Insurance Company License

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.

1st step would be to fill up the form and submitting the form to IRDA. When accepted by the IRDAI, then a form IRDA/R2 must be filed for grant of registration of the company. Only a public limited company registered under the companies act 2013 or 1956 can be considered as an insurance company. A different certificate for each category of the insurance business is required, for example, a certificate for registration for life insurance business and a certificate for the general insurance business. The following documents must be filed along with the applications:

• Where the applicant is a company incorporated under Companies Act 2013 or Companies Act 1956, a certified copy of the Memorandum of Association and Articles of Association.
• A statement of a class of insurance business proposed to be carried on;
• A statement mentioning the sources contributing to the share capital required.
• Director and principal’s name, address, and occupation.

Any other documents as per the demand of IRDA. And once the form IRDA/R1 is complied with, the concerned authority would grant a certificate of registration in form IRDA/R2.

2nd step is relating to grant of IRDA/R2 to proceed further with the registration only when authority satisfied with IRDA/R1. Following requirement for IRDA/R2 applications are all the documents required regarding deposit amount, more than 100 crores of paid up equity capital in case of life insurance business and general insurance business, more than 200 crore of paid-up equity capital in case of reinsurance business. Other requirements of information and documents include:-

• A statement of a number of shares issued in respect of share capital of the applicant to each promoter and shareholder.
• Receipt of payment, for a class of business, of fee of Rs.50,000/- only.
• A certified copy of the memorandum of understanding (MOU) including detailed support comfort letters exchanged between the parties, made between the foreign promoter or amongst the promoters and the Indian promoter.
• A certified copy of the published prospectus.
• An affidavit by the promoters and the principal office certifying about the paid-up capital not being more than 26%.
• Affidavit by the promoter and principal officer in regards of the requirements of paid-up share capital being adequate after deposit, registration of the company and preliminary expenses incurred.
• A certified copy of the standard forms of the insurer.
• A certificate from practicing CS or CA regarding all the requirements of registration fees, share capital, deposits and other documents requisite for the applicant.
• A certified copy of the statements of the assured rates, terms and conditions, advantages to be offered in connection with insurance policies and a certificate from the actuary certifying the advantages, rates, terms and conditions are sound of the life insurance business.
• Fee for each class of business for registration, of Rs.50, 000/-, payable at New Delhi and remitted by bank draft from any scheduled bank in favour of Insurance Regulatory and Development Authority. 
• Any other documents or information as required by the concerned authority during the process of application for registration.

The third and last step is the grant of a certificate of registration to start a business. 

After scrutinizing the documents and information provided by the applicant, the authority would grant the certificate form IRDA/R3, if satisfied. The certificate is granted with the condition that the business must be commenced within 12 months of the this certification and if, for some reason, the applicant believes that it would not be possible for him to start a business within the prescribed time, it may take an extension from the authority within that 12 month time. And the certificate granted would be valid for a year and can be renewed after a year.