IDRA publishes ‘Insurance Broker’ draft rules

The Insurance Development and Regulatory Authority (IDRA) has prepared a draft of ‘Insurance Broker’ Licensing Rules to expand non-life insurance business in the country. The draft rules have been published on the IDRA website.

According to the draft, a paid capital of 2 crore taka and a registration fee of 50,000 taka will be needed to be paid in order to get an insurance broker license. In addition, a 20 per cent deposit of initial capital in the form of permanent deposit in any scheduled bank, adherence to prescribed code of conduct and taking professional compensation insurance are included in the conditions.

The license will be issued for 3 years in compliance with the conditions and will have to be renewed after 3 years.

According to the draft rules, the functions of an insurance broker include, but not limited to: hiring an insurance agent on behalf of the insurer or taking up a non-life insurance business for the insured; collecting non-life insurance business directly for insurers or reinsurers or both; performing administrative and organisational functions for the insurer or reinsurer or both.

Other functions include: to provide advice on appropriate insurance coverage and terms; assist in the bargaining of claims; maintain proper records of claims; maintenance of ledger with details of insurer's business to assist reinsurers and others; provide advice and risk management services for reinsurance and negotiate with the reinsurer on behalf of the customer (insured or insurer).

No insurance broker may be paid more than the prescribed rate (including royalty or license fee or administrative charge or similar compensation). Or in case of the direct non-life insurance business, an agreement cannot be made to pay 12.50 per cent of the premium earned under the relevant contract. In the case of non-life business through insurance agents, 15 per cent of the premium earned under the relevant contract, from which the agents have to deduct the commission paid; 5 per cent of the premium earned under the relevant contract for any other service.

50,000 taka will be needed to be paid for the issuance of license or submission of application for renewal of the license to an insurance broker for issuance of a license and 50,000 taka for license renewal as well. There is an additional fee of 5,000 taka per day for delays and a fee of 5,000 taka for the issuance of a duplicate copy of a license. These fees have to be paid by cross check, bank draft or pay order in favour of the insurance development and regulatory authority.

The regulator says that under Section 126 of the Insurance Act 2010, non-life insurers can appoint a licensed company of an insurance broker issued by the authority as an insurance broker.

Insurance brokers will be able to make a significant contribution to the expansion of the non-life insurance business and the creation of professionalism in the non-life insurance sector of the country, said IDRA.

sr/teb