While people mostly shy away from legal matters, insurance is one subject in which most of them are interested. A securer of future, an insurance policy is something everyone seeks, regardless of their financial background. As the population is increases, so is the number of people wanting insurance policies. To cater to this enhancing crowd, many entrepreneurs are trying to penetrate the insurance market by understanding the IRDA certification process. Their goal is to become insurance brokers in India.
If you’re one of those entrepreneurs, it’s important for you to know which type of insurance broker that you want to become.
Do you want to be one of the web aggregators in insurance? Or, do you want to become an corporate agent? Do you want to be a direct broker or you want to be an insurance broker?
Getting the answers to these questions will help you decide the perfect insurance brokerage service that suits your qualification and your ability. Thus, through this article, we are going to dive into the types of insurance policies and the IRDA registration process to become them.
The three main types of insurance brokers in India
When you look at the services that insurance brokers provide and the way they conduct these services, three types of insurance brokers emerge:
- The direct brokers: They “broker” the insurance deal between the end-users and the primary insurers.
- The insurance brokers: They “broker” insurance deals between the primary insurers and the insurers.
- The composite brokers: They are the combination of the above two – acting as an intermediary between end-users & primary insurers and primary insurers & insurers.
Let’s now discuss what these brokers do when they have the IRDA license in hand.
Direct Broker: One that uses the IRDA license to act as a direct intermediate
A direct brokeris an insurance broker who gets the online insurance license to provide re-insurance services for his clients.
What is reinsurance?
Sometimes, the insurance claims can be too big. So, to reduce the risk of paying big amount on his own, the insurer transfers a portion of that insurance portfolio to other parties. That way, all the parties can pay portions of that insurance claim and the primary insurer only has to pay a portion of the claimed amount.
What are the functions of a Direct Insurance Broker?
Following is the list of duties that a Direct Insurance broker has:
- He acquires information of the client’s risk management and business philosophy.
- He then takes his time to go through that information including the underwriting info so that he can better explain the insurer to the end users.
- he advices in matters of insurance covers and terms
- He maintains and keeps up with the knowledge about the available insurance market, and implements that knowledge when the need arises.
- He has to submit the quotation from the insurer to the end user.
- He provides all the underwriting information that an insurer needs for risk assessment when deciding the pricing terms and conditions for the insurance cover.
- He ensures that his client is always informed by providing the client progress report and acknowledgement receipts when the client asks for them.
- He helps the client in paying the premium as per the Section 64VB of the Insurance Act, 1938.
- He provides services pertaining to insurance consultancy and risk management
- He assists the end user and the insurer in the matters of claims negotiation.
- He maintains a register detailing the record of the claims.
Reinsurance broker: The traditional insurance broker
While the Direct Insurance broker uses his IRDA license to arrange re-insurance for his clients, the reinsurance broker arranges insurance for his clients.
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What are the duties of a Reinsurance broker?
A reinsurance broker performs the following duties when providing his services:
- He dives into the risk assessment and business philosophy of his clients and familiarizes himself to them.
- He maintains a proper record all the business dealings of the insurer to assist him when the need arises.
- He provides services that are based on the technical data extracted from the insurance covers available in the reinsurance and the international insurance market.
- He maintains a register that has the data of the available reinsurance market which includes the solvency ratings of individual insurers.
- He provides risk management and consultancy services for reinsurance.
- He promotes, recommends and even select between insurer or a group of insurers. Simply put, he markets the insurers.
- He is the primary negotiator acting on behalf of his client to negotiate terms with the insurers.
- In case of commutation of reinsurance – where a settlement agreement is reached between the reinsurer and the reinsured before the end of that agreement’s term – a reinsurance broker helps to make the transaction smooth.
- He acts as per the instructions of the clients and when asked, provides them with progress reports and acknowledgements.
- He is the one that collects and remits the insurance terms as per the agreement’s terms.
- He is responsible of maintaining proper record of all the insurance claims.
- He is the one that scrutinizes the insurers and international insurance brokers based on their security ratings before selecting the best one among them.
- He delegates specific responsibilities to the selected international insurance brokers and insurers when engaged in their services.
Composite Insurance Broker: Provider of combined insurance services
A composite insurance brokeris the one who, when holding the IRDA license, provides the services associated with arranging insurance or reinsurance services for his clients.
As for the functions that a composite insurance broker performs, it’s a combination of the above to. But he has to be more stringent and follow more regulations when providing his services.
The process of becoming an insurance broker
Naturally, the process of becoming a broker is to get the IRDA license for insurance brokers. The process is a simple one and it’s as follows:
- File the offline application of IRDA license. It’s called FORM B and you can download it from the IRDA website.
- When filing the application, submit all the required documents that the IRDA needs to assess your viability as a broker
- You’ll receive intimation by the IRDA that might ask you to provide more documents.
- Follow the directions of the intimation
- IRDA will then verify your documents.
- If all the documents are accurate, and so is the application, you’ll obtain the IRDA license. Download it from the official website.
Other than the main three, there is also insurance web aggregators
You might have noticed that even though we introduced this article mentioning web aggregators in India, we don’t count it among the insurance brokers.
It’s because “technically”, an insurance web aggregator in India is not an insurance broker. The double quotations however, tell a different story.
When you obtain insurance web aggregator license, India aspects you to provide unbiased options of insurance policies or products on your website.You are in fact acting as an intermediary in this case as well. However, the only difference between you and the rest of the brokers is that you’re providing your services by an online medium without marketing particular insurers. Your function as an insurance web aggregator is to:
- Provide the end users with options to choose between the insurance policies
- Provide unbiased information about the insurance policies to the end users to assist with making the decisions.
An insurance web aggregator isn’t allowed to market a particular insurance policy. The foundation of your services as a web aggregator would be to be as unbiased as possible when providing the services.
Other than that, most things are the same. The portal for acquire the Insurance web aggregator license would be the same as the IRDA agent licensing portal.
How to get IRDA license for insurance web aggregator business?
Following are the steps to acquire the IRDA web aggregator license:
- Establish a company whose objective is to aggregate insurance policies.
- Appoint a principal officer having all the qualifications necessary as per the IRDA guidelines
- Manage the net worth of your company as per the IRDA license eligibility criteria
- File the application of IRDA license for web aggregator via the online portal.
- Submit the required documentation.
- IRDA will run a thorough assessment on the application and the documents. If there are no faults with them, the Insurance Regulatory Development Authority will send you the license.
Among all the types of Insurance broker license, which one suits you depends upon your needs. If you require any assistance in getting any of the above licenses, our doors are always open. Check out our IRDA services for more info.