Categories Of Insurance Brokers

September 13, 2019 in Insurance Broking



Categories Of Insurance Brokers

Insurance is contributing a lot to the general economic growth of the society by reducing or eliminating the risk of loss to life and property. It is a developing sector and holds a bright future for people who’re interested to develop their career in it. So, listed here are the types of insurance brokers and their roles and responsibilities.

Three Categories Of Insurance Brokers:

1.      Direct Broker

2.      Reinsurance Broker

3.      Composite Broker

Direct Broker – An insurance broker, in exchange for fees or remuneration, works between clients and primary insurers only. Brokers can apply for license in any one of the below-said: (1) Direct life insurance, (2) Direct Non-Life Insurance, (3) Direct Life & Non-Life Insurance. The capital requirement for a direct broker is Rs. 75 lakhs.

The functions of a direct broker include one or more of the following.

  •  Gathering each and every information relating to client’s business and risk management philosophy so this can be explained to an insurer and others at ease.
  • Providing advice on needed insurance cover and terms.
  • Maintaining knowledge of available insurance markets and claim records.
  • Submitting quotation from insurer to client for consideration.
  •  Providing essential underwriting information required by an insurer in determining the risk to evaluate pricing terms and conditions for policy.
  •  Acting instantly on a client’s instructions and delivering him written reports and acknowledgements.
  •  Helping a client in the negotiation of the claims and paying premium under section 64VB of Insurance Act, 1938. (4 of 1938).
  •  Delivering services like insurance consultancy and risk management as per regulations.

Reinsurance Broker – A broker, in exchange for fees or remuneration, acts as an intermediary between primary insurers and reinsurers only. The capital requirement for a reinsurance broker is Rs. 4 crs. The clients are only insurers or/and reinsurers in India or abroad.

The functions of a reinsurance broker include one or more of the following.

  • Collecting and maintaining information about the client’s business and risk retention philosophy to assist the reinsurer or others.
  •  Providing advice based on technical data on the policies available in the international insurance and reinsurance markets.
  • Maintaining a database of reinsurance markets available that includes solvency ratings of individual reinsurers.
  • Negotiating with a reinsurer on behalf of clients.
  • Suggesting a reinsurer or a set of reinsurers.
  • Delivering consultancy and risk management services for reinsurance.
  • Rendering help in the negotiation, settlement of claims, and in case of commutation of reinsurance contracts.
  • Providing a client with written acknowledgments and various reports.
  • Obtaining and forwarding premiums within time as agreed upon.
  • Giving Preliminary Loss Advice (PLA) within the prescribed time.

Composite Broker – An insurance broker, in exchange for fees or remuneration, arranges insurance between clients and primary insurers only and/or reinsurance between primary insurers and reinsurers only. Brokers can apply for a license in any of these two: (1) Composite (Non-Life) (2) Composite (Both). The capital requirement for a composite broker is Rs. 5 crs.

The functions of a composite broker shall carry out the functions mentioned in the above two cases. In case if the insurer assigns the composite broker as a reinsurance broker for selling reinsurance on the same risk on which the composite broker acted as a direct broker, the composite broker can make sure that the interests of the client and insurer are not biased.

How to apply for a license?

  •  Fill and submit an application form to IRDAI with the scanned copies of the required documents.
  • The form can be submitted only after the authorized signatures of the firm. So, save the form in draft mode.
  • Once submitted the form, another authorized signatory must sign it before going to IRDAI for approval.
  • IRDAI evaluates and validates the application – can approve, reject or close it.

IRDA requires every broker to renew their license every three years.

Now, advancement in technology is influencing the roles of the broker. The entire broking business can be done seamlessly in Sibro.

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