A Glance at Insurance Broker’s Compliance under IRDAI

Blog   wpadmin   October 14, 2021

Executive Summary:

      • This article emphasizes the Compliances done by Insurance Brokers.
      • This article will also assist insurance brokers in understanding when they can be penalized or prosecuted with the sections of the act for non-compliance with the requirements.
      • This article will also assist readers in understanding the entire operation of an insurance broker and the consequences of non-compliance.


Insurance Regulatory and Development Authority of India (IRDAI) is playing a vital role in governing the Insurance sector. The main motive of the Insurance companies is upholding the resources and to invest the same. Companies dealing in Insurance sector are looked upon a lot of expectations for meeting the complex economic patterns. However, Reporting is the basic requirement expected from the Insurance companies by the authorities. IRDAI Compliances for Insurance companies are necessary to maintain transparency and accountability. So, they must share the information to ensure better governance of the organization.The insurance business is governed by a number of statutes, the most important of which are:

  • A) Insurance Act, 1938
  • B) Companies Act, 2013
  • C) Foreign Exchange Management Act, 1999

In addition, many more regulations are enforced on insurance firms when dealing with difficult business to enable its smooth operation and to maintain openness and responsibility.

Who are Insurance Brokers?

Insurance brokers are individuals who market insurance products from various companies to customers. They help consumers choose the best insurance policy for their needs and receive a commission based on the amount of insurance products sold. Unlike insurance agents, insurance brokers have a large amount of business since they deal with the products of multiple businesses rather than just one.

Insurance Brokers must comply in Order for Insurance Broker Registration to be granted:

For the purpose of registering an Insurance Broker License:

  • i. An insurance broker is required to carry on their business solely in accordance with the regulations.
  • ii. The broker must follow the provisions of the IRDAI as well as any additional instructions published by the authority.
  • iii. The broker must respond to their client’s complaint within fourteen days of receiving it and must also alert the authorities.
  • iv. An insurance broker is not permitted to engage in multi-level marketing for the purpose of soliciting and purchasing insurance products.
  • v. The broker is obligated to keep books of accounts and to follow the code of conduct.
  • vi. It is the responsibility of an insurance broker to notify the authorities if there is a change in the information given or if any of the information submitted is deceptive or incorrect.

Risk Management Services: A Compliance by Insurance Agent

According to the regulations, insurance brokers may charge client fees in place of its service to the client for risk management services or other similar activities, and the broker may begin the activity for commercial risks only after receiving written confirmation from the client.Under IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations,2016, insurance agents and brokers are not permitted to accept remuneration and reward, as well as fees for the same risk management services.
The insurance broker must maintain all information pertaining to the risk management services provided. In the event that insurance brokers lack the necessary resources and abilities to provide risk management services, the company may hire outside experts. The insurance broker would be held accountable for any acts performed by outside specialists.

Insurance Broker’s Compliance in respect of Keeping of Books, and Maintenance of Records:

For each fiscal year, the insurance broker must keep the following records:

  • i. At the end of each accounting period, a balance sheet or statement of affairs is prepared
  • ii. Profit and loss statement
  • iii. A cash or money flow statement using the direct approach
  • iv. Any further declaration about the broking business that the authority deems necessary

The accounts may be kept on an accrual basis, and the financial period must be 12 months, according to the regulations. The insurance broker must present to the authority a copy of the financial audited statement as well as the auditor’s report. Such submissions must be made within 30 days of the conclusion of an annual general meeting, or by 30th September of each year. If there is a flaw in the auditor’s report, the insurance broker has 90 days from the date of the audit report to fix such flaws.

The insurance broker’s central office or other branch offices will keep the books of accounts, statements, and paperwork. These documents must be available for review by authority officers on all working days. These papers must be kept for seven years, but in cases where claims have been reported and the court’s decision is pending, such materials must be kept until the cases are resolved.
The insurance brokers must furnish financial statements for all transactions done by or for them. The auditor must issue a certificate confirming conformity with the regulations in the manner specified in Schedule II- Form UA. Schedule II- Form V requires insurance brokers to submit the statutory auditor’s details as well as the audited accounts. Statutory auditors for insurance brokers shall be appointed for a maximum of 5 years.

If the Salary and any other payments made to the broker exceed the statutory maximum, the insurer may file a certificate with the authorities in accordance with Schedule II- Form W. It must be signed by the CEO and CFO of the insurance. Another comparable certificate verifying it in the same manner as described above must be filed by the broker’s CFO and main officer.

Charges may be levied if the Regulatory Compliance by Broker is not complied:

  • 1. IRDAI may upon examining the documents on hand and submissions made by the broker issue a show cause notice.
  • 2. IRDAI may impose a charge pertains to the Broker’s failure to submit required information to the inspection team, such as solicitation-related papers, mandate letters, comparison chart, quotations, proposal form, policy documents, complaints-related paperwork, and so on. The Broker’s failure to keep the premium register and other policy-related information up to date may also invite penalties to the insurance broker.
  • 3. Broker may also get penalize if he improperly manages the premisesdue to the lack of a legal lease agreement for its offices. As a result, the Broker is instructed to ensure that it has infrastructure, including a suitable leasing agreement, in order to comply in letter and spirit with Clause 2(b) of Regulation 8 of the IRDAI (Insurance Brokers) Regulations, 2018.
  • 4. Further IRDAI may charge the broker which pertains to Failure of the Broker to acquire the renewal training certificate for two of its Qualified Persons, demonstrating that the Qualified Persons have not completed regular interval training as required by the Regulations.
  • 5. If the Broker does not have the requisite number of competent people at the Branch office as required by the Regulations, he may be prosecuted with violating the Act.
  • 6. Failure to file quarterly and semi-annual returns may result in a penalty for the Broker.
  • 7. A broker will be penalized if the Professional Indemnity coverage does not comply with the regulations.
  • 8. If the Broker fails to submit a Certificate from their statutory auditors proving compliance with certain parts of the IRDAI Broker Regulations, he may be penalized.

After hearing both sides, the Authority may impose a fine or issue a warning and directions to the specific broker who has not complied with the regulatory compliances.


Compliance with IRDAI rules is required for efficient operation and to preserve transparency in the business. To ensure customer equity, the IRDAI supervises the rates and terms and conditions given by insurance firms to consumers. For insurance businesses, IRDAI compliance is critical. To combat fraudulent practices, the IRDAI has established standards and a suitable surveillance structure.

Legal Team

Proind Business Solutions Private Limited
306, Tower B, I-thum, Plot No A-40, Sector 62, Noida, UP, India- 201301
No.: +91 120 4224203
Email: info@proind.in, website: www.proind.in

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