Introduction: IRDA Insurance License

Insurance was governed under the Insurance Act 1938 before the Insurance Regulatory Development Authority of India (IRDAI). Various adjustments have been passed throughout the years to guarantee that the insurance industry is properly regulated. Following 1938, a number of laws and regulations were enacted. Insurance businesses were nationalised in the mid-1950s. The nationalisation of the Life Insurance Corporation of India was also part of this (LIC). The LIC is primarily responsible for all life insurance businesses. The number of insurance firms in India has decreased as a result of various nationalisations. All of the companies were under the umbrella of many insurance companies that provided services.

The Insurance Regulatory and Development Act of 1999 (IRDAI Act) was enacted to regulate the Indian insurance industry. For the development of India's insurance sector, such regulations were enacted. This rule oversees the registration of insurance businesses in India, the issuance of an IRDAI licence to start a business, and the protection of policyholders' rights. Aside from that, the nodal agency ensures that businesses follow the regulations that are issued from time to time.

Policyholders can purchase insurance goods online or in person. The Insurance Regulatory and Development Authority (IRDA) licence is a certificate that allows insurance companies to operate.

The Goal of Obtaining an IRDA Licence for Your Insurance Company

The Insurance Regulatory and Development Authority of India (IRDAI) was created to monitor India's insurance market. Aside from that, the agency monitors how insurance businesses in India are governed. This regulator guarantees that the relationship between insurance companies and policyholders remains balanced. Because your business will be dealing with financial products, you'll need to get an insurance licence. Insurance contracts are agreements that guarantee the policyholder's financial protection in the case of a specific occurrence. As a result, these locations are regularly regulated. As a result, these areas are regulated on a regular basis. As a result, acquiring an IRDA licence is essential prior to launch an insurance company.

Read Also: Insurance Repository and Insurance Business Process

IRDA License Requirement

For the following reasons, an IRDA licence would be required:

• To guarantee that the insurance industry complies with the IRDAI's legislation and regulations when they become effective.
• Controlling the insurance industry in India. The insurance sector must be strictly regulated in order to protect consumers' interests.
• It also assures the public and authorities that when doing insurance business, proper rules and laws are followed, as well as extra care and protection.
• The IRDAI keeps the insurance industry under ongoing scrutiny and regulation.
• The IRDAI will also deal with any policyholder complaints. As a grievance management mechanism, this would be addressed.
• Obtaining an insurance licence ensures that a company is in compliance with all insurance rules.

As a result, for the reasons described above, an IRDA licence is required prior to the establishment of an insurance firm in India.

Regulation of IRDA Licence

The major regulatory authority and the statute that oversees insurance (IRDA Licence) are as follows:

• Insurance Regulatory Development Authority of India: IRDAI.
• Companies Act 2013 (the Companies Act)/ Companies Act 1956.
• IRDA (Registration of Indian Insurance Companies) Regulations 2000 (the Registration Regulations).
• IRDAI (Reinsurance) Regulations 2018 (Reinsurance Regulations).
• Any other applicable laws that apply to obtaining an insurance licence in India.

Eligibility Criteria for Obtaining an IRDA License/Insurance Business in India

The applicant must ensure that the promoter or firm meets the following requirements:

• To start an insurance company, you'll need 100 crores, and to build a reinsurance company, you'll need 200 crores.
• Aside from that, the applicant must ensure that no previous application for founding an insurance company has been denied.
• Other requirements for beginning a business in the insurance industry include:
  • An application to form an insurance company has not been denied in the recent five years.
  • The IRDAI has not cancelled or revoked the certificate.
  • The word "insurance company" must be included in the company's name.
• If a foreign firm or a non-resident Indian makes an equity investment, the foreign company or non-resident Indian must own 26 per cent of the stock.
• If a bank wants to launch an insurance company, it must first obtain authorization from the Reserve Bank of India.

Obtaining an IRDA Licence: The Process/Procedure

• A company that wishes to launch an insurance company must submit a proper online application.
• This application is submitted using the IRDA/R1 form.

Step 1: Complete the IRDA/R1 Form And Send it to IRDA (IRDA Licence)

• An applicant who wishes to do insurance business in India must submit an IRDA/R1 demand for the registration application. After the Authority has approved the applicant's demand for registration, the applicant must submit an application for a certificate of registration in Form IRDA/R2.
• The corporation must be a Public Limited Company under the Companies Act 2013 or the Companies Act 1956 to be deemed an insurance company.
• Each type of insurance-related business requires a certificate of registration. In essence, a certificate of registration for life insurance and a certificate of registration for general insurance will be issued.
• The following documents must be included with the application:
  • The Memorandum of Association and Articles of Association must be certified. If the applicant is a corporation incorporated under the Companies Act 2013 or the Companies Act 1956, this would be the case.
  • The directors' and principal officer's names, addresses, and occupations;
  • A description of the type of insurance business that will be conducted;
  • A statement identifying the sources of funding for the required share capital.
• Any other documentation that the IRDA requires.
• The authority will grant the IRDA/R2 form for a certificate of registration once the IRDA/R1 form has been completed.

Step 2- The Authority Is Satisfied With The IRDA/R1 And Grants The Applicant Form IRDA/R2 To Proceed With The Registration Process.

The following should be included in the IRDA/R2 application:

• Section 7 of the Act requires documentary proof of the deposit being made.
• If the application for a certificate is for a life insurance business or a general insurance business, evidence of a paid-up equity share capital of rupees one hundred crores or more;
• If the application for a certificate is for a reinsurance business, evidence of possessing at least Rs. 200 crores in paid-up equity share capital;
• An affidavit signed by the applicant's senior officer and promoters certifying that the paid-up share capital requirements are sufficient after deducting any preliminary expenses incurred in the company's creation and registration, as well as the deposit made by the company;
• A statement detailing the unique numbers of shares issued to each promoter and shareholder in the applicant's share capital;
• An affidavit signed by the applicant's principal officer and promoters certifying that the paid-up equity capital does not exceed 26%.
• A verified copy of the prospectus as published;
• A certified copy of the insurer's standard forms and statements of the assured rates, advantages, terms, and conditions to be offered in connection with insurance policies, as well as a certificate from an actuary that such rates, advantages, terms, and conditions are workable and sound in the case of life insurance business;
• A certified copy of the memorandum of understanding (MOU) signed between the Indian promoter and the foreign promoter, or between all of the promoters, including details of the support comfort letters sent between the parties;
• The genuine receipt shows the payment of a fare of Rs. 50,000 for a business class;
• A certificate from a practising chartered accountant or a practising company secretary attesting that the applicant has met all of the requirements for registration fees, share capital, deposits, and other papers;
• Any additional information requested by the authorities in the course of processing the registration application; and
• A bank draft issued by any scheduled bank in favour of the Insurance Regulatory and Development Authority payable in New Delhi shall be used to pay the registration fee of Rs. 50,000 for each class of business.

Step 3: The Applicant Must Begin an Insurance Business Within 12 Months After Registering (IRDA/R3 Form).

• If all of the requirements are met and the authority feels the company is sound and fit to conduct insurance business, the certificate Form IRDA/R3 will be issued.
• The applicant who has been issued a certificate of registration must begin doing business in the insurance industry within 12 months of the date of registration.
• If the applicant company does not believe it will be able to begin operations within 12 months, it must request a 12-month extension from the authority before that time runs out.

Documents Needed to Obtain an IRDA Licence

An IRDA licence requires the following documents:

• Evidence of Capital for an Insurance Company, which is 100 crores in equity capital.
• The equity capital of 200 crores is evidence of money for the reinsurance business.
• The directors' names and addresses
• The directors' qualifications.
• A copy of the prospectus that has been certified.
• A statement detailing the unique numbers of shares issued to each promoter and shareholder in the applicant's share capital.
• A certified copy of the insurer's standard forms and statements of the assured rates, benefits, terms, and conditions to be offered in connection with insurance policies, as well as a certificate from an actuary, if the business is life insurance, that such rates, benefits, terms, and conditions are workable and sound.
• The authentic receipt indicates the payment of a price of Rs. 50,000 for a business class.
• A certificate from a practising chartered accountant or a practising company secretary attesting that the applicant has met all of the act's criteria for registration fees, share capital, deposits, and other matters.
• Any additional information requested by the authority in the course of processing the registration application.

Validity of IRDA Insurance Licence

For one year, an IRDA licence would be valid. In order to renew an insurance licence in India, the applicant must submit a new application.