The Insurance Regulatory and Development Authority (IRDA) has assured the broking community that it will address issues raised by them such as high penalties, short term licenses and service tax on reinsurance brokers.
Brokers have demanded a reduction in penalties. They have argued that as their size is smaller as compared to an insurance company, they can’t be treated on the same footing as insurers while imposing penalties.
Brokers have also been asking to have long term licenses for brokers. According to the Insurance Act, 1938, a broker’s license is valid for only three years, after which it has to be renewed.
While IRDA has expressed solidarity in resolving this issue, the Insurance Act will have to be amended and the insurance bill passed in parliament for the changes to come into force. The broking community is also looking at approaching the parliamentary committee on finance to resolve the issue.
Another issue raised by brokers is related to service tax. Till last year, there was no service tax imposed on insurance brokers. However, in July 2012, it was decided that reinsurance brokers would also come under the purview of service tax. Brokers say that it will eat away their profits as a large percentage of it would be utilized to pay service taxes.
This issue too, since is a taxation issue, will have to be resolved by the finance ministry, and the broking officials are planning to take it up with the ministry.
The draft report by the IRDA committee on insurance broking has suggested certain amendments to the insurance broking regulations. While the ceiling on business from one client has been increased to 50%, the period for re-application for license by broker has been set at after one year from date of cancellation.
