Banks to be allowed to become insurance broker, recommends the committee.
A committee on insurance broking, headed by Suresh Mathur has recently submitted a report to IRDA recommending that the banks should be allowed to become an insurance broker. For this, the banks have to maintain a minimum deposit with IRDA i.e. Rs 50 lakh for direct insurance broker, Rs 2 crore for composite insurance broker and Rs 2.5 lakh for reinsurance broker.
The committee has reviewed the entire insurance brokers regulation of IRDA and made various recommendations to improve the existing model and to assess the gravity of violation for imposition of appropriate penalties. Some of the key recommendations of the committee are:
· Fee should be reduced from 0.50 percent to 0.40 percent i.e. the minimum fee of direct insurance broker should be reduced from Rs 25000 to Rs 15000.
· Ceiling on business of single client should be increased to 50 percent.
· Minimum and maximum limit of indemnity should be clearly specified.
· Training period of insurance brokers should be reduced from 50 hours to 25 hours.
· Renewal procedure of license should be eased.
· An additional remuneration of 2.5 percent should be given for general insurance and risk management services.
· For life insurance an additional bonus commission of 5 percent should be paid to insurance brokers.
· Compliance officer should be appointed if the insurance broking business exceeds Rs 10 crore.
· If the license of broker is cancelled then he/she can apply for a fresh license only after one year from the date of cancellation.
· LLP should be allowed to become an insurance broker.
· Direct broking license should be issued in sub categories i.e. direct (life), direct (non-life) and direct (life/non-life).
· Cancellation or suspension of license without notice.
· IRDA to maintain a database of dishonest person of broking companies.
· Co-broking should be allowed with client’s consent.
· Single broking license with one corporate group dealing with group companies.
· Insurance broker in the name of every broking company should be made mandatory.
· Authority may create exit policy for brokers.
· Authority should look into possibility of increasing the role of Insurance Brokers Association of India.