a

*lhEEEE

To

CEO's/ Principal Officers

Of All lnsurance Broking Companies

Re: ADDroach in case of non-compliance of IRDA's (lnsurance Broker) Reoulations.

idoi

cTnfu fur frfurrd 3fr{ f{fir€ vl0ffiulINSURANCE REGULATORY ANDDEVELOPMENT AUTHORITY OF INDIA

IRDA/ INT/ M|SC/ ORD/ 0141 01t2016

15t 0'U 2016

The Authority has evolved a graded approach for non-compliance / violation of BrokerRegulations or its circulars, orders, directions etc. The approach elaborates the procedure

and laid down the methodology in case of lirst time violation and second time violation of the

regulations, circular, directions, orders, etc.

However it may be recalled the lnsurance Broker Regulations were amended in December,

2013 and new lnsurance broker Regulations notified in January, 2014.

Based on the experience gained over the last 6 years and given the fact that the new

regulations have been notified, there is a need to revise the approach to be followed in case

of non-compliance of Broker Regulations by the broking companies. The objectives behind

the approach are two-fold namely:

'1 . To encourage good behaviour and foster better compliance of the regulations by theinsurance brokers.

2. To simplify the application of penalties in case of non-compliance/ violation ofregulations.

ln order lo achieve the above objective the following approach has been adopted:

1. lmposition of monetary penalties is not the solution to encourage good behaviour andfoster compliance.

2. A graded approach is proposed on the following lines:a. Generally a warning for first time non-compliance

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Parisharam Bhavan, 3rd Floor, Basheer Bagh, Hyderabad-soo 004. lndia.

Ph.: 91-040-2338 1 100, Fax: 91-04G6682 3334

E-mail : irda@irda.gov.in Web.: s/ww.irda.gov.in

2015

Updates - 2201/2016

qftsc rrfi, frs{ m, qvfrrcrq, tffdr-soo oo4. qrrtr(o : 91-040-2338 1100, ft-€: 91-040-6682 3334

{-id: irda@irda.gov.in t{: www.irda.gov.in

sTnfiq mm frfurrfi 3frt F{*,H vrRrfiurINSURANCE REGULATORY ANDDEVELOPMENT AUTHORITY OF INDIA

Parisharam Bha\an, 3rd Floor, Basheer Bagh, Hyderabad-soo 004. lndia

Ph.: 9'l-040-2338 1100, Fax:91-0404682 3334

E-mail : irda@irda.gov.in Web-: www.irda.govin

a

IrEEirdoi

b. Largely not undertaking placement of new business till such time the Problemis rectified ot lot 214 months whichever is later for second time non-compliance.

c. lnitiate steps for suspension/ cancellation of the license with the condition thatthe broker will not undertake placemenl of new business till such time the

problem is rectified or 6 months whichever is later for third time non-compliance.

3. Greater onus on the Principal Officer to ensure compliance as he will be heldpersonally responsible along-with the compliance officer.

4. Methodology to be followed for non-compliance of each and every regulation hasbeen outllned.

The approach to be followed in case of non-compliance of various sub-regulations of IRDA'S

(lnsurance Broker) Regulations, 2013 is placed at Annexure "A" for necessary information.

W-tr^4Nil6sh Sathe

Member (Life)w

Encl.: Annexure "4"

Updates - 2201/2016

Annexure "A"Aooroach in case of non-com oliance of IRDA's (lnsurance Broker) Reoulations. 2013

Regulations NoRelevant provision of the regulation

First Time violation Second Time violation Third Time Violation

1 Short title and commencement No action required

2 DefinitionsComposite Broker

A composite broker who is not licensed fordirect life or direct general insurancebusiness yet undertakes soliciting of thesaid business shall be wamed at the firstinstance.Further he shall not be allowed to carry onbusiness for a period of 2 months or theperiod he was undertaking soliciting of thesaid business whichever is longer.

The broker shall not be allowed tocarry on business for a period of 6months or the period he wasundertaking soliciting of the saidbusiness whichever is longer.The Authority may also initiate theprocess of suspension/ cancellation ofthe license of the lnsurance BrokerRegulations, 2015 as per the procedurelaid down in Regulation 41.

Direct broker If the direct broker does relnsurancebroking business in any form or manner,he shall be warned at the first instance.Further he shall not be allowed to carry onbusiness for a period of 2 months or theperiod he was undertaking soliciting of thesaid business whichever is longer.

As above As above

Reinsurance Broker If the reinsurance broker undertakes directinsurance broking business in any form ormanner, he shall be warned at the firstinstance.Further he shall not be allowed to carry onbusiness for a period of 2 months or theperiod he was undertaking soliciting of thesaid business whichever is longer.

As above As above

Insurer Any insurer who is found acceptingbusiness from an entity who is not licensedfor soliciting, shall be asked to explainwhy compliance ofthe Act requirement isnot met at their end.Based upon the reply and the intention ofthe company, the insurer shall be warned atthe first instance.

The insurer shall not be allowed tocarry on business for a period of 2weeks.Further he may be imposed a penaltyof Rs 50 lakhs as stipulated underSection 42D of the Insurance Act,1938.

The insurer shall not be allowed tocarry on business for a period of onemonth.Further he may be imposed a penaltyof Rs I crore per day as stipulatedunder Section 42D of the InsuranceAct, 1938.Still further, the Principal Officer /CEO of the insurer shall be removed

The broker shall not be allowed tocarry on business for a period of 4months or the period he wasundertaking soliciting of the saidbusiness whichever is longer.

Updates - 2201/2016

and such shall not be considered forthe post of principal officer/ CEO ofthe insurer for a period of atleast 5

The Principal Officer / CEO of thebroking company shall be removed andshall not be considered for the post ofprincipal officer/ CEO of the brokingcompany for a period of atleast 5 yearsafter completing the requirements.

The Principal Officer / CEO of thebroking company shall be removedand shall not be considered for thepost of principal officer/ CEO of thebroking company for a period ofatleast I year after completing there rrirements

Takeon

Principal Officer

No action requiredJ of InsuranceCategoriesbrokers

If the violation is again repeated theninitiate steps for suspension/cancellation of the license underRegulation 41 & 42 in addition to stepsmentioned in S.No. II of second timeviolation with the condition that thebroker will not undertake placement ofnew business till such time theproblem is rectified or 6 monthswhichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters.

II. If it is found that the violationswere deliberate then the broker shall:a) submit a plan to set right theshortcomingsb) identi! the person(s) responsiblefor the violations and take necessary

r the Rules of theaction as

If there are complainants by thepolicyholder or it is brought to the noticethat the broking company has notperformed the functions detailed in theregulation, the broker shall be:a) warned and advised to take necessarysleps to prevent its re-occurrence,b) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall also givean undertaking that the same shall not berepeated.c) the promoters and Board be apprised ofthe position.f) will not undertake placement of newbusiness till such time the problem isrectified or 2 months whichever is later.

4 Functions ofl. Direct broker2. Reinsurance broker3. Composite broker

years.

If the principal officer, does not complywith the definition, he shall be wamed inthe first instance and asked to comply. Hewill not be appointed till such time hefulfills the criteria.

I. If the violations are repeated thenthe broker shall have to prove to theAuthority that the violations wereaccidental not deliberatelf the violations are found to be foundaccidental and one off then the brokershalla) submit a plan to set right theshortcomingsb) The Principal Officer shall be heldresponsible for the lapse and shalI beissued a warning letter. He shall alsogivc an undertaking that the sameshall not be repeated.c) the promoters and Board beapprised of the position.d) report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccumence by an independentperson.

Updates - 2201/2016

company and report the details ofsuch persons to the Authorityc) hold the Principal Officerresponsible for the violations andremove him. He shall not beconsidered for the post of principalofficer for a period ofatleast I year.d) promoters and Board be apprisedof the position and advised to takenecessary corrective stepse) report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccurTence by an independentpersonf,) will not undertake placement ofnew business till such time theproblem is rectified or 4 monthswhichever is later.

5,6and 7

If the application received for the freshlicense does not comply with all therequirements listed in the regulations, thesame will not be treated as an applicationaccepted by the Authority and thecommunication to that effect will be givento the applicant. This process shall becompleted up to the level ofdepartment.

In case of renewal application, if therequirements are not fulfilled, specifiedtime to comply with those requirementsshall be communicated to the brokingcompany.

Procedure as laid down in the regulationsfor new and renewal shall be followed.

8 Consideration of application-Sub Reg. I is a generalprovision for which there is nonecessity for penal action. It isfor the authority to getsatisfied.

Requirements for consideration ofapplicationNery an tion - same shall be verifiedand confirmed at the time of newapplication. If not, applicant shall beadvised to comply. If applicant does not

Application for grant oflicense

Updates - 2201/2016

comply, application will not be processedfurther till completion of the requirements.These include:i. whether the applicant suffers from any ofthe disqualification specified under Sec42D(5) ofthe Insurance Act.ii. Necessary infrastructureiii Minimum 2 persons with qualificationsand experience and in branch office oneperson per branchiv. with any person, directly or indirectlyconnected with the applicant refusedlicense by the Authority in the pastv. applicant fulfills the capital / networth/deposit requirementsvi. PO possess the required qualificationand information about Directorsshareholders/ promoters / KMP issubmitted.vii. PO suitable to be appointed given hisexperience, preferably in insurance sectorviii. whether PO/ Directors/ Promoters/shareholders/ partners are Fit & properbased on statements.ix. whether PO/ Directors/ Promoters/shareholders/ partners comply with Fit &proper guidelines.x. PO and/ or any other official ofinsurance broker has violated the code ofconductxi. applicant engaged in business otherthan the main objectsxii. grant of license will be in the interestof policyholdersxiii. promoters/ shareholders/ partners arein sound financial position.xiv. employee responsible for solicitingshould fulfill the re uirements.

Sub Reg. 2 is specific to therequirement

a) Reg 9( I ) - minimum paid up capital/contribution requirements for direct/reinsurance and composite brokers -

lication - same shall be verifiedNew a

9 Requirement as to Capital

Updates - 2201/2016

and confirmed at the time of newapplication. If not, applicant shall beadvised to comply. If applicant does notcomply application will not be processed.Renewal aoolication - compliancereported by the auditor in Form Vl-A. Anynon-compliance shall result in thefollowing:i) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance or 2 months whichever islater.ii) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a waming letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.iii) an explanation shall also be called fromthe auditor and a report submitted to theCA institute.

b) Reg 9(4) - applicant to exclusivelycarry on the business of insurance broker-New aDplication as per a) aboveRenewal annlication - as per a) above

c) Reg 9(5) - FDI not to exceed 26/oin themanner applicable to insurance companies

New aoolication - as per a) aboveRenewal anolication - as per a) above.

d) Reg 9(6) - shares of insurance brokingcompany not to be pledged in any form ormanner to secure credit or any otherfacility and at all times shall beunencumbered.New application - as per a) aboveRenewal aDDlicalion - as per a) above

l0 Transfer of Ownership Registration of transfer of shares orcontribution only with the prior approval

Any non-compliance for second timeviolation shall be proceeded as under:

If the violation is again repeated theninitiate steps for suspension/

Updates - 2201/2016

of the Authority and beneficial ownershipand control of the sharesAny non-compliance shall be proceeded asunder:a) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a waming letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.b) Form VI-A certified by the Auditor willbe examined. If discrepancy found anexplanation shall be called from the auditorand a repon submitted to the CA institute.

a) hold the Principal Officerresponsible for the violations andremove him.b) promoters and Board be apprisedof the position and advised to takenecessary corrective stepsc) Form VI-A certified by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.d) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.

cancellation of the license underRegulation 4l & 42 in addition to stepsmentioned in second time violation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

ll Maintenance of minimumamount of Networth

Maintenance of minimum nelworthNew application - same shall be verifiedand confirmed at the time of newapplication. If not, applicant shall beadvised to comply. If applicant does notcomply application will not be processed.Reuewal application compliancereported by the auditor in Form VI-A. Anynon-compliance shall result in thefollowing:a) the broker to immediately inform theAuthority of the steps taken to restore thenetworth.b) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance.c) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.d) an explanation shall also be called fromthe auditor and a report submitted to theCA institute.

If the violation is again repeated theninitiate steps for suspension/cancellation of the license underRegulation 4l & 42 in addition to stepsmentioned in second time violation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

t2 Deposit Requirement Maintenance of depositNew application - same shall be verified

Any non-compliance for second timeviolation shall be proceeded as under:

Any non-compliance for third timeviolation shall be proceeded as under:

Any non-compliance for second timeviolation shall be proceeded as under:a) the broker to immediately informthe Authority of the steps taken torestore the networth.b) hold the Principal Officerresponsible for the violations andremove him.c) promoters and Board be apprised ofthe position and advised to takenecessary corrective stepsd) Form VI-A certified by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.e) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.

Updates - 2201/2016

and confirmed at the time of newapplication. If not, applicant shall beadvised to comply. If applicant does notcomply application will not be processed.Renewal aDDlication - compliancereported by the auditor in Form VI-B. Anynon-compliance shall result in thefollowing:a) the broker to take steps taken to complywith the deposit requirements.b) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.c) an explanation shall also be called fromthe auditor and a report submitted to theCA institute.

a) the broker to take steps taken tocomply with the deposit requirements.b) hold the Principal Officerresponsible for the violation.c) promoters and Board be apprised ofthe position and advised to takenecessary corrective stepsd) Form Vl-A certified by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmifted to the CA institute.e) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.

a) the broker to take steps taken tocomply with the deposit requirements.b) hold the Principal Officerresponsible for the violation andremove him from the position ofPO.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.d) promoters and Board be apprised ofthe position and advised to takenecessary corrective steps.e) initiate steps for suspension/cancellation of the license underRegulation 4l & 42.f) Form VI-A certified by the Auditorwill be examined. [f discrepancy foundan explanation shall be called from theauditor and a report submitted to theCA institute.

l3 Requirement of ProfessionalIndemnity Insurance

Maintenance of Professional IndemnityInsuranceNew application - undertaking from thePrincipal Officer that the PI insurance willbe taken within a period of l2 months fromdate of issue of license. If not then theinsurance broker cannot solicit business forthe period he did not have the PI insurancein force.Renewal application - compliancereported by the auditor in Form VI-C. Anynon-compliance shall result in thefollowing:a) the broker to take steps taken to complywith the deposit requirements.b) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a uarning lefter. The PrincipalOlficer shall also give an undertaking thatthe same shall not be repeated.

I c) an explanation shall also be called from

Any non-compliance for second timeviolation shall be proceeded as under:a) the broker to take steps taken tocomply with the deposit requirements.b) hold the Principal Officerresponsible for the violations.c) promoters and Board be apprised ofthe position and advised to takenecessary corrective stepsd) Form VI-A certified by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.e) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.

Any non-compliance for third timeviolation shall be proceeded as under:a) the broker to take steps taken tocomply with the PI Indemnitylnsurance requirements.b) hold the Principal Officerresponsible for the violation andremove him from the position of PO.c) promoters and Board be apprised ofthe position and advised to takenecessary corrective steps.d) initiate steps for suspension/cancellation of the license underRegulation 4l & 42.e) Forrn Vl-A certified by the Auditorwill be examined. If discrepancy foundan explanation shall be called from theauditor and a report submitted to theCA institute.f) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4

Updates - 2201/2016

the auditor and a report submitted to theCA institute.

t4 Payment of fees andconsequences of failure to payfees

Renewal application compliancereported by the auditor in Form VI-C. Anynon-compliance shall result in thefollowing:If the broker does not pay the annual feesby the due date, but pays within one monththen the he shall have to pay the annualfees plus Rs 10,000 plus applicable taxes.

If the broker does not pay the annualfees even after three months of the duedate, but pays within one year then thehe shall have to pay the annual feesplus Rs 50,000 plus applicable tares.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.

Procedure for licensing,validity of license

No action required as the procedure is welllaid down

1l Rejection of application

l8 Renewal of License Reg l8(l) - time periods for submittingthe renewal application specified. Nofurther action required.

Reg 18 (2) - after expiry of license theinsurance broker cannot do any freshbusiness but only undertake servicing ofexisting policyholders. No further actionrequired.

Reg l8(3) The PO and employees shouldcomplete 25 hours of renewal training.Action: If delay in renewal traininga) upto one month issue a warning;b) if more than one month and upto 3months a penalty of Rs 10,000 and noplacement ofnew business for I month.c) if more than 3 months penalty of Rs25,000 and no placement of new businessfor 3 months.

Reg 18(4) - Renewal application to bedealt in the manner specified under Reg 8i) whether applicant suffering from of thedisqualifications specified under section

months whichever is later.

If the broker does not pay the annualfees even after one month of the duedate, but pays within three monthsthen the he shall have to pay theannual fees plus Rs 25,000 plusapplicable taxes.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.

l5&16

As above

Updates - 2201/2016

42D(5) ofthe Insurance Act.Action: If yes, invoke Reg 4l forsuspension of license with notice.

ii) whether the applicant has necessaryinfrastructure.Action: Ifthe infrastructure declared at thetime of grant of license and at the time ofrenewal of the license is found deficientthereafter, a warning may be issued to thebroker and he be asked to comply with therequirements within a period of 2 weeksand confirm compliance.

iii) Minimum 2 persons with qualificationsand experience and in branch offrce oneperson per branchAction: if not available a) The broker shallnot carry on business till the time hecorrects his non-compliance and has atleast2 qualified personas andl person in abranch.b) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undenaking thatthe same shall not be repeated.c) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance or 2 months whichever islater.

iv. with any person, directly or indirectlyconnected with the applicant refusedlicense by the Authority in the pastAction: a) If the person has been refusedlicense and the same is disclosed, thendepending upon the facts of the case adecision of renewal of license shall betaken.b) However if the same is not disclosed to

Updates - 2201/2016

the Authority, then invoke Reg 4l forsuspension of license with notice.c) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and may be askedto resign.

v. applicant fulfills the capital / networth/deposit requirementsAction: a) lf the applicant does not fulfillany of the capital/ networth/ depositrequirement, then the renewal of thelicense shall not be renewed till therequirements are complied.b) The procedure laid down at S.No. 9, I Iand l2 may be followed.

vi. PO possess the required qualificationand information about Directorsshareholders/ promoters / KMP issubmitted.Action: a) If the PO does not possess therequired qualifications, then PO shall beremoved.b) The broker shall not carry on businesstill the time he appoints a new PO.c) The compliance officer shall be issued awarning letter for the above violation if itis unintentional and in case of a repetitionor intentional violation he will be removedfrom the position.d) If the information of shareholders/promoters/ KMP necessary for processingof application is incomplete then the sameshall be submitted.

vii. PO suitable to be appointed given hisexperience, preferably in insurance sectorAction: a) The experience of the PO to beconsidered for reckoning shall be as under:i) atleast 3 years in supervisory capacity ininsurance sector.

Updates - 2201/2016

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x. PO and/ or any other official ofinsurance broker has violated the code ofconductAction: a) The Authority would examinethe violation of the code of conduct. If theviolation is one off and unintentional thenthe Principal Officer and the complianceofficer shall be issued a waming letter andan undertaking from both of them that thesame shall not be repeated.b) In case of a repetition or an intentionalviolation, theni.; the broker shall not carry on business.ii) hold the Principal Officer andcompliance officer responsible for theviolation and remove them from theposition of PO and compliance officer.iii) The broker shall not be allowed tocarry on business till the time he correctshis non-compliance or 2 months whicheveris later.iv) promoters and Board be apprised of theposition and advised to take necessarycorrective steps.v) initiate steps for suspension/cancellation of the license underRegulation 41 & 42.

xi. applicant engaged in business otherthan the main objectsAction: as above

xii, grant of license will be in the interestofpolicyholdenAction: subjective issue. The Authoritymay decline renewal if it of the view thatthe interest of policyholders will not beserved after invoking Reg 4l forsuspension of license with notice.

the broking company.

Updates - 2201/2016

xiii. promoters/ shareholders/ partners arein sound financial position.Action: The Authority may declinerenewal if it ofthe view that the promoters/shareholders/ partners are not in soundfinancial position after invoking Reg 4l forsuspension of license with notice.

xiv. employee responsible for solicitingshould fulfill the requirementsAction: a) If the broking company do nothave atleast 2 persons in head/ corporateoffice and one in branch office then thebroking company cannot write insurancebusiness till the broking company hasappointed a trained and qualified person.b) hold the Principal Officer andcompliance officer responsible for theviolation and issue them a waming.c) lfthe same is repeated theni) the broking company shall not writeinsurance business for the period the officewas without the trained and qualifiedpersons.ii) the PO and the compliance officer shallbe held responsible for this violation andmay be removed from their position.iii) inform the Board of the violation andadvise them to submit a necessary plan toprevent its re-occurrence.

Procedure where a renewal oflicense is not granted

No action required as the procedure is welllaid down

Effect oflicense

refusal to grant

21 Issue of duplicate license As above NA

22

l9

As above

Sale of Insurance Online Reg 22(l) allows brokers to enter into anagreement for sale of insurance productsonline by linking to the web portal of theinsurers.

Updates - 2201/2016

Action: If the violation is againrepeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in S.No. ll ofsecond time violation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.ln addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters.

Action: If the violations are repeatedthen the broker shall have to prove tothe Authority that the violations wereaccidental not deliberateIf the violations are found to be foundaccidental and one off then the brokershalla) submit a plan to set right theshortcomingsb) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall alsogive an undertaking that the sameshall not be repeated.c) the promoters and Board beapprised of the position.d) report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccurrence by an independentperson.

II. lf it is found that the violationswere deliberate then the broker shall:a) submit a plan to set right theshortcomingsb) identifo the person(s) responsiblefor the violations and take necessaryaction as per the Rules of thecompany and report the details ofsuch persons to the Authorityc) hold the Principal Officerresponsible for the violations andremove him. He shall not beconsidered for the post of principalofficer for a period of atleast I year.d) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.e) promoters and Board be apprised of

sition and advised to takethe

Action: a) if broker sells insuranceproducts of an insurer wilhout entering intoan agreement then there would be aviolation. The violations would be dealt inmanner specified in S.No. 4.

Reg 22(Z): The insurance broker shallfollow the procedure laid down inSchedule VIII of the regulationsAction: lf the insurance broker does notfollow the procedure laid down inAnnexure VIll, then the broker shall be:a) wamed and advised to take necessarysteps to prevent its re-occurrence.b) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall also givean undertaking that the same shall not berepeated.c) the promoters and Board be apprised ofthe position.

Updates - 2201/2016

necessary corrective steps

0 report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccurence by an independentperson

Sale of Insurance by tele-marketing mode

Reg 23(l) - An insurance broker whointends to engage the services of atelemarketer shall have to abide byGuidelines on distance marketing ofinsurance products

Reg 23(2) - Insurance broker shall have toabide by with the following additionalconditions:i) the telemarketer engaged by insurancebroker shall comply with various circular/guidelines issued by TRAIii) the telemarketer engaged by theinsurance broker shall not engage with anyother insurer or insurance related entityiii) ln case insurance broker registers as atelemarketer with TRAI, the insurancebroker shall do telemarketing for itselfonly and not for any other entigriv) Authorised verifier employed bytelemarketer/ insurance broker shallundergo statutory training and pass examas per Schedule II ofthese regulationsv) An insurance broker shall enter into anagreement with the telemarketer, a copy ofwhich shall be filed with the Authorityalong-with undertakings as per AnnexureIV-A and IV-B ofthese regulations.vi) The Authority shall power to inspectthe premises of the telemarketer or anyother premises, which the Authority feelsnecessary for verification/ documents, etcvii) the telemarketer shall have to complywith the terms and conditions as may beprescribed.Action: If the insurance broker does not Action: I. lf the violations are Action: If the violation is again

23

Updates - 2201/2016

repeated then the broker shall have toprove to the Authority that theviolations were accidental notdeliberatelf the violations are found to be foundaccidental and one off then the brokershalla) submit a plan to set right theshortcomingsb) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall alsogive an undertaking that the sameshall not be repeated.c) the promoters and Board beapprised of the position.d) report monthly/ quarterlycompliance of the steps taken/measures put in place to prevenl itsreoccurrence by an independentperson.

Il. If it is found that the violationswere deliberate then the broker shall:a) submit a plan to set right theshortcomingsb) identifo the person(s) responsiblefor the violations and take necessaryaction as per the Rules of thecompany and report the details ofsuch persons to the Authorityc) hold the Principal Officerresponsible for the violations andremove him. He shall not beconsidered for the post of principalofficer for a period of atleast I year.d) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.e) promoters and Board be apprised of

ition and advised to takethe

repeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in S.No. II ofsecond time violation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters.

comply with any of the above points, thenthe broker shall be:a) warned and advised to take necessarysleps to prevent its re-occurrence.b) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall also givean undertaking that the same shall not berepeated.c) the promoters and Board be apprised ofthe position.

Updates - 2201/2016

necessary corrective steps

0 report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccurrence by an independentperson

24 Action against a person actingas an insurance broker withouta valid license

25 Remuneration Reg 25(1) - life and general insurance - noinsurance broker shall be paid or contractto be paid by way of remuneration anamount exceeding the limits as specifiedby the AuthorityAction:

Reg 25(2) - reinsurance - remunerationthat will be paid shall be as per marketpractice.

Reg 25(3) - sefilement of accounts byinsurers in respect of remuneration shall bedone on monthly basis and it is to beensured that there is no cross settlement ofoutstanding balances

Action: Any non-compliance forsecond time violation shall beproceeded as under:a) the broker to immediately informthe Authority of the steps taken tocomply with the regulations.b) hold the Principal Officerresponsible for the violations andremove him.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.d) promoters and Board be apprisedof the position and advised to takene corrective st s

Action: lf the violation is againrepeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in second timeviolation.The broker shall not be allowed tocarry on business till tlre time hecorrects his non-compliance or 2months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

No action required as the procedure is welllaid down

Action: compliance reported by theauditor in Form VI-D. Any non-compliance shall result in the following:a) the broker to immediately inform theAuthority of the steps taken to complywith the regulationsb) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance.c) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.d) an explanation shall also be called from

Updates - 2201/2016

e) Form Vl-D certified by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.

the auditor and a report submitted to theCA institute.

Action: Any non-compliance forsecond time time violation shall beproceeded as under:a) the broker to immediately informthe Authority of the steps taken tocomply with the regulations.b) hold the Principal Officerresponsible for the violations andremove him.

Action: lf the violation is againrepeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in second timeviolation.The broker shall not be allowed tocan-y on business till the time hecorrects his non-com liance or 4

Ceiling of business from single Reg 26(l) - Not more than 50% of thepremium (quantum, receipts, etc) shallemanate from any one client in a financialyeaf

Reg 26(2) - for insurance brokerspromoted by corporate houses having aninsurance company within their group notmore than 25yo of the insurance handledby the insurance broker shall be placedwith the insurance company within thepromoter group separately for life andgeneral insurance.

Reg 26(3) - the oZ of premium as specifiedin sub-reg (l) above will not includereinsurance premium as well premiumemanating from Government body orpublic sector undertaking.

Reg 26(4) - The decision of the Authoritywhether the company/ business or anorganization is under same managementshall be final.

Reg 26(5) - An insurance broker shallsubmit CA certificate to that effect

Action: compliance reported by theauditor annually. Any non-complianceshall result in the following:a) the broker shall be wamed for thebreach of the regulations.b) the broker shall submit an action plan toensure that the breach is not repeated.c) The Principal Officer and the

liance officer shall be heldcolll

26

Updates - 2201/2016

responsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.d) an explanation shall also be called fromthe auditor and a report submitted to theCA institute.

c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.d) promoters and Board be apprisedof the position and advised to takenecessary corrective stepse) certificate of the Auditor will beexamined. If discrepancy found anexplanation shall be called from theauditor and a report submitted to theCA institute.

months whichever is later.In addition the Authoriry shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

Segregation of InsuranceMoney

Reg 27( I ) - Provisions of Sec 64Vb of theAct shall continue to be applicable

Reg 27(2) - [n case of reinsurancecontracts, it may be agreed upon betweenthe parties or as part of the internationalmarket practice, the reinsurance/composite broker can collect premium andremit to the reinsurer and,/ or collect claimsfrom the reinsurer to be passed on to theinsurer. The money collected by the brokershall be dealt with in the manner specifiedin Schedule V ofthe Regulations.

Action: compliance reported by theauditor in Form VI-E. Any non-compliance shall result in the following:a) the broker to immediately inform theAuthority of the steps taken to complywith the regulationsb) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance.c) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.

lanation shall also be called frornd alt ex

Action: Any non-compliance forsecond time violation shall beproceeded as under:a) the broker to immediately informthe Authority of the steps taken tocomply with the regulations.b) hold the Principal Officerresponsible for the violations andremove him.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.d) promoters and Board be apprisedof the position and advised to takeneces corrective ste

Action: If the violation is againrepeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in second timeviolation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

27

Updates - 2201/2016

e) Form VI-E certified by the Auditorwill be examined. lf discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.

the auditor and a report submitted to theCA institute.

If the violation is again repeated theninitiate steps for suspension/cancellation of the license underRegulation 4l & 42 in addition to stepsmentioned in S.No. II of second timeviolation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.ln addition the Authori| shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters-

I. If the violations are repeated thenthe broker shall have to prove to theAuthority that the violations wereaccidental not deliberateIf the violations are found to be foundaccidental and one off then the brokershalla) submit a plan to set right theshortcomingsb) The Principal Officer shall be heldresponsible for the lapse and shall beissued a waming letter. He shall alsogive an undertaking that the sameshall not be repeated.c) the promoters and Board beapprised of the position.d) report monthly/ quarterlycompliance of the steps taker/measures put in place to prevent itsreoccurrence by an independentperson.

ll. If it is found that the violationswere deliberate then the broker shall:a) submit a plan to set right theshortcomingsb) identifu the person(s) responsiblefor the violations and take necessaryaction as per the Rules of thecompany and report the details ofsuch persons to the Authorityc) hold the Principal Officerresponsible for the violations andremove him. He shall not beconsidered for the post of principalofficer for a period of atleast 5 years.

The broker shall not be allowed tod

If it is brought to the notice of theAuthority that the broking company hasviolated the code of conduct, the brokershall be:a) warned and advised to take necessarysteps to prevent ils re-occurrence.b) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning letter. He shall also givean undertaking that the same shall not berepeated.c) the promoters and Board be apprised ofthe position.

Code of Conduct28

Updates - 2201/2016

carry on business till the time hecorrects his non-compliance or 2months whichever is later.e) promoters and Board be apprised ofthe position and advised to takenecessary corrective stepsf) report monthly/ quarterlycompliance of the steps taken/measures put in place to prevent itsreoccurrence by an independentperson

29 Maintenance of books ofaccounts, records, etc

Reg 29(l) - Every insurance broker shallprepare for every financial year a) balancesheet; b) profit & loss account: c)statement of cash/ fund flow d) additionalstatemenls on insurance broking businessas required by the Authority

F.eg 29(2) - Every insurance broker shallsubmit to the Authority, audited financialstatement alongwith auditor's report before30'h September alongwith remarks orobservations of auditors, if any, on conductof business, state of accounts, etc and asuitable explanations

Reg 29(3) - every broker shall within 90days from the date of auditor's report takesteps to rectiry the deficiencies and reportto the Authority

Reg 29(4) - All books of accounts,documents, etc shall be maintained at thehead office of the broking company

Reg 29(5) - All books of accounts shall bemaintained for atleast l0 years

Rge 29(6) - A certificate confirmingcompliance of various regulations shallform part of Auditors Report.

Updates - 2201/2016

Reg 29(7) - every insurance broker shallsubmit to the Authority the details ofstatutory auditors engaged by them along-with audited accounts as per Annexure V.

Action: compliance reported by theauditor in form of certificate confirmingcompliance to various regulations formingpart of the Auditors report. Any non-compliance shall result in the following:a) the broker to immediately inform theAuthority of the steps taken to complywith the regulationsb) The broker shall not be allowed to carryon business till the time he corrects hisnon-compliance.c) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter. The PrincipalOfficer shall also give an undertaking thatthe same shall not be repeated.d) an explanation shall also be called fromthe auditor and a report submitted to theCA institute.

Action: Any non-compliance forsecond time violation shall beproceeded as under:a) the broker to immediately informthe Authority of the steps taken tocomply with the regulations.b) hold the Principal Officerresponsible for the violations andremove him.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.d) promoters and Board be apprisedof the position and advised to takenecessary correctiv€ stepse) certificate issued by the Auditorwill be examined. If discrepancyfound an explanation shall be calledfrom the auditor and a reportsubmitted to the CA institute.

Action: If the violation is againrepeated then initiate steps forsuspension/ cancellation of the licenseunder Regulation 4l & 42 in additionto steps mentioned in second timeviolation.The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.In addition the Authority shall recordthe fit & proper criteria applicable todirectors/ shareholders/ promoters

30 Submission of half yearlyreturns

Reg 30( I )-Submission of Forms given inAnnexure VI-A to Vl-E duly certified byCA on half-yearly basis.

Action: as above3l Internal control and systems Reg 3l(l) - every broker shall have proper

internal audit in place and internal controlsand systems adequate for the size, natureand complicity of business

Reg 3l(2) - for reinsurance/ compositebroker it is mandatory to have acompliance officer

Reg 3l(3) - for direct insurer if the

Updates - 2201/2016

business in a financial year more than l0crs then mandatory to have a complianceofficer.

Action: Any non-compliance shall resultin the following:a) the broker to take steps taken to appointa compliance officer immediately.b) The Principal Officer shall be heldresponsible for the lapse and shall beissued a warning Ietter.c) The Principal Officer shall also give anundertaking that the same shall not berepeated.

Action: Any non-compliance forsecond time violation shall beproceeded as under:a) the broker to take steps taken toappoint the compliance officerimmediately.b) hold the Principal Officerresponsible for the violation.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 2months whichever is later.d) promoters and Board be apprisedof the position and advised to takenecessary corrective steps

Action: Any non-compliance for thirdtime violation shall be proceeded asunder:a) the broker to take steps taken toappoint the compliance officerimmediately.b) hold the Principal Officerresponsible for the violation andremove him from the position of PO.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-compliance or 4months whichever is later.d) promoters and Board be apprised ofthe position and advised to takenecessary corrective steps.e) initiate steps for suspension/cancellation of the Iicense under

lation 4l & 42.32 Claim Consultancy Any violation of Reg 32 shall be dealt in

accordance with the steps laid down forviolation of regulation 31.

l3 Co-Broking As above

34 Reinsurance/ CompositeBroker sharing brokerage

As above

35 Single broking license to onecorporate group

As above

36 Nomenclature of InsuranceBrokers

Immediate compliance

37 Financial penalty for certainviolations/ breaches

Financial penalties for violations. Nofurther action.

38 Disclosures to the Authority Reg 38(l) - The Insurance broker shalldisclose to the Authority on their own anymaterial change which has a bearing ontheir license within 30 days of such change

Updates - 2201/2016

Action: Any non-compliance for thirdtime or more time violation shall beproceeded as under:a) the broker to take steps taken tocomply with the regulations.b) hold the Principal Officer andcompliance officer responsible for theviolation and remove him from theposition of PO.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-com liance or 2

Action: Any non-compliance forsecond time violation shall beproceeded as under:a) the broker to take steps taken tocomply with the deposit requirements.b) hold the Principal Officer and thecompliance offrcer responsible for theviolations and remove the complianceofficer.c) The broker shall not be allowed tocarry on business till the time hecorrects his non-com liance or I

Reg 38(2) - the insurance broker shalldisclose to the Authority, as and whenrequired by it,

Reg 38(3) - The insurance broker shalltake prior approval of the Authority in thefollowing cases: change in i) PrincipalOfficer; ii) Director(s)/ Partner(s)/; iii)name of the company; iv) place ofcorporate/ registered office; v) principalplace of business.

Reg 38(4) - An insurance broker shallfurnish to the Authority as and when thereis change/ addition to the informationfurnished previously to the Authority i)opening/ closing of branch; ii) list ofbroker qualified person; iii) in respect of aclaim under the professional indemnitypolicy; iv) acquiring immovable property.

Reg 38(5) - The Authority may from timeto time require the broker to furnishinformation/ documents in the manner asmay be specified

Reg 38(6) Failure to comply with theregulation will lead to action in accordancewith provision of Reg 41.

Action: Any non-compliance shall resultin the following:a) the broker to take steps taken to complywith the deposit requirements.b) The Principal Officer and thecompliance officer shall be heldresponsible for the lapse and shall beissued a warning letter.c ) The Principal Officer shall also give anundertaking that the same shall not berepeated.

Updates - 2201/2016

month whichever is later.d) promoters and Board be apprisedof the position and advised to takenecessary corrective steps

months whichever is later.d) promoters and Board be apprised ofthe position and advised to takenecessary corrective steps.e) initiate steps for suspension/cancellation of the license underRegulation 41.

39&40

Authority's power to inspect/appointment of investigator bythe Authority

Exercise of Authority's power. No furtheraction.

4t&A'

Suspension of license withnotice/ Cancellation orsuspension of license withoutnotice

The regulations cover in detail theprovisions/ circumstances surroundingsuspension/ cancellation. No furthercomments

Publicationsuspension

of order of No action required as the procedure is welllaid down

44 Manner of holding enquiryafter suspension

As above.

45 Action to be taken after receiptof enquiry report

As above.

46 Procedure for cancellation As above

Publication of order ofcancellation of license

As above

48 Effect of cancellation As above

49 Voluntary surrender of license Voluntary surrender to be accepted only onfulfillment of requirements. If any actionpending then voluntary surrender not to beaccepted till outstanding issues are settled.

50 Power of Authority to issueclarifications

5l General As above

Note 1: Despite the above penalty chart, if the Authority considers the violation committed by theinsurance broker grave, then it may initiate steps for suspension/ cancellation of license at the first stageitself.Note 2: If the broker is financially benefitted, then such benefits shall be neutralized/ set-off by fines.

43

47

As above

Updates - 2201/2016