI. Such other registration would only be granted to the applicant after issuing the certificate of registration for the first instance
• .
• An applicant can make a new application if the certificate of registration has been canceled/ repealed due to a change in law or held by a Securities Appellate Tribunal or any court of law. An application under this can only be made after one year to the concerned authority.

Rejection

• An application for starting an insurance business can be rejected if the authority feels that the applicant has not fulfilled the necessary requirements.
• The authority must communicate the refusal to grant the application for an Insurance broker license within 30 days of communication of the rejection.
• An applicant can make a new application after one year of rejection of the application.

Conditions for Granting the Insurance Broker License

The IRDAI makes certain conditions before granting the insurance brokers license:

• The insurance broker must conduct the business according to the rules of the IRDAI.
• If the insurance broker business has provided false or misleading information regarding the particulars of the business, then the same must be intimated to the authority.
• Insurance broker business must handle all grievance procedures of clients within 14 days of receiving the complaint. The business must keep information regarding the number of complaints received from customers.
• Insurance brokers must reasonably conduct their business under the rules laid down by the IRDAI.
• The insurance broker must maintain books of accounts.
• Insurance broker should not conduct multi-level marketing or solicitation.

Documents required for Insurance Broker License

• Submission of relevant information as required in the Schedule I – Form B.
• Copy of the Memorandum of Association and Articles of Association should be according to the requirements of the Companies Act 2013.
• Remittance of the Fee for the particular category of Insurance broker license.
• Training for the employees starting an insurance broker business
• Schedule-I Form F should have the relevant data of the principal officer.
• Fit and Proper certification, which is required as per Schedule-I Form G.
• Declaration submitted by a key management executive, principal officer, director of the company that they are not having any form of disqualification under the Act.
• Details of Directors/ Partners, Promoter and Key Management Personnel are to be provided in the Form.
• Schedule I- Form F- List of qualified persons responsible for managing and procuring brokerage business along with their qualifications.
• Details of statutory auditors and Principal Bankers along with the Bank Account Number of the applicant. Details of infrastructure, including IT infrastructure along with supporting evidence thereof like ownership or lease agreement evidencing that sufficient space is present for managing the brokering business.

Validity for Certificate of Registration for Insurance Brokers License

• A certificate granted by the IRDAI would be valid for three years from the date of issue. This would be subject to the order from the authority.
• An insurance broker would not be permitted to do the Insurance Broker business without possessing a proper certificate and registered with the authority

Insurance Broker License Renewal

• Applications for renewing an insurance broker license must be made to the relevant authority 30 days before the expiry of the license. The application must be made in FORM K of Schedule –I of the regulations.
• If an application is made after the expiry of the above period, but before the actual expiry of the certificate, then a payment of Rs. 100/- must be made with the application.
• If there is a delay in making an application for renewal of registration, then the same must be made by the applicant. If this is within 60 days of the expiry of the certificate of registration, the applicant would have to pay Rs. 750/-.
• Any application which is received after the expiry of the 60 days would be considered only after 1 year. In the one year, the insurer must not conduct any business or solicit any form of business.
• An Insurance broker cannot apply for renewal after 90 from the expiry of the certificate.
• Insurance brokers cannot business of brokering after the expiry of the certificate except serve existing policyholders.
• The application for renewal of certificate for broker insurance would be the same as the new application.
• If the application or renewal is rejected, the same has to be notified to the applicant

Please refer to the Insurance Regulatory and Development Authority of India(Insurance Brokers) Regulations, 2018 on www.irdai.gov.in