In the insurance business, it's essential for organisations to effectively communicate important information to regulatory authorities. For insurance businesses operating in India, adhering to specific compliance requirements, filings and returns outlined in corporate and tax laws is essential. Compliance, in this context means abiding by the specific rules and guidelines applicable to the entity. All entities are subject to governing laws and are obliged to adhere to the respective regulations. This holds true for insurance brokers too, as they are required to fulfil various IRDA Broker Licence Compliances for Insurance Company as provided by the Insurance Regulatory and Development Authority of India (IRDAI).
Meaning and Importance of Insurance Brokers
Insurance brokers are important figures within the insurance industry, serving as intermediaries connecting customers with insurance companies. These professionals hold licences to offer policies from a diverse array of insurers and extend expert guidance to their clientele.
Roles and Responsibilities of Insurance Brokers
Given below are the major responsibilities of Insurance brokers:
- Specialisation in Insurance and Risk Management:
Insurance brokers possess a specialised understanding of the complexities of insurance and risk management. Their expertise includes in-depth knowledge about various insurance products, enabling them to deal with the industry for the benefit of their clients.
- Advocates for Clients:
The core responsibility of insurance brokers is to advocate for and act in the best interests of their clients. They prioritise their clients' welfare, ensuring that policies are customised to suit their unique needs and situations.
- Risk Assessment and Management:
Insurance brokers play a vital role in assisting clients in identifying and comprehending the risks they face, both as individuals and businesses. They aid in determining what aspects to insure and recommend the most effective strategies to manage those risks.
- Technical Expertise:
Offering invaluable technical advice is a hallmark of insurance brokers. This expertise becomes particularly critical when clients need to deal with insurance claims. Brokers guide clients through the claims process, ensuring they receive the entitled compensation.
IRDA Broker Licence Compliances
Insurance brokers operate within a regulated framework governed by specific compliance requirements. These requirements can be broadly classified into the following IRDA Broker Licence Compliances for insurance company:
Capital Requirements for Insurance Broker Licence
Prospective insurance brokers must meet specific minimum paid-up capital requirements, depending on the type of insurance brokerage they intend to operate:
- Direct Broker: Rs. 75 lakhs.
- Reinsurance Broker: Rs. 4 crores.
- Composite Broker: Rs. 5 crores.
For entities organised as corporations or cooperative societies, the capital must be represented through equity shares. In the scenario of Limited Liability Partnerships, partners' contributions must be in cash and shares held as contributions or capital in an insurance brokerage within an LLP or an equivalent entity cannot be assured in any manner.
These IRDA Broker Licence Compliances and capital regulations are established to uphold the integrity, financial stability and professionalism of insurance brokers. This, in turn, safeguards the welfare of clients and the overall insurance industry.
Insurance brokers must adhere to the following general IRDA Broker Licence Compliances:
- Exclusive Focus: As part of IRDA Broker Licence Compliances, Insurance brokers are obligated to exclusively engage in the business of an insurance broker as permitted by the IRDAI (Insurance Brokers) Regulations.
- Compliance with Regulatory Provisions: Compliance with the Insurance Regulatory and Development Authority Act, 1999 and the regulations, guidelines, circulars and instructions issued by the Authority is mandatory for IRDA Broker Licence Compliances.
- Truthful Information: In case of false or misleading information submitted to the Authority or material changes in the information provided, brokers must promptly inform the Authority in writing.
- Grievance Redressal: Insurance brokers are required to address client grievances within 14 days of receiving a complaint and report the number, nature and other details of complaints to the Authority to adhere to IRDA Broker Licence Compliances.
- Solicitation of Policies: Brokers should solicit and procure insurance policies in a manner equal with their resources and the total number of Broker Qualified Persons they employ to adhere to IRDA Broker Licence Compliances.
- Record-Keeping: Maintain records as specified by the Authority, capturing policy-wise details and tagging each policy solicited by the broker to the responsible Broker Qualified Person or authorised personnel, where applicable.
- Code of Conduct: Compliance with the Code of Conduct applicable to insurance brokers is obligatory as part of IRDA Broker Licence Compliances.
- Books of Accounts: Insurance brokers must maintain books of accounts in accordance with the IRDAI (Insurance Brokers) Regulationsto comply withIRDA Broker Licence Compliances.
Board Approved Policy
Every insurance broker must establish a Board approved policy that outlines how insurance policies are solicited as a part of IRDA Broker Licence Compliances. This policy should address multiple tie-ups, solicitation methods, types of products offered, grievance redressal procedures, reporting requirements and other aspects related to different business segments. The Board of the Insurance Broker should review this policy at least once every three years.
Internal Control and System
Insurance brokers must ensure that appropriate internal control and auditing systems are in place as part of their IRDA Broker Licence Compliances. The following are key aspects of internal control and system compliance:
- Internal Audit:
Insurance brokers must establish a proper system of internal audit to ensure the effectiveness and integrity of their internal controls and systems.
- Compliance Officer:
In instances involving reinsurance and composite brokers, it is obligatory to assign a compliance officer and establish internal audit systems.
These extensive IRDA Broker Licence Compliances are made to guarantee that insurance brokers function with ethics, transparency and efficiency within the regulatory structure, all while upholding the utmost standards of professionalism and client service.
Maintenance of Books of Account and Records by Insurance Brokers
Insurance brokers are required to maintain and submit various financial records and statements in accordance with the regulations set forth by the regulatory authority to comply with IRDA Broker Licence Compliances. Here are the key aspects related to the maintenance of books of account and records by insurance brokers:
1. Financial Statements:
Insurance brokers must prepare the following financial documents for each financial year as part of the IRDA Broker Licence Compliances:
- Balance sheet or statement of affairs as at the end of each accounting period.
- Profit and loss account for that period.
- Statement of cash/fund flow using the direct method.
Additional statements related to insurance broking business as may be required by the regulatory Authority.
2. Submission of Audited Financial Statements:
Insurance brokers must provide the Authority with a copy of the audited financial statements, along with the auditor's report as part of IRDA Broker Licence Compliances. This submission should occur within 30 days of the Annual General Meeting or before September 30th of each year, whichever date is earlier. The auditors' comments and insights concerning business conduct and the state of accounts should be included, accompanied by suitable explanations for any observations.
3. Rectification of Deficiencies:
In cases where deficiencies are identified in the auditor's report, insurance brokers must take corrective actions and promptly inform the Authority within 90 days from the date of the auditor's report.
4. Maintenance and Accessibility:
All books of account, statements and related documents must be maintained at the insurance broker's head office or designated branch office, as notified to the Authority. These records should be accessible to authorised officers of the Authority for inspection on all working days.
5. Retention Period:
Insurance brokers must uphold all books, documents, statements, contract notes and associated records for a minimum of 7 years from the end of the respective year. If claims are reported and awaiting a court decision, these documents must be preserved until the court reaches a final disposition. For reinsurance brokers, all other documents should be retained until their natural expiry.
6. Income and Payment Details:
Financial statements should include a note specifying details of income obtained from insurers and insurer's group companies on an insurer-wise basis. Additionally, the payments received by the group companies, associates or related parties of the insurance broker from any insurer should be detailed.
7. Compliance Certificate:
Auditors must submit a certificate confirming compliance with these regulations in the format provided in Schedule II Form UA.
8. Statutory Auditors:
Insurance brokers are required to provide details of the statutory auditors engaged by them to the Authority, along with the audited accounts in the format specified in Schedule II Form V. Statutory auditors can be appointed for a maximum duration of up to 5 yearscontinuously.
These regulations ensure transparency, accountability and the maintenance of financial records and statements by insurance brokers, ultimately contributing to the integrity of the industry.
Filing of Returns and Compliance Certificates by Insurance Brokers
Insurance brokers are required to provide the following certificates to the regulatory authority, certified by an auditor, by specified deadlines each year to adhere to the IRDA Broker Licence Compliances:
- Capital and Net Worth Certificate:
A certificate affirming that the insurance broker maintains the required capital, exclusively conducts insurance broking business and maintains the necessary net worth as per regulations 19 and 22.
- Deposit Compliance Certificate:
A certificate confirming compliance with regulation 23, indicating that the insurance broker maintains the required deposit.
- Professional Indemnity Policy Certificate:
A certificate declaring the presence of a Professional Indemnity Policy in compliance with regulation 24.
- Remuneration Certificate:
A certificate affirming that the insurance broker's remuneration adheres to the limits prescribed in regulation 26.
- Reinsurance and Composite Broker Certificate:
In the case of a reinsurance broker or composite broker, a certificate stating compliance with the provisions of regulation 33. This certificate should confirm the maintenance of a separate Insurance Bank Account and the exclusive use of the funds in that account as specified in the regulations.
- Remuneration and Transfer Certificate:
For reinsurance brokers or composite brokers, a certificate detailing the remuneration or fees earned during the period and any transfers made to other accounts.
Additionally, insurance brokers are required to submit periodic returns, following the formats and returns stipulated under the Authority's Business Analytical Project, within the specified time frames.
Failure to comply with these regulations without a valid reason beyond 15 days will result in penal action. Furthermore, any false or misleading certification or concealment of facts in the certificates submitted to the Authority will also lead to penal action.
These regulations are in place to ensure that insurance brokers maintain the necessary financial and compliance standards, promoting transparency, accountability and trust within the industry.
Why Choose StartupFino for IRDA Broker Licence Compliance?
StartupFino specialises in offering comprehensive services on IRDA Broker Licence Compliance, assisting you from initial advice to ensuring full compliance with essential requirements.
Our services on IRDAI Broker Licence Compliance include the following:
- Comprehensive Compliance Support: We help insurance brokers by providing guidance and support on all rules, regulations and guidelines set forth by IRDAI. Our experts ensure that your brokerage operations align with the required standards.
- Application Monitoring: We take care of the entire registration process on your behalf. StartupFino tracks the status of your licence application, ensuring that it progresses smoothly and is in line with regulatory timelines.
- Post-Engagement Services: Our services assist you with ongoing compliance matters to maintain your licence, including regular updates, policy adjustments and audits.
- Consultancy Services: Our team of experienced professionals offers consultancy services for your specific needs. Whether you require guidance on code of conduct, client complaint resolution or maintaining books of accounts, we at StartupFino provide expert advice.
- 5. Regular IRDA Compliance Updates: Stay informed about the latest developments in insurance broker compliance. We keep you updated with timely notifications regarding any changes or new norms issued by IRDA.