Relaxing the regulatory guidelines, regulator Irda has permitted corporations owning general insurance business to set up their insurance broking companies.
"Keeping in view the international experience and practice it was decided that corporate houses can have both insurance companies and broking activity subject to certain safeguards," a memorandum issued by the Irda said.
The business houses promoting insurance broking companies, the Irda said, would have to give an undertaking that the clients of the company will not be "compelled to use the broker for their insurance requirements".
In addition, the insurer will not favour its brokers in any form, be it in terms of providing more remuneration or laying down terms favouring it, the regulator said.
The Irda further said the insurer will be barred from making special products for sale exclusively through the broking company promoted by the business house that owns the insurance company.
It would also be obligatory for the broking company to disclose related party transactions with the insurance company in its audited accounts. "The broker shall ensure that not more than 25 per cent of the insurances handled by it in any financial year is placed with the insurance company within the promoter group," the Irda added.
Presently, there are about 270 insurance brokerage firms, including Reliance Retail Insurance Broking Ltd and ICICI Direct which have been floated by business houses that also own insurance companies.
The other major insurance broking companies are ASK Insurance Broking and Risk Management Services, Optima Risk Management Services, Emkay Insurance Brokers and Enam Insurance Broker.
