For the purpose of starting an insurance company in India, it is mandatory to acquire a certificate from concerned authority. A person who desires to sell insurance items must procure an insurance company license from the insurance commissioner of the concerned state. The purpose of obtaining license is to sell the insurance and would be isolated in various kinds such as health, life and inability, auto and worker’s compensation. Insurance sector was regulated under the Insurance Act 1938 before the IRDAI (Insurance Regulatory Development Authority of India) came into existence. To ensure the proper regulation of insurance business, various amendments were made to said legislation. There even came nationalization of the Life Insurance Corporation of India (LIC) and all life insurance businesses came under the ambit of LIC. There were a reduction in number of insurance firms after nationalizations occurred causing several insurance firms to offer different services.
To bring development in Insurance sector in India, the Insurance Regulatory and Development Act 1999 (IRDAI Act) was implemented. This regulation is responsible for the registration of insurance businesses, provide IRDAI license for the purpose of starting an insurance business and to protect the policyholder’s interest, the main objective of this regulation was to ensure that all the firms remain compliant with the regulation which were and are going to be brought about. IRDA license grants a certificate to insurance businesses to operate and sell insurance products to policyholders.
Insurance Regulatory and Development Authority of India (IRDAI) regulates and monitors the regulation of insurance businesses. It also maintains the balance between policy holders and insurance firms. An insurance license is mandatory and crucial as well as it will involve dealing with financial linked products. It is absolutely essential to procure IRDA license before starting an insurance business as the Insurance contracts are the contracts that would provide indemnity on the happening of some event, to the policy holders. The regulations covers the plan of operation to procure license of insurance, authorization of insurance products, appointment of insurance intermediary.
IRDA provides license for various companies including Life Insurance business, Fire Insurance business, Marine Insurance business, Burglary Insurance business, General Insurance business, Reinsurance business, Cyber Liability Insurance business, Professional Indemnity Insurance business.
There are various laws and authorities behind securing insurance (IRDA License) which serve as primary regulatory authority such as IRDAI – Insurance Regulatory Development Authority of India, Companies Act 2013, IRDA (Registration of Indian Insurance Companies) Regulations 2000 (the registration regulation), IRDAI (Re-insurance) Regulations 2018 (Reinsurance Regulations), Any other relevant regulations applying to securing an Insurance License.
IRDA License isn’t a piece of cake and to procure this License one must fulfil the criteria set, i.e. the applicant must ensure that the company or the promoter is compliant with the requirements such as: i) the capital amount of 100 crores to start an insurance business and 200 crores for reinsurance business, ii) minimum subscription capital paid-up value of 100 crores for insurance business and 200 crores for reinsurance business, iii) any form of previous application for starting an insurance business must not have been rejected, iv) an application for starting an insurance business is not rejected in the previous five years, v) the words insurance company must be there in the name of the business, vi) the certificate has not been revoked or cancelled by the IRDAI, vii) 26% of equity investment shall be held by foreign company or non-resident Indian, if any, viii) permission from RBI to start the Insurance business.
A company willing to procure IRDA license for Insurance business shall apply in form IRDA/R1.