Hyderabad, April 4 Corporate houses which promote an insurance company can now foray into insurance broking as well without any regulatory hassles.
Keeping in view the international experience and practice, the Insurance Regulatory and Development Authority (IRDA) has decided that corporate houses can have both insurance companies and broking activity subject to certain safeguards, according to a circular hosted on its Web site.
“It was felt that organisations with high standard of corporate governance alone may be permitted to establish/continue insurance broking companies governed by certain conditions,” the circular said.
According to the safeguards listed out by IRDA, the promoter (of both insurance company and broking firm) should submit an undertaking to the regulator that none of the clients within the promoter group will be compelled to use the broker for their insurance requirements.
The insurer within the group should also give an undertaking that it would not pay higher remuneration to the broker for the same class of insurance or insurance product; an audit certificate on compliance with the undertaking should be filed annually with the audited accounts of the insurer.
Further, it should not quote terms to the broker that are more favourable than the terms quoted to the other brokers, and desist from designing special insurance products for sale exclusively through the broker.
The IRDA had also prescribed a number of obligations for the broker firm including that it should make an explicit disclosure of its being a sister company of the insurer within the same promoter group.
The above prudential requirements were in addition to the requirements stipulated under Regulation 20 of the IRDA (Brokers Regulation), the circular said.
The Regulation 20 prescribes that the business of the insurance broker shall be carried in such a manner that not more than 50 per cent of the premium in the first year of the business, 40 per cent of the premium in the second year and 30 per cent of the premium in the third year of business onwards shall emanate from any one client.