Company Registration is the prior requirement before applying for an Insurance Broker license from the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI is responsible for regulating various types of insurance companies, including life insurance companies, general insurance companies, health insurance companies, and reinsurance companies. It is also responsible for regulating insurance intermediaries, including insurance brokers, corporate agents, and web aggregators. IRDAI plays a vital role in ensuring the growth and stability of the insurance industry in India, and in protecting the interests of policyholders and other stakeholders.
Very first step to start a IRDAI approved Broker Company, Individual should go for the registration of the Company through MCA (Ministry of Corporate Affairs) in India, which is the statutory body responsible for regulating and administering companies and businesses registered in India.
Thoughts for IRDA -
The process for obtaining an Insurance Broker license involves various steps, including fulfilling eligibility criteria, submitting an application, providing required documents and information, and paying the applicable fees and must comply with the guidelines and regulations set by the Insurance Regulatory and Development Authority of India (IRDAI) and compliance with other regulatory requirements such as the Prevention of Money Laundering Act (PMLA), 2002.
The IRDAI will also conduct an inspection of your company's premises and operations to ensure that they comply with the regulatory requirements.
The registration process involves various steps, including submitting an application, fulfilling eligibility criteria, submitting required documents, and paying fees.
While doing the a Registration of Company must insure Broker word should be in the name of the Company and take "No Objection Certificate" which normally valid for 2 months from the date of receipt of the NOC letter from the department of IRDAI (Hyderabad) beforehand. Without Broker in the name IRDAI will not allow to give licences and also MCA will not give certificate as an insurance broker Company. NOC is issued for the sole purpose of to apply for registration with MCA and does not confer any right what so ever in processing of the application for grant of certificate of registration which shall be processed under the applicable rules and regulations by the lRDAl.
Under the Regulation 18(1) of the IRDAI (insurance Brokers) Regulations, 201g an entity applying for insurance Brokers shall have the word 'insurance Broker'/'insurance Brokers'/'insurance Broking’ in their name. This is to ensure transparency and clarity for customers and to distinguish the company as a licensed insurance broker. The use of the word 'broker' or 'broking' in the name of the company also helps customers to differentiate between different types of insurance intermediaries such as agents, corporate agents, and brokers. Customers can identify that a company with the word 'broker' or 'broking' in its name is an insurance broker, which means that it is a third-party entity that acts as an intermediary between the insurance company and the customer, and not an agent who represents the interests of the insurance company. The “No Objection Certificate” certificate will be valid for six months from the date of issuance of the certificate.
We can say that registering an insurance broker company in India can be a demanding process that requires compliance with various legal and regulatory requirements. But, the specific demands and requirements can vary depending on the type of company and the specific regulatory requirements. Insurance brokers can be broadly classified into five categories based on their specialization and the types of insurance products they deal with:
» Direct Broker (Life): This type of insurance broker specializes in life insurance products and works directly with the customers to provide them with suitable policies that meet their needs. An example of a direct broker specializing in life insurance products is Prudential Financial, which offers life insurance policies to customers directly.
» Direct Broker (General): This type of insurance broker specializes in general insurance products such as motor, property, travel, and health insurance, and works directly with customers to provide them with suitable policies that meet their needs. An example of a direct broker specializing in general insurance products is Progressive Corporation, which offers motor insurance, property insurance, and other general insurance products directly to customers.
» Direct Broker (Life & General): This type of insurance broker specializes in both life and general insurance products and works directly with customers to provide them with suitable policies that meet their needs. An example of a direct broker specializing in both life and general insurance products is Allstate Insurance Company, which offers a range of life and general insurance products, including auto insurance, home insurance, life insurance, and more, directly to customers.
» Reinsurance Broker: This type of insurance broker works with insurance companies to help them manage their risk exposure by arranging reinsurance coverage for them. Reinsurance brokers have specialized knowledge and expertise in the reinsurance market and help insurance companies to transfer their risk to other insurers. An example of a reinsurance broker is Aon Corporation, which specializes in arranging reinsurance coverage for insurance companies around the world.
» Composite Broker: This type of insurance broker offers a range of insurance products, both life and general, to their clients. Composite brokers provide a one-stop-shop for all insurance needs and offer a comprehensive insurance solution to their clients. An example of a composite broker is Marsh & McLennan Companies, which offers a range of life and general insurance products, as well as risk management and consulting services, to clients across the globe.
• Direct Broker (Life/General/Life & General): The minimum paid-up capital required for a Direct Broker is Rs. 50 lakhs.
• Reinsurance Broker: The minimum paid-up capital required for a Reinsurance Broker is Rs. 2 crores.
• Composite Broker: The minimum paid-up capital required for a Composite Broker is Rs. 75 lakhs, out of which at least Rs. 25 lakhs should be for each of the life, non-life, and reinsurance broking businesses.
It is important to note that these are the minimum capital requirements specified by the Insurance Regulatory and Development Authority of India (IRDAI), and the actual amount of capital required may vary depending on factors such as the size and scope of the broker's business, the geographical area of operations, and the type of insurance products being offered.
• Direct Broker (Life/General/Life & General): The minimum net worth required for a Direct Broker is Rs. 50 lakhs.
• Reinsurance Broker: The minimum net worth required for a Reinsurance Broker is Rs. 2 crores.
• Composite Broker: The minimum net worth required for a Composite Broker is Rs. 75 lakhs, out of which at least Rs. 25 lakhs should be for each of the life, non-life, and reinsurance broking businesses.
It is important to note that the net worth requirements are in addition to the minimum paid-up capital requirements, and are intended to ensure that the broker has sufficient financial resources to support its business operations and meet its obligations to clients and insurers. The net worth is calculated as the difference between the total assets and total liabilities of the broker.
The Insurance Regulatory and Development Authority of India (IRDAI) is a statutory regulatory body that oversees and regulates the insurance industry in India. Many reasons are there for why choosing an IRDAI regulated insurance broker company can be beneficial:-
IRDAI regulates the insurance broker industry to ensure that policyholders are protected from fraudulent activities and malpractices by insurers. IRDAI also ensures that insurance companies maintain sufficient financial strength to meet their obligations towards policyholders.
IRDAI provides a platform for policyholders to file complaints against insurers if they face any issues with their insurance policies. IRDAI ensures that complaints are addressed in a timely and effective manner.
IRDAI has prescribed various guidelines and regulations that insurers must follow while conducting their business. These guidelines are designed to ensure fair practices, transparency, and accountability on the part of insurers.
IRDAI regulated insurance broker companies offer a wide range of insurance products to cater to the diverse needs of customers. This includes life insurance, health insurance, motor insurance, travel insurance, and more.
Choosing an IRDAI regulated insurance broker company can give policyholders confidence and peace of mind knowing that their insurer is being regulated by an independent and impartial body.
Choosing an IRDAI regulated insurance broker company can provide policyholders with various benefits, including protection, fair practices, grievance redressal, a wide range of products, and confidence in their insurer.
The principal officer of an insurance broker company plays a crucial role in ensuring that the company operates in compliance with the regulatory framework set out by the Insurance Regulatory and Development Authority of India (IRDAI). roles and responsibilities of the principal officer of an insurance broker company include:-
The principal officer of an insurance broker company must have adequate qualifications, pass the Brokers exam, and acquire requisite training to be eligible to carry out the functions and responsibilities of the role.
The principal officer must ensure that the company complies with all the rules, regulations, and guidelines set out by the IRDAI. This includes maintaining proper documentation, keeping accurate records, and submitting periodic reports to the regulatory authority.
The principal officer of an insurance broker company is responsible for overseeing the day-to-day operations of the company and ensuring compliance with the regulatory framework set out by the IRDAI. Therefore, it is important that the principal officer has the necessary qualifications and training to carry out the role effectively.
The IRDAI has set out specific eligibility criteria for the principal officer of an insurance broker company, which includes minimum academic qualifications, relevant work experience, and successful completion of the IRDAI's Brokers exam. Additionally, the principal officer must undergo a training program that covers various aspects of insurance broking, including regulatory compliance, risk management, and customer service.
By ensuring that the principal officer has the required qualifications, training, and experience, an insurance broker company can provide its customers with professional and reliable services. This also helps the company to comply with the regulatory requirements set out by the IRDAI and maintain a good reputation in the industry.
The principal officer must ensure that the company provides high-quality services to its customers. This involves developing customer service policies and procedures, monitoring customer satisfaction levels, and addressing any customer complaints or issues.
STEP-1: NOC from IRDA for Reservation of name from MCA –
The requirement of the MCA that if the proposed name of an insurance broker company contains the words "Insurance Broker" or "Insurance Brokers" or "Insurance Broking," then a No Objection Certificate (NOC) is required from the Insurance Regulatory and Development Authority of India (IRDAI) before the company can be registered.
This is because the use of these words in the nomenclature of the proposed company implies that the company is engaged in insurance broking activities, which is a regulated activity. Therefore, the RoC wants to ensure that the company has obtained the necessary approvals and licenses from the IRDAI before it can use these words in its name.
The NOC can be obtained by submitting an application to the IRDAI along with the required documents and fees. Once the IRDAI reviews the application and finds everything to be in order, it will issue the NOC, which can then be submitted to the CRC-Incorporate Cell MCA along with the other registration documents.
STEP-2: Registration of Company with MCA
File the incorporation documents with following forms need to be filed with the MCA for registration through SPICe (INC-32), integrated form for incorporating a company, and it includes the Memorandum of Association (e-MOA), Articles of Association (e-AOA), and other details of the company and its directors. Once the MCA approves the incorporation documents and payment of fees, the Certificate of Incorporation (COI) will be issued. The COI contains the CIN (Corporate Identification Number) of the company along with Company received Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), ESI and EPF registration, Current Account Number, GST if any.
Documents required for application to IRDA for Broker License:
The documents required to be submitted along with a new application for a Direct/Reinsurance/Composite Broker Certificate of Registration are -
1. Application form for registration as a broker, duly filled and signed by the authorized signatory.
2. Certified copy of the Memorandum and Articles of Association (MOA/AOA) of the company.
3. A declaration in Form A signed by the principal officer of the applicant, stating that he/she has not been convicted of any offence involving moral turpitude or any economic offence, and that he/she is not an undischarged bankrupt.
4. Certified copy of the Certificate of Incorporation of the company issued by the Registrar of Companies (RoC).
5. Certified copy of the latest audited balance sheet and profit and loss account of the applicant.
6. Details of the directors and shareholders of the company, along with their photographs and identity proofs.
7. Details of the principal officer of the company, along with his/her qualifications, experience, and other relevant details.
8. Details of the proposed office premises of the company, along with the lease agreement or proof of ownership.
9. A statement of the company's proposed business plan, including details of the proposed insurance products and services to be offered, the target market, and the proposed distribution channels.
10. A declaration in Form B signed by the principal officer of the applicant, stating that the company has complied with all the requirements of the Insurance Regulatory and Development Authority of India (IRDAI) (Insurance Brokers) Regulations, 2018.
11. Any other documents as may be specified by the IRDAI from time to time.
Hence, the list of required documents may vary depending on the type of broker and the specific requirements of the IRDAI and subject to latest regulations and guidelines before submitting their application.
Through Circular No. IRDA/INT/2016 dated January 1, 2016, issued by the Insurance Regulatory and Development Authority of India (IRDAI), introduced a new process for the online registration of insurance brokers.
As per the circular, an applicant who wishes to apply for a new insurance broker license is required to register on the IRDAI portal by following the steps below:
1. Go to the IRDAI portal (www.irda.gov.in) and click on the link "Registration for Intermediaries."
2. Enter the required details such as name, address, email ID, and phone number, and submit the application.
3. Upon successful registration, the system will generate a user name and password, which will be sent to the applicant's email address.
4. Once the user name and password are received, the applicant can log in to the portal and submit the application for an insurance broker license.
Upon successful completion of the above steps, the IRDAI issues the license to the applicant.
The circular also provides detailed guidelines on the documents and information required to be submitted along with the application. The IRDAI has made the process of registration and licensing of insurance brokers online to simplify the process and make it more efficient.
Every insurance broker should display, in all their correspondences with all stakeholders, their name registered with the IRDAI, address of the registered and corporate office, IRDAI registration number, the category for which the insurance broker is registered, validity period of the registration. Further, insurance broker should not use any other name in their correspondence/literature/letter head without the prior approval of the Authority.
The maximum permissible limit for foreign direct investment (FDI) in an Indian insurance broking company is 100% of the paid-up equity share capital of the company, subject to certain conditions and restrictions. The FDI policy for insurance brokers is governed by the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, which allows 100% FDI under the automatic route in insurance broking companies. This means that foreign investors do not need prior approval from the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority of India (IRDAI) to invest in an Indian insurance broking company.
Further, there are certain conditions that must be met for FDI in insurance broking companies, such as:-
The company must be registered with the IRDAI as an insurance broker.
The foreign investor must be a regulated entity in its home country and must have a minimum track record of 10 years.
The foreign investor cannot have more than 49% ownership in an Indian insurance company.
The Indian insurance broker must be majority-owned and controlled by Indian residents.
It is important to note that the FDI policy for insurance broking companies is subject to change and investors are advised to check the latest regulations before investing.
Validity and renewal process for an insurance broker
Broker license can vary depending on the state or country in which the broker is licensed. Generally, an insurance broker's license is valid for a specific period of time, such as two years, and must be renewed before the expiration date to continue practicing as an insurance broker.
To renew an insurance broker license, the broker typically needs to complete a certain number of continuing education credits or courses to stay up to date with the latest industry standards and regulations. The specific number of credits required and the courses available may also vary depending on the state or country in which the broker is licensed.
In addition to completing continuing education requirements, insurance brokers may need to submit a renewal application and pay a renewal fee. Failure to renew the license before the expiration date can result in a lapse in licensure, which may require the broker to retake the licensing exam or complete additional education requirements to regain their license.
It is important for insurance brokers to stay on top of their license renewal requirements and deadlines to avoid any interruptions in their ability to practice and serve clients. They should also check with their state or country's insurance regulatory agency for specific renewal requirements and deadlines.
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