Insurance Broker (IRDAI)

An Insurance Broker is an IRDAI-licensed intermediary that represents the customer in the insurance transaction, with a regulatory duty of care to the customer rather than to any specific insurer. The licence is granted under the IRDAI (Insurance Brokers) Regulations 2018, in three categories — Direct Broker (sells to retail and corporate clients), Reinsurance Broker (places reinsurance for primary insurers), and Composite Broker (both direct and reinsurance). Direct Brokers further specialise into life-only, general-only, or composite.

The capital requirement varies — a Direct Broker requires ₹75 lakh of paid-up capital, a Reinsurance Broker ₹4 crore, and a Composite Broker ₹5 crore. The licence is valid for three years and is subject to renewal upon evidence of continuing compliance. The defining structural feature of broking is the duty to the client.

A broker is required by IRDAI regulations to gather a 'know your customer' profile, identify risks the client faces, recommend the most appropriate policy from the broader market (not from a tied panel of three), document the basis of the recommendation, assist with claims, and disclose commission income transparently. Brokers can place insurance with any IRDAI-licensed insurer, are not tied to any specific insurer, and typically maintain technical underwriting capability in-house for complex commercial risks. Worked example: a mid-sized manufacturing company with ₹400 crore turnover, a factory site with combustible inventory, and a fleet of delivery vehicles engages a composite direct broker to manage its annual insurance programme.

The broker reviews the company's risk profile, prepares a placement strategy covering fire and special perils on the factory, marine inland transit on inventory in transit, motor fleet, group health and group personal accident for employees, directors and officers liability, and product liability. The broker invites quotes from five general insurers, negotiates terms, recommends a placement, and handles renewals and claims through the policy year. The company pays brokerage from within the premium to the broker as part of the insurer's commission structure — disclosed transparently in the broker's invoice.

A common misconception is that brokers cost the customer more. The brokerage is funded from within the premium structure that the insurer would have paid to its own distribution force regardless; the customer often pays the same total premium with or without a broker, and gains an advocate in claim disputes. Another common misconception is that brokers are only for large corporates.

While that is the historical pattern, retail-focused direct brokers serve individual buyers for term plans, health policies, and motor insurance with the same structural advantage — duty to the client and access to the full market. Related: corporate-agent, web-aggregator, irdai.