Overview of IRDA Insurance License Before the Insurance Regulatory Development Authority of India (IRDAI), insurance was regulated under the Insurance Act 1938. Over the years, various amendments were passed to ensure that insurance business is appropriately regulated. There were several laws and regulations which were passed after 1938. In the mid-1950s, insurance companies were nationalized. This also included the nationalization of the Life Insurance Corporation of India (LIC). Mainly all life insurance businesses would come under the ambit of the LIC. After several nationalizations occurred, the number of insurance firms reduced in India. All the firms came under the purview of several insurance firms offering services. The Insurance Regulatory and Development Act 1999 (IRDAI Act) was brought out with the view to regulate the insurance businesses in India. Such regulation was brought out for the development of the Insurance Sector in India. This regulation governs the registration of insurance business in India, granting of IRDAI Licence for starting an insurance business and protection of the interests of the policyholders. Apart from this, the nodal agency ensures that firms are compliant with the regulations which are brought out from time to time. Insurance products can be sold to policyholders, either online or offline. IRDA Licence provides a certificate for Insurance companies to operate. Purpose of securing an IRDA Licence for your Insurance Business Insurance Regulatory and Development Authority of India (IRDAI) has been set up as a nodal agency to regulate the insurance sector in India. Apart from this, the agency also monitors the regulation of insurance businesses in India. This regulator ensures to maintain the balance between insurance firms and policyholders. Securing an insurance licence for your business is crucial as it involves dealing with financial linked products. Insurance contracts are contracts that provide indemnity to the policyholder on the happening of a particular event. Therefore these areas require regulation constantly. Hence it is essential to obtain an IRDA licence before commencing an insurance business. Requirement of IRDA License An IRDA Licence would be required for the following reasons: To ensure that the insurance business is compliant with the laws and regulations that are passed by the IRDAI from time to time. To control the business of insurance in India. Insurance sector requires to be heavily regulated to protect the interests of consumers. It also assures the people and authorities that proper rules and regulations, and extra care and protection are followed while carrying out the business of insurance. The IRDAI ensures that insurance business are being monitored and regulated on a constant basis. The IRDAI would also handle any form of grievance of policyholders. This would be addressed as a grievance handling mechanism. Securing an insurance licence would ensure that a business is compliant with all regulations governing insurance. Therefore for the above reasons, an IRDA Licence is required before starting an insurance business in India. Who Regulates IRDA Licence The primary regulatory authority and the law behind securing insurance (IRDA Licence) are: IRDAI- Insurance Regulatory Development Authority of India. Companies Act 2013 (the Companies Act)/ Companies Act 1956. IRDA (Registration of Indian Insurance Companies) Regulations 2000 (the Registration Regulations). IRDAI (Re-insurance) Regulations 2018 (Reinsurance Regulations). Any other relevant regulations which apply to securing an Insurance Licence in India. Eligibility criteria for securing an IRDA Licence/ Insurance Business in India The applicant has to ensure that the promoter or the company has the following requirements: The amount of capital that is required to start an insurance business is 100 crores, and the reinsurance business is 200 crores. Apart from this, the applicant must ensure that any form of previous application for starting an insurance business is not rejected. The following other conditions are present for starting an insurance business: 1. In the last five years, an application for starting an insurance business is not rejected 2. The certificate has not been cancelled or revoked by the IRDAI. 3. The name of the business must contain the word insurance company. If the Equity Investment is by a foreign company or a Non-Resident Indian, then 26% must be held by the Foreign Company or Non-Resident Indian. If Banking Companies want to start the business of insurance, they have to take permission from the Reserve Bank of India. Different Types of Insurance Businesses- IRDA Licence All the below businesses require an IRDA licence. IRDA licence is provided for the following businesses:
Once the authority receives IRDA/R1 and if it is approved, then IRDA/R2 form would be provided to the applicant. Once the applicant completes IRDA/R2, it must be submitted to the authority. If the authority grants IRDA/R3, then the applicant can commence the insurance business. However, the insurance business must be commenced within one year of granting the licence.
General insurance will cover all the unforeseen perils. The following perils would be covered under general insurance: • Accidents • Illness • Fire • Financial Securities • Burglary • Property Damage General Insurance provides you with much-needed protection against such unforeseen events. Unlike Life Insurance, General Insurance is not meant to offer returns but is a protection against contingencies. Under individual Acts of Parliament, some types of insurance like Motor Insurance and Public Liability Insurance have been made compulsory.
Premium is the fixed amount of sum paid over the period by the insured to the insurance company to take insurance policy and to complete the contract of insurance.
It is an arrangement by which insurance companies spread their risk with other underwriters or reinsurance companies called Reinsurance.
Insurance is subjected to marketing. IRDA allows insurance to be sold primarily through the following: • Agents representing an insurance company • Insurance brokers are allowed to sell products of more than one insurance company • Company websites • Buying online or through the phone • Banks, retail houses, or any other commercial ventures which are the channel partner of these insurance companies.
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