New IRDA guidelines for insurance brokers to follow

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New IRDA guidelines for insurance brokers to follow
Insurance Regulatory and Development Authority (IRDA), the regulatory framework administering the functionality of insurance companies in India, issued new guidelines for insurance brokers to comply with. The degree of accountability and the responsibility they owe towards their customers is relatively high and any default on their end can result in legal action.

Few such major changes proposed by the institution to safeguard public interest as well as offer better customer service are in respect of minimum capital requirement for operating insurance broking business; online sales of insurance plans and claims; and extent of business from a single client.

Minimum capital requirement: For the conduct of insurance broking business, the minimum capital requirement is set at Rs. 50 lakh and entities need to ensure that their net worth does not falls below this level. Further, of the minimum capital of Rs. 50 lakh, entities or institutions need to park 20% in bank deposits.

Online sales and claims : As per the new ruling in order to promote as well as assist customers in making a more relevant insurance deal that meets their specific requirement online, insurance brokers from now on can put forth the comparison of different available product across different categories. In this regard, IRDA requires insurance brokers to provide a comparison of not less than 5 insurers offering similar kind of product. Until now, the facility was provided by only some specific financial portals or blogs that guided decision making through comparison charts enlisting the difference in insurance premium for a similar insurance plan or likewise.

With respect to insurance claim, insurance brokers are allowed to assist customers is making the claim however with some set limits. For instance, brokers can guide clients only in a case when the claim amount is not over Rs. 1 crore. In case Further, brokers can charge a relative fee depending on the service.

Limits in respect of business: Company-promoted insurance brokers with a insurance arm can operate not over 25% of the business of the concerned insurance company within the group. Further, insurance brokers are not allowed to accept over 50% of premiums from one client. Else it be a state-run set up or a government entity or in case of reinsurance.

At present IRDA is mulling on the proposal that it will make it mandatory for all banks, including nationalised and private banks to act as insurance brokers. The proposal is aimed at promoting insurance as well as financial inclusion in the country.

Read more about: irda, insurance brokers, banks
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