Advantages and Disadvantages of Holding an Insurance Broker License

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Advantages and Disadvantages of Holding an Insurance Broker License

As per IRDAI, an insurance broker is a person for the time being licensed by the authority, who for remuneration arranges insurance contracts with insurance companies or reinsurance companies on behalf of his/her clients.

In simple terms, an insurance broker represents consumers and sells different policies to them as per their financial needs such as health insurance, general insurance and life insurance. The primary duty of a broker is towards the customers and they help them in the following ways:

• Identify insurable risks and decide the amount of insurance to purchase
• Intensive research on products across the insurance industry
• Evaluate quotes from various insurance companies
• Operational support during pre and post-sales
• Claims Management

Categories of Insurance Brokers

Application for grant of certificate of registration to act as an insurance broker will be made for any one of the following categories, and these are:

• Direct Broker: This means an insurance broker, who works as an intermediary between end-users and the primary insurers only.
• Reinsurance Broker: This insurance broker is an intermediary between end-users and primary insurers only.
• Composite Broker: This insurance broker is a mix of both the above brokers.

What is Insurance Broker License?

Any person intending to get licensed as an insurance broker needs to first register himself/herself on the IRDAI BAP portal. The application can be made for any one or more of the categories such as direct broker, reinsurance broker, and composite broker.

The Authority while considering an application for a grant of a license will check all the relevant matters related to an insurance broker. Some of these considerations are as follows:-

• The applicant should not come under the disqualifications specified under sub-section (5) of section 42D of the Act.
• Checks the necessary infrastructure, such as adequate office space, equipment and trained manpower to effectively discharge his activities.
• The applicant has in his employment a minimum of two persons who have the necessary qualifications specified in clause (F)  and experience to conduct the business of insurance broker.
• Any person, directly or indirectly connected with the applicant, has been refused in the past the grant of a license by the Authority.
• Applicant fulfils the capital requirements as specified in Regulation 10 and deposit requirements as specified in Regulation 22.

Advantages of an Insurance Broker License

The following are the advantages of an insurance broker license in India that you can avail of by applying the authority:

Legal Status

A firm with a legal insurance broker license becomes an authorised entity to work as per the guidelines of the insurance authority. The legal status will help the broker get benefits provided by the government, under some schemes.

Increase Income of Brokers

By obtaining a license, the broker can sell the insurance policies of different companies to the customers. They can set up various sale contracts with different companies which allows them to increase their customer base and eventually their income source. By having multiple products in the portfolio, they can fulfil the needs of customers and help them with the right policy. The insurance broker is not like an insurance agent, who only has access to limited products.

Access to Multiple Insurers

With an insurance broker license, the broker can sell insurance products and services to different insurance companies. This means they can reach numerous insurers, as per their capability of handling the products and drawing sales. The insurance broker is more versatile in customer interaction and sales portfolio.

Customized Sale Strategy

The insurance broker can make its customised strategy to sell the insurance products. But the strategy must be under the laws and should not misguide the customers. This is relaxation to brokers to create a sales blueprint and it is done to maximise the sales and revenue. But under any circumstances, the broker cannot promote anything offensive or misleading, basically not do something which is not as per the guidelines.

Disadvantages of an Insurance Broker License

1. Lack of Professionalism: The insurance broker license in India, doesn’t provide training to the brokers. Then it can happen that some of the brokers will not follow the guidelines of IRDAI, or they are not aware of it. Some brokers even do scams with the customers by showing a fake license. So, the lack of professionalism is a difference, however, the corporate agents work in a company itself, so there are rare chances that you find bad services
2. Brokerage Fees: Insurance brokers usually charge some extra fees as compared to insurance agents, under the name of ‘broker fee’. This you will not face in the case of an insurance agent.

Conclusion

To conclude, the insurance broker works for insurance companies and helps customers to choose the right policy. The broker must follow the obligations and rules set by IRDAI, they cannot go beyond the existing guidelines for their additional benefits. From marketing to sale, the insurance broker must keep the laws maintained. If you are looking to obtain an insurance broker license or insurance agent license, then reach out to Registrationwala, we assist you in every step of the process.

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