An insurance marketing firm is an entity that markets insurance services. In the legal terms as prescribed by the IRDAI, an IMF or Insurance marketing firm is an entity with permission to undertake insurance service activities. As per the regulation 3(a) of the Insurance regulatory and development authority of India (IRDAI), you must register your Insurance marketing firm to undertake insurance service activities.
Insurance Marketing Firms conduct the services related to an insurance distribution firm. An entity likely to operate as an insurance marketing firm must secure an insurance marketing firm licence i.e. IMF License. For receiving the insurance marketing firm licence an applicant must be a company/ LLP/ cooperative society/ any other entity. However, an individual cannot be an insurance marketing firm. These types of firms are free to sell the insurance products on behalf of different insurance companies. However, some specific guidelines required to be followed by an insurance marketing firm in dealing with the clients.
Applicable Acts/ Rules regulating the Insurance Marketing Firm Licence
The following acts, rules and regulations govern the Activities of an Insurance Marketing Firm:
- Insurance Regulatory & Development Authority of India (Registration of Insurance Marketing Firm) Regulations, 2015
- Insurance Act, 1938
- Insurance Regulatory & Development Authority Act, 1999
The main regulatory authority for the Insurance Marketing Firm Licence is an Insurance Regulatory and Development Authority of India (IRDAI). The Reserve Bank of India also regulates Insurance Marketing Firm licence, Pension Fund Regulatory, Securities Exchange Board of India, and Development Authority and Department of Posts.
Eligibility criteria for the Insurance Marketing Firm Licence
The following eligibility criteria for an applicant:
As per the Regulation 2 of IRDAI (Registration of Insurance Marketing Firm) Regulations 2015, the applicant for an insurance marketing firm licence must be:
- Company established under the Companies Act 2013
- A partnership registered under Limited Liability Partnership Act, 2008;
- A co-operative society registered under the Co-operative society act 1912;
- Any other individual or company is allowed to conduct the business related to the Insurance Marketing Firm.
As per the Regulation 6 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, the applicant requires to meet the capital requirements to apply for an insurance marketing firm licence are as follows:
- Net Worth – an applicant's net worth should not be less than Rs 10 lakhs.
- If an applicant applied to act as an Insurance Marketing Firm in the particular district, then an applicant's net worth should be at least Rs 5 lakhs.
- The applicant must ensure that the company's net worth is always maintained. For this, a certificate has to be submitted as duly certified by a chartered accountant within the period of 3 months of the closing of the financial year.
Aggregate holdings of equity shares and contribution in the firm by foreign investors (it includes the portfolio investors) must not exceed 49% of paid up equity capital of the Insurance marketing firm at any time.
The insurance marketing firm should have a principal officer with specific qualifications. A principal officer is required to be responsible for all activities of the insurance marketing firm. The principal officer has required to meet the following criteria:
- Associate/Fellow of Insurance Institute of India, Mumbai;
- Associate/Fellow of Institute of Actuaries of India;
- Associate/Fellow of the Chartered Insurance Institute, London;
- Postgraduate qualification from the Institute of Insurance and Risk Management, Hyderabad;
- Graduate with at least five years of insurance experience preceding the application year;
- Graduate with at least ten years of experience in the financial services sector preceding the application year.
Additionally, the Principal Officer must fulfil training requirements specified by the authority. An insurance marketing firm's directors, principal officers, and shareholders should not be disqualified under any applicable law and must satisfy the FIT and PROPER test. Principal Officers are required to meet the prescribed General Eligibility Criterion.
Name of the Business
The Insurance Marketing Firm must include the words "Insurance Marketing Firm" in its name.
Office Space/ Facilities
Applicants for an Insurance Marketing Firm License must provide adequate infrastructure, including office space, equipment, trained personnel, and IT infrastructure, to effectively conduct their activities.
Purpose of the Business
The primary objective of the business must align with insurance marketing, as outlined in the objects clause of the (AOA) Articles of Association and the (MOA) Memorandum of Association. To secure an insurance marketing firm's licence, activities should be according to the set of activities approved by an authority
No refusal for an application
Applicants must not have previously had their application for an Insurance Marketing Firm License rejected.
Certification Requirements of ISP and FSE
- Independent Sales Persons (ISPs) and Frontline Sales Executives (FSEs) must meet certification and training requirements mandated by the authority.
- ISPs engaging with the insurance firm to market life insurance, general insurance, and the health insurance products must hold valid certificates per authority requirements.
- FSEs must possess independent financial licences from relevant financial authorities.
- ISPs must undergo insurance marketing firm training, as prescribed by the authority, and pass the examination conducted by the authority.
- ISPs acting for an insurance marketing firm should meet the same training requirements as the Principal Officer.
- FSEs must fulfil necessary training requirements when appointed by the Insurance Marketing Firm.
Services offered by an Insurance Marketing Firm
The following are services offered by Insurance marketing firm that are:
Marketing of Insurance Products
Insurance Marketing Firms, as per IRDAI regulations, can market and solicit various insurance products, including health insurance, general insurance, and life insurance. Each IMF can represent a maximum of 2 life insurance companies, 2 health insurance companies, and 2 general insurance companies at any given time. IMFs can exclusively market individual lines of products, such as health, motor, householders, personal accident, and similar products, but not commercial ones.
Insurance Servicing Activities
IMFs can conduct insurance servicing activities on behalf of insurance firms, including back-end activities, in accordance with IRDAI's Guidelines on Outsourcing Activities by Insurance Companies. IMFs can also become approved persons of insurance repositories and engage in surveys to assess loss amounts. Apart from this, marketing firms can carry the surveys and access the amount of loss during an incident. Marketing firms have an authority to appoint licensed surveyors and loss assessors for the role. An Insurance Marketing Firm can carry out any other activity as per the requirements laid down by IRDAI.
Marketing of Financial Services
IMFs are authorised to market other financial products, including Mutual Funds regulated by SEBI, the Pension products regulated by PFRDA, the products distributed by SEBI licensed Investment Advisors, the banking/financial products of banks/NBFCs regulated by SEBI, the non-insurance products offered by the Department of Posts (Government of India), and any other financial products or activities permitted by IRDAI.
Scope of Insurance Marketing Firm Licence
The insurance marketing firm engaged the independent ISP for procuring and marketing insurance-based products. Insurance marketing firms hire the ISP to solicit and procure 2 Life insurance, 2 General insurance, and 2 Health Insurance companies. However, it will be regulated by an authority.
When it comes to any of the general insurance, insurance marketing firms are then only allowed to handle the retail lines of insurance-related products. They have been prescribed to follow certain guidelines related to motor, personal accident, health, householders, shopkeepers, and other insurance products approved by an authority.
Prior approval is required from an authority regarding any form of change in the engagement with an insurance company. Insurance marketing firms are also allowed to deal with stocks, shares, mutual and pension funds. The activities carried out by the Insurance Marketing Firm are related to insurance and other products.
Conditions applicable for Granting the Insurance Marketing Firm Licence
As per the Regulation 11 of the IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, the applicant must have to satisfy the following conditions before granting the registration of insurance marketing firm:
- The Insurance marketing firm should be allowed to solicit insurance products of 2 life insurance, 2 general insurance and 2 health insurance companies only.
- The insurance marketing firm should inform the authorities in case of any form of change in the business structure.
- The insurance marketing firm should redress all grievances of customers within the 15 days of receipt of the complaint.
- The insurance marketing firm is required to conduct their business under as per the rules laid down by the IRDAI.
- Insurance marketing firms must not conduct multi-level marketing or solicitation.
- The insurance marketing firm should ensure compliance with the code of conduct related to the FSE and ISP.
- The Insurance marketing firm should secure policies commensurate to the business and the number of ISP recruited.
- The insurance marketing firm should comply with the requirements of the authorities also.
Documents required for Insurance Marketing Firm Licence
As per the Annexure 2 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, the applicant required to submit the documents at the time of registration of insurance marketing firm are as follows:
- Submission of full disclosure of information as required in the FORM A.
- Remittance of requisite fee by the demand draft payable.
- Submission of the applicant's MOA and AOA's charter documents (Memorandum and Articles of Association). The company Bye Laws must also be submitted.
- Declaration of Fit & Proper criteria required from the Principal Officer, Directors, & Managing Partners (separately for every person) must be given in the 'Fit and Proper Form.'
- Details of infrastructure, the supporting evidence thereof like ownership and lease agreement papers for the office space and trained manpower for the registered office and the branch offices at various locations.
- Projections of the administrative expenses, salaries and wages, and other expenses, draw to the revenue account, the profit and loss account and also provide the balance sheet for the next 3 years.
- Organisation chart giving the complete picture of the company's activities like IT, claims settlement, risk assessment, marketing, accounts and back office.
- Any other information relevant to the nature of services rendered by an applicant for the growth and promotion of insurance business.
- Any other requirements as deemed necessary by an authority.
- 2 directors are mandatorily required to sign on an application form.
Procedure to apply for Insurance Marketing Firm Licence
As per the Regulation 4 of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, the applicant requires to submit the documents at the time of registration of insurance marketing firm are as follows:
Application for the Certificate of Registration for Insurance Marketing Firm Licence
- The applicant must make an application in Form-A regarding Insurance Marketing Firm Licence.
- A non-refundable fee of Rs. 5000/- plus service tax (GST) requires to be paid to authority.
- All necessary documents required to be submitted along with Form-A.
- All the principal officers and directors have to provide a declaration regarding the FIT and PROPER criteria sufficed by the insurance marketing firm's directors/ principal officers.
- Along with an Application, the exam pass certificate of the Insurance Marketing Firm requires to be submitted. The exam pass certificate must relate to the principal officers and the directors of insurance marketing firms.
- Apart from this, the copy of a surveyor, loss assessor licence of the individual who the Insurance marketing firm employs must be submitted to an authority.
- Approved Person Certificate Copy also must be submitted to an authority.
- All registered individuals' licences are required to be submitted to an authority by the insurance marketing firm. It would also include the licences under the IRDAI, SEBI, RBI, PFRDA, and Post Office.
- The application will be confirmed according to the requirements of an authority.
Granting Registration of the Insurance Marketing Firm Licence
- If an authority feels that all the requisite information complies with Insurance Marketing firm Licence, then the authority will grant a registration certificate in Form- B.
- The Insurance marketing firm applying for a registration certificate can also apply for the other categories under the IRDAI.
Rejection of Insurance Marketing Firm Licence
- The application for starting an insurance business can be rejected if an authority feels that an applicant has not fulfilled the requirements.
- The authority requires to communicate the refusal to grant an application for the Insurance marketing firm within the time period of 30 days of communication from the rejection.
- An applicant can appeal for such rejection to the authority's Chairman within the time period of 30 days to consider the decision.
- The authority's Chairman will review an application and reconsider the decision within the time period of 60 days from the receipt of appeal.
- An appeal further can be made to the Securities Appellate Tribunal (SAT) within the time period of 45 days of receipt.
- Where the SAT rejects that appeal, the fresh application made by the applicant after the time period of 1 year only.
Validity and its Renewal of Insurance Marketing Firm Licence
The licence for the insurance marketing firm is valid for the time period of 3 years. The insurance marketing firm cannot conduct activities with an expired certificate.
Renewal of the Insurance Marketing Firm Licence
As per the Chapter III of IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015, the applicant has to follow the given procedure for a renewal of Registration of insurance marketing firm:
- Applications for renewing the insurance marketing licence must be made to the relevant authority within 30 days before the licence expiry. The application requires to be made in FORM AA. However, a renewal application can be made 90 days before the expiry of the licence.
- Documents and Form AA requires to be submitted with the renewal fee of Rs. 2000/- plus service tax (GST).
- If the application is made after the expiry of the period, but before the actual expiry of the certificate, then a required payment of Rs. 100/- requires to be made with an application.
- The authority will consider an application for renewal of certificate for an insurance marketing firm which is received after 60 days but before one year. During the interim period, an applicant cannot conduct the business of an Insurance Marketing Firm.
- The Principal Officer and the ISP must complete at least 25 hours of practical training before renewing the certificate.
- Before renewing the application, an authority can ask the applicant to furnish further information. Insurance marketing firms have to submit the required information within the time period of 21 days from receiving such information.
- The authority will then grant the certificate in Form-D for that will be the certificate of renewal of registration.
Why to choose Startupfino?
Startupfino helps individuals and entities obtain an Insurance Marketing Firm License. Here's how Startupfino can help in this process:
- Guidance and Consultation: Startupfino specialising in insurance regulations and licensing can provide expert guidance and consultation.
- Application Preparation: Startupfino can assist in preparing and completing the licence application for IMF License
- Documentation Support: We can help compile and organise the required documentation, ensuring everything is in order and meets regulatory standards.