The insurance regulator IRDAI has proposed a host of stringent measures, including doubling the capital requirements for broking segment, in a bid to streamline the sector.
After almost 13 years since broking was allowed in the insurance industry, the regulator has taken initiatives to regulate the segment more closely, reported Indian Express.
The IRDAI has proposed doubling the capital requirement of insurance brokers to INR10 million (US$155,300), INR40 million and INR50 million for direct, reinsurance and composite brokers, respectively. The existing capital requirement is INR5 million, INR20 million and INR25 million for direct, reinsurance and composite brokers, respectively. A composite broker can engage in both direct insurance and reinsurance business.
The draft rules also suggest there should be cooling off period of two years in case a foreign investor exits an Indian insurance broking venture and wants to reinvest in another insurance broking company.
Currently, there are over 500 brokers channelling over INR250 billion (US$3.9 billion) worth of business, or 20-25% of the total premiums in the non-life sector.
In another proposed measure, the IRDAI said a person can be a promoter only in one insurance broking company.
Other significant proposals of IRDAI are: Allowing brokers to provide risk management services, introducing a board-approved policy for the comparison and distribution of insurance products, allowing co-broking based on the written consent of clients and on the basis of agreement (no co-broking for retail clients), and the submission by the CEO and CFO of an insurance company and the CEO and CFO of an insurance broker of an annual certificate regarding remuneration and other payments in excess of stipulated limits.