Consequent upon promulgation of Insurance Laws (Amendment) Act, 2015, the existing Insurance Broker regulations would undergo a change. In addition to the developments in the market and the experience of the last three years, there is a need to update the Broker Regulations. The draft contains, amongst the others, the following changes:
Objective and definitions
1) Stating the objective of the regulations
2) Modification of definition of direct broker/ reinsurance broker & composite broker
3) Introduction of new definitions of “Broker Qualified Person”, “Fee” and “Risk Management”.
4) Reference to telecaller/ telemarketer/ Lead generator dropped
5) Replacement of the word “license” with the words “certificate of registration” in line with Act requirements.
6) The draft regulations will supersede the existing IRDA (Insurance Broker) Regulations, 2013
Issuance of new certificates of registration and renewal of certificate of registration
1. IT Infrastructure made one of the factors for consideration of application
2. Broker Qualified person to be trained and pass exam and have certificate based on Aadhaar No. from NIA, Pune or any other body that may be recognized by Authority
3 Concept of promoter and investor introduced
4. Cooling off period of one year on rejection or withdrawal of application
5. Cooling off period of 2 years in case foreign investor exits the venture
6. A person can be a promoter only in one Insurance broking company
7. An investor can hold upto 10% equity stake in multiple broking companies.
8. The total capital holding of all investors taken together cannot exceed 25% in the broking company.
9. Consideration of application in cases of conflict of interest
10. Replacement of word license by certificate of registration
11. Tagging of policies sold by Insurance broker to Broker Qualified Person and POS to check mis-selling
12. Appeal to SAT
13. Separate section on renewal of registration including separate form
Corporate Governance
14. Capital Requirements increased to Rs 1 cr/ 4 crs/ 5 crs for direct/ reinsurance and composite broker
15. Increase in FDI based on Central Government notification
16. Manner of calculation of equity capital held by foreign investors specified
17. Compliance to Indian owned and Indian control laid down
18. Prior approval of the Authority required:
a. where after the transfer the total paid up equity holding or contribution of the transferee in the shares of the web aggregator is likely to exceed 20% of their paid up capital or contribution
b. where the nominal value of shares intended to be transferred by an individual, firm, group under the same management jointly or severally exceeds 10% of the paid-up capital or contribution.
19. No change in net worth and deposit requirements
20. Professional Indemnity Policy restricted to Rs 50 crs/ Rs 75 crs/ Rs 100 crs for direct/ reinsurance/ composite brokers
21. Manner for considering transfer of shares proposed.
22. Proposed to allow risk management services to brokers.
23. Limit for claims consultancy increased to Rs 10 crs
24. Introduction of Board approved policy for comparison and distribution of insurance products
25. Co-broking allowed based on written consent of the client and on the basis of agreement. No co-broking for retail clients
26. CEO & CFO of Insurers and CEO & CFO of Insurance broker to submit an annual certificate on exception basis in case they pay remuneration and other payments in excess of stipulated limits.
27. Regulatory framework for outsourcing of activities of insurance brokers proposed.
28. Regulatory requirement of compulsorily using Indian brokers when placing foreign inward reinsurance business deleted.
29. Business Analytics Project (BAP) filings made mandatory
30. Regulatory framework for Amalgamation and merger & acquisition and transfer of business proposed.
31. No payment of annual fees. Instead upfront 3 years fees proposed for administrative convenience.
Online Sales, Tele-Marketing and Distance Marketing
32. Online Sales, Tele-Marketing and Distance Marketing to be in accordance with Insurance Web Aggregator Regulations and Guidelines on Insurance e-commerce
33. Outsourcing of only tele-calling to the extent allowed to web aggregators proposed in order to maintain parity in tele-marketing and distance marketing space.
Others
34. Foreign to foreign reinsurance business for reinsurance/ composite broker allowed
35. Principal Officer, Broker Qualified Person and PoS to have certificate based on Aadhaar No. in order to develop a common database for all intermediaries
All stakeholders are requested to offer their comments/ suggestions on the proposed regulations for consideration of the same by the department.
