What are the documents required to obtain an Insurance broker license in India?
An insurance broker is someone who acts as an intermediary between a potential customer and an insurance company to help them find a policy that best suits their needs. They represent their customers and are looking to aid them. They also cannot bind coverage on behalf of the insurance provider.
Becoming an Insurance broker is sought after by many, but it is a complicated process that needs to be clearly examined and understood before attempting to do so. So how does one go about it? what kinds of brokers are there, what are the eligibility criteria, and what documents are required to get a license?
Let’s find out in this blog.
What kinds of brokers are there?
According to the IRDAI, which is the regulatory authority for insurance, there are typically five categories of brokers.
- Direct Broker (Life)
- Direct Broker (General)
- Direct Broker (Life & General)
- Reinsurance Broker
- Composite Broker
Out of these five categories, one can typically become three types of brokers.
● Direct Broker
This type of broker deals with an insurance provider to let them know their customer’s needs. They provide consultation and advice to their customers based on the best policy according to their needs. They are sometimes also involved in negotiating claim settlements for their customers.
● Reinsurance Broker
A reinsurance broker provides services for claims consultancy, Risk Management services, or other similar service.
● Composite Brokers
Composite brokers are a mix between direct and reinsurance brokers as they solicit and arrange insurance and/or re-insurance for their customers with insurance providers and provide claims consultancy, Risk Management services, or other similar services.
What is a broker license, and how to get it?
Becoming an insurance broker requires an aspirant to fulfill specific eligibility criteria such as capital requirements, corporate structure, broker license, net worth, deposit, and infrastructure.
These things all differ based on the category of the broker and the current required conditions.
These are the documents required to apply for a broker license:
- A duly formed Schedule I – Form B
- A copy of the articles of association and memorandum of association
- Payment of the license fee for the specific category of an Insurance Broker
- Employees beginning a business as insurance brokers should receive training, and Schedule-I Form F should contain pertinent information about the principal officer
- It is necessary to have Fit and Proper certification, as per Schedule-I Form G
- Declaration stating that they are not ineligible for any type of office under the Act
- A duly filled form with information on the Directors/Partners, Promoter, and Key Management Personnel
- List of competent individuals with credentials in Schedule I, Form F, responsible for managing and acquiring brokerage business
- The applicant’s bank account number and details of the principal bankers and statutory auditors are also provided
- Information on infrastructure, particularly IT equipment, and accompanying documentation, such as a lease agreement or proof of ownership, demonstrate that there is enough space for administering the brokering firm
These are the minimum capital, net worth, and deposit requirements for all of these types:
- A direct broker needs a capital of at least Rs. 50-75 lakhs for registration and maintaining a net worth of at least Rs. 50 lakh. They also need to deposit Rs 10 Lakh in a fixed deposit in a bank to register.
- A reinsurance broker should have a capital of at least 4 crores to register and must maintain a net worth of at least 50% of that amount. They also need to deposit a sum equal to 10% of the minimum capital in a fixed deposit in a bank to register.
- A composite broker should have a capital of at least 5 crores to register and must maintain a net worth of at least 50% of that amount. They also need to deposit a sum equal to 10% of the minimum capital in a fixed deposit in a bank to register.
Other than these criteria, one must also have a broker license which can be applied online on the IRDAI website. And follow the following steps to apply for the license.
- The applicant should fill out an application specific to the type of insurance broker business.
- The application for an Insurance Broker License must be made in FORM B- Schedule I.
- The application must be submitted with documents mentioned in FORM-C Schedule I.
- For granting the certificate of registration, an application must be submitted along with the fees specified in FORM D- Schedule I.
- Apart from this, there are mandatory fees that have to be paid for the registration requirements. The fee payable as the mandatory fee would be for the validity period of the certificate of registration.
- Fees must be paid either online or through a demand draft (DD) in favour of the Insurance Regulatory and Development Authority of India, Hyderabad.
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 of registration as an Insurance Broker License if the applicant has complied with the laws and regulations and satisfies the code of conduct.
This is how one can apply for an insurance broker license in India, along with all the requirements. Hope this helped make the process more simple and allowed you to understand how to go about it. For any further information or a detailed understanding, it is highly recommended to check out the IRDAI website.