Irda had notified the final norms for insurance brokers on October 16, 02, under which a composite broker is licensed to act for a remuneration, arranges insurance for his clients with insurance companies and/or reinsurance for his client/s.
The Irda has stipulated a minimum capital of Rs 50 lakh for direct brokers (who do only general insurance, life or both but not reinsurance), Rs 2 crore for reinsurance and Rs 2.5 crore for composite brokers.
In line with the government policy on FDI in insurance, the 26 per cent cap on foreign equity has been made applicable in the case of brokers too. The remuneration in direct non-life insurance brokerage has been limited to 10 per cent of the premium on mandatory tariffed insurance; 12.5 per cent on other tariffed products and; 17.5 per cent of the premium on non-tariff products.
In the case of life insurance, brokerage has been pegged between 30 per cent of first year premium in individual business and 0.5 per cent in the case of single-premium business procurement subject to a ceiling of Rs 5 lakh per scheme.
Irda also enjoined upon brokers the need to ensure that premium income from one client does not exceed more than 50 per cent of the premium in the first year of business, 40 per cent in the second year and 30 per cent from the third year onwards.