The Insurance Regulatory and Development Authority of India (IRDA) through the IRDA Registration of Insurance Marketing Firm Act 2015 has introduced the concept of “Insurance Marketing Firm” in India. Insurance Marketing Firms are an entity registered in India that are allowed to solicit or procure insurance products, to undertake insurance services and to distribute other financial products. With the Government of India raising the FDI in insurance, the insurance industry is set to witness robust growth in the coming years and there exists tremendous potential for those starting an insurance marketing firm. In this article, we look at the procedure for starting an insurance marketing firm in India.
IRDA Insurance Marketing Firm
The IRDA has allowed for the registration of insurance marketing firms, so that entrepreneurs and insurance agents can start their own insurance distribution company. As per the Registration of Insurance Marketing Firm Regulations, 2015, an “Insurance Marketing Firm” is defined as an entity registered by the IRDA to solicit or procure insurance products, to undertake insurance service activities and to distribute other financial products.
Activities of a IRDA Insurance Marketing Firm
An Insurance Marketing Firm will be allowed to perform the following functions as per the Act:
- Solicit and procure Insurance Products:
- Solicit or procure insurance products of two Life, two General and two Health Insurance companies at any point of time. In respect of general insurance, the Insurance Marketing Firm would be allowed to solicit or procure only retail lines of insurance products as given in the file & use guidelines namely motor, health, personal accident, householders, shopkeepers and such other insurance products approved by the IRDA from time to time.
- Provide Insurance Servicing Activities:
- Undertake back office activities of insurers as allowed in the Guidelines on Outsourcing Activities by Insurance Companies issued by the IRDA;
- Become approved person of Insurance Repositories;
- Undertake survey and loss assessment work by employing on their rolls licensed surveyor & loss assessors;
- Perform any other insurance related activity permitted by the IRDA from time to time.
Note: Insurance marketing firm can only undertake the insurance servicing activities in respect of only those insurance companies with whom they have an agreement for soliciting or procuring insurance products;
- Marketing of other financial products, namely:
- Mutual funds of mutual fund companies regulated by SEBI;
- Pension products regulated by PFRDA;
- Other financial products distributed by SEBI licensed Investment Advisors;
- Banking/ financial products of banks/ NBFC regulated by RBI;
- Non-insurance products offered by Department of Posts, Government of India;
- Any other financial product or activity permitted by the IRDA from time to time.
Requirement for Obtaining Insurance Marketing Firm Registration
To obtain IRDA registration for an Insurance Marketing Firm, the following eligibility criteria must be fulfilled:
- The following types of entity can apply for the IRDA Insurance Marketing Firm registration:
- A private limited company, click here to know more;
- A Limited Liability Partnership (LLP), click here to know more;
- Co-operative Societies registered under Co-operative Societies Act, 1912
- Any other person as may be recognized by the IRDA to act as an Insurance Marketing Firm.
Note: Since the act doesn’t expressly mention Partnership Firm or Proprietorship, it is best to start a private limited company or LLP.
- Have a net worth (as per Companies Act, 2013) of not less than Rs.10 lakhs.
- Companies Act, 2013 defines net worth as “the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation”.
- The entity Private Limited Company or LLP must have in its name the words “Insurance Marketing Firm”.
- Due care must be taken to ensure the word “Insurance Marketing Firm” is a part of the name of the entity.
- Take out and maintain at all times a professional indemnity insurance cover throughout the validity of the period of the Insurance Marketing Firm registration granted by the IRDA.
- Newly registered insurance marketing firm must produce a policy within twelve months from the date of issue of original registration and with minimum sum insured of Rs 10 lakhs.
- Principal officer of the Insurance Marketing Firm must satisfy one of the following eligibility criteria:
- Be an Associate/Fellow of the Insurance Institute of India, Mumbai; or
- Be an Associate/Fellow of the Institute of Actuaries of India; or
- Bean Associate/Fellow of Chartered Insurance Institute, London; or
- Be a Post graduate qualification of the Institute of Insurance and Risk Management, Hyderabad; or
- Be a Graduate with Insurance experience of five years preceding the year in which the application is made; or
- Be a Graduate with 10 years of experience in financial services sector preceding the year in which the application is made.
- Principal officer of the Insurance Marketing Firm must satisfy the following training, examination and certification criteria:
- The Principal Officer shall undergo Fifty Hours of Insurance Marketing Firm training from an institution recognised by the Authority, and should pass an examination, at the end of the period of training, conducted by the Examination Body recognised by the Authority.
- Principal Officer of the Insurance Marketing Firm must be considered as a ‘fit and proper person’. To be considered a “fit and proper person”, the following criteria would be considered:
- Financial integrity;
- Absence of convictions or civil liabilities;
- Good reputation and character;
- Efficiency and honesty; and
- Absence of any disqualification to act as an intermediary as stipulated in the Act, as amended from time to time.
- Have the necessary infrastructure like adequate office space earmarked for its Insurance Marketing Firm activities, equipment and trained manpower to effectively discharge its activities.
If the above eligibility criteria are satisfied, then the applicant can make an application to the IRDA in the form provided for registration as an Insurance Marketing Firm. The IRDA on being satisfied with the application and applicant would provide registration as “Insurance Marketing Firm”. The registration for Insurance Marketing Firm issued by the IRDA would be valid for a period of three years from the date of its issue.