Insurance is an agreement between two parties in which the insurer agrees to compensate the insured payment of an agreed amount, at the time of the occurrence of an incident or a particular eventuality. The payment of the amount depends on the situation and the company that issues it. Insurance falls into the main categories namely life, property, health, transport, vehicles, personal accident and sickness. Insurance companies hire individuals known as insurance agents. An individual agent is an individual who takes up obligatory training, passed an examination and has received an IRDA license. This license serves as a permit that allows him to sell insurance policies to the public and provide after-sales services including providing necessary support at the time of the insurance claim. The license he receives could work for life insurance, general insurance or both.
Purpose of Insurance
The main purpose of insurance is to provide protection against any probability that leads to a risk of loss. The insurance policy is the responsible entity that covers the risk associated with. The insured person is indemnified for the actual loss suffered by him.
Functions of Insurance
- Insurance provides certainty,
- Insurance provides protection,
- It consists of a risk-sharing factor
- It helps in the prevention of loss,
- It Provides Capital,
- It Improves Efficiency,
- It helps in economic progress,
- It serves as a tool used for saving and investment
Types of Insurance
Credit insurance refers to ensuring the payment of commercial debts against the risk of non-payment by the borrower because of his insolvency or for some other reason.
Life Insurance/Assurance is a contract by which the insurer/insurance company accepts to pay the person for whose benefit the cover is created or to his personal representative, a certain sum of money on the happening of a certain event, or on the death of the person whose life is assured.
Fire insurance is the creation of a contract of indemnity by which an insurance company agrees to sort out all damages or to compensate any loss that incurs because of a fire in buildings or properties during a particular time.
Group Insurance is insurance or life insurance obtained by a person as a member of a group, such as an organization, rather than as an individual. Group insurance provides better conditions, which is why it is a better option wherever a group is involved. It contains group savings for the company, and sometimes also because a particular group has a better life expectancy than people in particular.
Defining an Insurance Agent
An insurance agent is a person who works as an intermediary between the insurer and the individual availing the insurance. Insurance agents offer products that the insurance company has to offer. They are majorly responsible and offer help in filling proposal forms, paperwork and paying insurance premiums.
Defining an Insurance Broker
A direct broker can offer a variety of insurance and financial products and services to consider. Insurance brokers undertake higher responsibilities to assist individuals to choose the insurance and financial product that is suitable and is as per his requirements. Insurance brokers help in the selection of the most suitable insurance company among several insurance service providers as well as products. They provide with accurate information about the range of insurance companies and compare their products and services for the insurance seekers.
They advise people on their insurance needs and requirements. An insurance broker offer professional services to his clients and work as middlemen between an insurance company and an individual who is on the searching for a particular insurance, as per his conditions from an insurance policy.
Types of Insurance Brokers
- Direct Insurance Broker (Between the end-users and primary insurers only)
- Composite Insurance Broker (Between primary insurers and re-insurers only)
- Reinsurance Broker – (Combination of both)
Insurance Broker License Capital Requirements
As per IRDA (Insurance Broker) Regulations, 2018, Insurance Broker License can be obtained in one of the three different ways –
- Direct Insurance Broker License –
Capital requirement amount – Rs 75 Lac
- Composite Insurance Broker License –
Capital required amount – Rs 5 Cr
- Reinsurance broker License
Capital required amount – Rs 4 Cr
Documents Required for Insurance Broker License
- Application Filing
Application for Insurance Broker License must be submitted in Form B along with all the necessary details and information.
- MOA and AOA of the applicant
A Copy of MOA and AOA of the applicant must be provided along the main objects stated in such incorporation document must be as per regulations and also certain activities must be mentioned that will be undertaken by an insurance broker.
- Information regarding Principal Officer
Information relating to Principal Officer and whether they satisfy the fit and proper criteria must be presented in Form G of Schedule I. The training compliances must be fulfilled before the submission of the application.
- Written declaration
A written declaration from the Principle officer stating that they along with directors/partners and other managerial personnel do not have any disqualifications stated in section 42 D of the Act.
- Details regarding company managerial head
A detailed information of all the directors/partners, promoters and other key managerial personnel must be submitted.
- Broker details
A list of at least of two qualified brokers with their qualification proof is important information that must be provided. Their qualification proof is an important document as the brokers have greater responsibilities.
- Bank related details
Bank account details and Details of Principal Bankers along with the statutory auditors
- Infrastructure details
For registration, the applicant is required to have requisite infrastructure. Therefore, details must be submitted along with the application. Infrastructure will include office space, IT infrastructure, equipment, and requisite qualified manpower.
Applicant Eligibility Requirements for Insurance License
- Any company registered under the Companies Act, 2013.
- Any registered co-operative society created as per the provisions of Co-operative Societies Act, 1912 or any other similar law.
- Any LLP registered as per Limited Liability Partnership Act, 2008.
- Any other person recognized by the Authority
Insurance Broker License Process
- An Insurance Broker License application form in Form B that is provided in Schedule I of the regulations must be submitted by the applicant along with the non-refundable application fee and necessary documents.
- The application form is then evaluated on the basis of the predefined conditions for Insurance Broker.
- In case the authority needs any clarifications or any documents that must be replaced, the applicant must submit within 30 days from the date of the submission of the application.
- Once the authority is satisfied with the application after undertaking a proper evaluation, the Authority will issue an in-principle approval for Insurance Broker Registration.
- After receiving the issuance of in-principle approval, the applicant is required to comply with the additional requirements and submit Insurance Broker License fees to the Authority within a stipulated time.
- If the Authority is satisfied that all the requirements mentioned in the Act, if the applicant is following all the rules and regulations and all the guidelines are satisfied him along with the conditions stated in the in-principle approval certificate, then the authority will issue a Certificate of Registration in Form J prescribed in schedule 1.
The duty and responsibilities of an insurance agent are more than just selling some insurance policies. He is accountable to the individuals to whom he sells the policies and also to the insurance company he is working for. Thus, he must acquire the desired qualifications and he must be eager to gain expertise in his field as he progresses to be an agent who is considered more knowledgeable in comparison to other agents in a particular region or country.