Insurance Broking business is gaining popularity in India due to increasing awareness about insurance and large untouched market, also many new insurance companies are now coming with different insurance products, while now Term Insurance, Health Insurance, and Vehicle Insurance is now a very important part of individual’s financial planning, Also if we consider the requirements of Insurance also in a business where Fire Insurance, Machinery, Keyman Insurance, Directors and Officers liability insurance are importantly required. Insurance Brokers play a very important role in the Insurance Industry as
An insurance broker is a professional who offers, negotiates, and sells policies. He acts as an intermediary between insurers and customers and receives compensation.
An important role of brokers is to help insurers to assess the types of risks they face. Risks include natural hazards such as bad weather, hurricanes, tornadoes, fires, and floods. At the same time, brokers act on behalf of and in the interest of customers. They do comparison shopping to find the best deals and offer policies from more than one insurance company. Brokers also help their clients to outline risk management strategies, which are suitable for their profile. There are different types of risk to look into, including natural disasters, car accidents, credit risks, cash flow problems, legal liabilities, and others
In this article we will discuss about the registration of Insurance Broking Company in India
Categories of the Insurance brokers
Following are the categories of Insurance Brokers:
- Direct broker (life)
- Direct broker (general)
- Direct broker (life & general)
- Reinsurance broker
- Composite broker
Registration of Private Limited Company/LLP
In India, IRDA regulates the Insurance broking business in India and as per regulations of IRDA, an Insurance Broker should be registered as Private Limited Company /LLP in India
Name of Insurance Broking Company
The insurance brokers shall have the word ‘Insurance Broker’/ ‘Insurance Brokers’/‘Insurance Broking’ in the name of the Insurance Broker to reflect their line of activity and to enable the public to differentiate insurance brokers registered with the Authority from other non-registered insurance-related entities.
Minimum Capital Requirement for Insurance Broking Business
Any applicant seeking to become an insurance broker shall have a minimum paid-up capital/contribution as mentioned below:
|Category||Minimum Capital/ Contribution (Rupees)|
|Direct broker||Seventy Five Lakh|
|Reinsurance broker||Four crore|
|Composite broker||Five crore|
The above Capital should be only in equity and not in any other form, further, the investment in the applicant by the promoters/ shareholders/ partners shall be from their own funds and not from any other sources.
Explanation: Own funds do not include funds arranged by way of borrowings or loans.
Net-worth requirements for Insurance Broking business
The net-worth of an Insurance Broker shall at no time during the period of the certificate of registration fall below:
- Rupees fifty lakh for a direct broker,
- 50% of the minimum capital requirements or contribution or equivalent for reinsurance / composite broker.
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
Every Insurance broker shall submit net worth certificate duly certified by an Auditor every half-year to IRDA
Deposit requirements for Insurance Borking Business in India
Every insurance broker shall before the commencement of their business, deposit and keep deposited with any scheduled bank a sum equivalent to:
- Rupees ten lakhs for Direct broker
- 10% of the minimum capital/ contribution specified under Regulation 19(1)for reinsurance / composite broker in fixed deposit, which shall not be released to them without the prior written permission of the Authority.
- The deposit shall have a lien with the Authority
- Such deposit shall not be pledged for taking any loan or overdraft facility by the insurance broker
- Every insurance broker shall furnish to the Authority as and when called upon to do so a non-encumbrance statement from scheduled bank in which such fixed deposit is kept
- The interest earned on the deposit shall not be subject to lien with the Authority
Professional indemnity insurance
Need to furnished, within 12 months for newly registered brokers
Other services that can be provided by Insurance Broker
Claim Consultancy and Risk Management can also be provided by Insurance brokers
Application Fee for Registration of Insurance Broker
Direct broker: Rs.25,000 and Rs.50,000/- after the grant of in-principle approval in case of a fresh applicant.
In the case of Renewal of Registration, the fee shall be Rs 1,00,000/- for a period of 3 years
- Fifty hours (50hrs) of theoretical and practical training from an institution recognised by the IRDA from time to time, and should have passed an examination, at the end of the period of training, conducted by the National Insurance Academy, Pune or any other examining body recognized by the Authority
- 25 hours if the applicant is CA, CS etc and should pass the examination within 1 year
Step by Step Procedure for Registration of Insurance Broking Business
- Register Private Limited company by including word “Insurance Broker’/ ‘Insurance Brokers’/‘Insurance Broking
- Increase Capital to Rs. 75 Lakh
- Obtain Training and Pass Required Examination
- Make a Deposit of Rs. 10 Lakh
- Apply to IRDA for Licence
- Follow up with IRDA
- Insurance Broking Licence
- Professional Indemnity Insurance