Becoming An Insurance Broker In India: A Comprehensive Guide

Becoming an insurance broker in India requires a license from the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI regulates the insurance broking industry in India and ensures that brokers comply with legal and ethical guidelines. The process of obtaining a license involves several steps, including eligibility checks, documentation, application, and approval.

The eligibility criteria for obtaining an insurance broker license in India include meeting specific capital, net worth, and deposit requirements. Additionally, applicants must have a bachelor's degree in a relevant field, relevant work experience, and the necessary infrastructure, such as office space and trained staff.

The application process typically takes 1 to 2 weeks, and the entire process of obtaining a license can take up to 12 months. Once licensed, insurance brokers can act as intermediaries between insurance providers and customers, earning commissions by providing different types of insurance to meet customers' needs.

Choose the type of insurance broker: direct, reinsurance or composite

The first step to becoming an insurance broker in India is to choose the type of insurance broker you want to be. This decision will depend on your business goals, the amount of capital you have, and the specific services you want to offer your clients. Here is an overview of the three main types of insurance brokers in India:

Direct Broker:

A direct broker serves as an intermediary between insurance companies and insurance customers. They work directly with clients to understand their business and risk management needs and then connect them with suitable primary insurers. Direct brokers must have detailed knowledge of the insurance market and provide advice on appropriate insurance coverage. The capital requirement for a direct broker license in India is INR 75 lakhs.

Reinsurance Broker:

Reinsurance brokers act as intermediaries between insurance companies and reinsurance companies. They help manage the business of reinsurance and sell related products, such as international insurance. Reinsurance brokers also maintain market statistics and provide advice based on technical data on reinsurance covers available in the international market. The capital requirement for a reinsurance broker license in India is INR 4 crores.

Composite Broker:

A composite broker combines the roles of both a direct broker and a reinsurance broker. They work with clients to provide insurance and/or reinsurance services, connecting them with insurance companies and/or reinsurers, both within India and internationally. Composite brokers must also meet the capital requirement of INR 4 crores, the same as reinsurance brokers.

When choosing the type of insurance broker you want to be, consider your expertise, the size of your business, and your ability to meet the capital requirements. Additionally, each type of broker must comply with specific regulations set by the Insurance Regulatory and Development Authority of India (IRDAI) and adhere to a code of conduct.

Incorporate a company

To obtain an IRDA license to act as an insurance intermediary, you need to be a company. You can select either a cooperative society or an LLP, but a company is a better option because of the following reasons:

• It makes it easier to manage the business
• The process of company incorporation is simple
• It provides you with an accurate infrastructure to run your insurance broking business

When establishing your company, take care of the following requirements:

Paid-up capital requirement

• Direct Broker – INR 75 Lakhs
• Reinsurance Broker – INR 4 Crores
• Composite Broker – INR 4 Crores

Net worth requirement

• Direct Broker – INR 50 Lakh
• Reinsurance Broker – 50% of paid-up capital
• Composite Broker – 50% of paid-up capital

Deposit Requirement

• Direct Broker – INR 10 Lakh
• Reinsurance Broker – 10% of paid-up capital
• Composite Broker – 10% of paid-up capital

Steps to incorporate a company:

• Choose a name for your company: The name of your company should ideally reflect the nature of your business. You can also reserve a name for your company with the Ministry of Corporate Affairs (MCA) for a period of time while you complete the other incorporation steps.
• Obtain a Digital Signature Certificate (DSC): A DSC is required for signing all the documents electronically during the company registration process.
• Apply for Director Identification Number (DIN): All directors of the company must have a DIN, which can be obtained by filing an application with the MCA.
• Draft the Memorandum of Association (MoA) and Articles of Association (AoA): These documents outline the company's objectives, business activities, share capital structure, and internal management policies.
• Register the company: Submit the incorporation form, MoA, AoA, and other required documents to the MCA. If all the documents are in order, the MCA will issue a Certificate of Incorporation.
• Obtain the necessary licenses and permits: In addition to the IRDA license, you may need to obtain other licenses and permits depending on the nature of your business, such as a fire safety license or a license to use hazardous substances.
• Open a bank account: You will need to open a bank account in the company's name to conduct financial transactions.
• Compliance and registration: Ensure that your company complies with all the applicable laws and regulations, and register with the relevant authorities, such as the Goods and Services Tax (GST) department.
• Hire employees: Recruit qualified personnel to handle the insurance broking activities, including a principal officer who has completed the IRDA training and passed the examination.

Train the Principal Officer

The Principal Officer of an insurance broker company must undergo training and pass the examination organised by the National Insurance Academy in Pune, India. This is a crucial step in the process of becoming an insurance broker in India. Here are the key points to note about training the Principal Officer:

• The Principal Officer must be a key management executive, full-time director, partner, or office-bearer with the requisite experience.
• They must undergo the necessary 50 hours of training at an institution recognised by the Insurance Regulatory and Development Authority of India (IRDAI).
• The training covers the regulations and guidelines that insurance brokers must adhere to.
• After the training, the Principal Officer must pass the examination with a minimum of 50% marks.
• If the Principal Officer has already undergone training and passed the examination for an insurance broking company, they may be exempt from the training and examination requirements for an insurance marketing firm.
• The insurance marketing firm must still arrange for the Principal Officer to undergo training and pass the examination within five years before applying for a license.
• The training and examination ensure that the Principal Officer is knowledgeable about the industry and can perform their duties effectively and in compliance with the law.

Furnish the documents

To become an insurance broker in India, you must furnish a variety of documents to support your application. Here is a detailed list of the documents you will need to provide:

• Certificate of Incorporation of Your Company: This document serves as proof of your company's legal existence and is a crucial requirement for obtaining your insurance broker license.
• Memorandum of Association (MoA): The MoA outlines the company's name, address, and the business activities it intends to undertake. It also includes details about the company's shareholders and the amount of capital they have contributed. Obtaining a copy of the MoA is essential for your application.
• Articles of Association (AoA): The AoA outlines the company's internal rules and regulations, including the responsibilities of directors and shareholders. It is a critical document that governs the company's operations and management.
• Qualification Documents of the Principal Officer: The principal officer plays a key role in the company and must meet specific qualifications. Their qualification documents should be submitted as proof of their expertise and suitability for the position.
• Address Proof of the Premises of Business: You will need to provide address proof of your business premises to ensure it complies with the infrastructure requirements.
• Qualification Documents of the Employees: Similar to the principal officer, the employees who will be facilitating insurance services must also meet specific qualifications. Their qualification documents should be submitted to demonstrate their expertise in the field.
• Insurance Broker Exam Completion Certificate: All key personnel, including the principal officer and employees, must complete the necessary insurance broker exam. The completion certificate is a mandatory requirement and should be included in your application.
• Net Worth Certificate of the Company: This document provides a snapshot of the company's financial health and net worth. It is essential to demonstrate the company's financial stability and ability to meet the net worth requirements for the license.
• Audited Balance Sheet of the Company: An audited balance sheet is a critical financial statement that provides a detailed overview of the company's financial position. It includes information about the company's assets, liabilities, equity, income, and expenses. This document is essential for assessing the financial health and stability of your company.

These documents are crucial for demonstrating your eligibility and compliance with the requirements set by the Insurance Regulatory and Development Authority of India (IRDAI). Make sure to carefully review the list and gather all the necessary documents before initiating your application for an insurance broker license in India.

Apply online for the Insurance Broker License

To apply online for an Insurance Broker License in India, follow these steps:

Step 1: Choose the type of insurance broker

First, decide what type of insurance broker you want to become:

• Direct insurance broker: Intermediary between an insurance company and an insurance customer.
• Reinsurance broker: Intermediary between an insurance company and a reinsurance company.
• Composite insurance broker: Provides the services of both insurance and a reinsurance broker.

Step 2: Incorporate a company

To obtain an IRDA license, you need to be a company. While you can choose a cooperative society or an LLP, a company is generally a better option due to ease of management, simpler incorporation, and better infrastructure.

Step 3: Train the Principal Officer

The Principal Officer of the company must undergo IRDA training for insurance brokers and pass the examination organized by the National Insurance Academy, Pune, with a minimum of 50% marks.

Step 4: Furnish the documents

The following documents must be submitted along with the application:

• Certificate of incorporation of your company
• Memorandum of Association
• Articles of Association
• Qualification documents of the Principal Officer and employees
• Insurance Broker Exam Completion Certificate
• Net worth certificate of the company
• Audited balance sheet of the company

Step 5: Apply online

You can apply online via the IRDA portal. The process is straightforward and a guide is provided to help you file the application:

• Go to the official IRDA portal
• Select the Insurance Broker option
• Start filling out the application form
• Upload the required documents
• Pay the insurance broker license fee
• Submit the application

Once your application is received, the IRDA will assess your form and documents. After a successful assessment, you will receive the insurance broking license.

Frequently asked questions