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Home / IRDA Update 

Entry Norms for brokers announced by IRDA

Mumbai: Entry-level norms for the four defined categories of brokers: insurance, re-insurance, composite and others have been announced by the Insurance Regulatory and Development Authority (IRDA).

While insurance and risk management consultants and others approved by IRDA fall under the category ‘others’, composite brokers are those who can undertake direct insurance and re-insurance broking businesses.

So far non-life companies were allowed to seek services of reinsurance brokers to place a reinsurance deal in the international market. Reinsurance is where an insurance company is able to hedge their risks in the international market.

The solvency margin for brokers, as stipulated by the authority, for direct insurance broker is 10 per cent of brokerage in a year subject to a minimum of Rs.50,000.

For reinsurance broker 10 per cent of brokerage and fees in year subject to minimum of Rs.2,00,000/- For composite broker, 10 per cent of brokerage and fees in year subject to minimum of Rs.2,50,000/-

The applicant should have a minimum qualification as associate for insurance institute of India or its equivalent or any professional qualification from an institution recognised by the Government in finance, law or business management and practical training for a period exceeding a year.

However, the authority on consideration of the qualification and experience of such a person may exempt the person from the provisions of this section, in case a person is carrying reinsurance broking and or insurance consultancy for a continuous period of ten years before these regulations come into force and who is required to be licensed under the regulation.

The authority issued detailed guidelines instructing the broker to maintain insurance money segregation:

• Treat all money (premiums and claims) received from or on behalf of an insured as 'insurance money'
  
  
• Ensure that 'insurance money is held in an ‘insurance bank account' with one or more scheduled banks or with such other institutions as approved by the authority
  
  
• Only remove from the insurance bank account charges fees or commission earned and interest received from any funds comprising the account
  
  
• The license granted to the insurance broker is valid for three years
  
  
• The refusal to grant license shall be communicated by the authority within the thirty days of such refusal to the applicant stating the grounds on which the application has been rejected
  
  
• Any applicant being aggrieved by the decision of the authority may apply within a period of thirty days from the date of receipt of such information to the authority for reconsideration of the decision
  
  
• Any person who acts as an insurance broker without holding a license will be punishable by the authority with a fine, which may extend to rupees one lakh. Also any insurer who appoints an insurance broker not licensed to act as such shall be punishable by the authority with a fine to the tune of five lakhs

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