TYPE OF BUSINESS SUITABLE FOR THE INSURANCE INDUSTRY

One of the first decisions you must make is choosing the type of business entity and model for your insurance venture. Unlike some small businesses which can operate as sole proprietorships, the insurance sector has specific requirements on the form of organization. Here’s a look at the suitable business types and our advice on what works best:

• Insurance Company (Insurer): To start an insurance company (life, general or health), you must register as a company under the Companies Act—typically as a public limited company. This structure meets regulatory norms, enables capital raising and ensures greater transparency. The Insurance Act, 1938 strictly prohibits unregistered entities from offering insurance. Hence, forming a public company is mandatory for insurers, especially considering the high capital requirements and the need to gain trust from regulators and stakeholders.
• Insurance Intermediary (Broker/Agent/etc.): If launching a full insurance company feels overwhelming, consider becoming an insurance intermediary—such as a broker, agent, web aggregator or marketing firm. These ventures often incorporate as private limited companies or LLPs, offering credibility, limited liability and simpler compliance. While individual agents may operate as sole proprietors, scaling operations is easier through a company or LLP. All insurance entities must solely focus on insurance activities—mixing unrelated businesses in the same entity is not permitted.
• Choosing the Right Model – Insurer vs Intermediary: Choosing your insurance business model is key—you can either become an insurer (underwriting policies and assuming risk) or an intermediary (like a broker or agent selling policies for existing insurers). Insurers face high entry barriers, including ₹100 crore capital and lengthy IRDAI approvals, while intermediaries need lower capital (starting ₹75 lakhs) and face a quicker process. For most entrepreneurs, starting as an intermediary is more practical. Regardless of the model, you must incorporate a compliant company or LLP vetted by IRDAI.

NECESSARY APPROVALS

Starting an insurance industry business in India involves obtaining several regulatory approvals at different stages. These approvals ensure that only serious and qualified players enter the market. Below, we outline the necessary approvals you will need:

• IRDAI Name Approval (NOC for Using “Insurance” in Name): Before incorporation, you must get a No-Objection Certificate (NOC) from IRDAI to use terms like “Insurance” or “Assurance” in your company name. Submit a proposal detailing your intent, promoters and business plan. The NOC is valid for 6 months, extendable by 3 months.
• In-Principle Approval (Requisition for Registration): Post-incorporation, file Form IRDAI/R1 for in-principle approval to apply for an insurance license. Submit company details, financial projections, promoter backgrounds and plans for rural/social sectors. IRDAI evaluates financial strength and compliance readiness before granting R1 approval or requesting clarifications.
• Final License Approval – Form IRDAI/R2 (Certificate of Registration Application):After R1, apply for the Certificate of Registration via Form IRDAI/R2. Submit proof of capital infusion (₹100 crore minimum), shareholding details, affidavits, FDI compliance (if any) and key agreements. IRDAI reviews infrastructure and preparedness before granting the final license to start operations.
• Foreign Investment Approval (If Applicable): For ventures with FDI, ensure compliance with India’s FDI policy—currently up to 74% under the automatic route. Additional conditions apply above 49%, like Indian-majority board. IRDAI won’t issue final registration without verifying legal and regulatory adherence to FDI rules and governance norms.
• Other Ancillary Approvals: Additional approvals may be required based on your model, such as branch office permissions, foreign reinsurance branch approvals or intermediary name approvals. While secondary, these are crucial checkpoints. Ensure all IRDAI-specific licenses, clearances and post-licensing permissions are properly addressed during setup.

REQUIRED LICENSES

Apart from the preliminary approvals, specific licenses are required to legally operate in the insurance industry. The exact license depends on the type of business you are undertaking (insurer vs intermediary). Below is a breakdown of the required licenses in brief:

• IRDAI Certificate of Registration (Insurance Company License): This license authorizes companies to underwrite life, general or health insurance policies in India. Granted under Section 3 of the Insurance Act, it follows R2 approval. It’s valid indefinitely but requires the company to commence operations within 12 months and maintain ongoing compliance.
• Insurance Broker License: Required to act as a broker between clients and insurers, this IRDAI license allows solicitation of policies from multiple insurers. Categories include Direct, Reinsurance and Composite Brokers. Entities must meet capital, net worth, infrastructure and personnel qualifications. The license is valid for three years and renewable.
• Corporate Agent License: This license permits a business to distribute insurance policies on behalf of up to three insurers per category (life, general, health). Requirements are less stringent than for brokers, with minimal capital and trained staff. Common among banks and platforms offering limited insurer tie-ups. Must follow IRDAI conduct rules.
• Insurance Web Aggregator License: This license is for companies running online platforms that compare and sell insurance policies digitally. Requires a company structure, net worth of ₹25 lakh, a compliant IT setup and IRDAI approval. Web aggregators must operate fairly, protect data and provide unbiased comparisons without promoting specific insurers unjustly.
• Third-Party Administrator (TPA) Registration: TPAs handle insurance claim processing and services for insurers, especially in health insurance. Must be a dedicated company with ₹1 crore share capital, medical and administrative experts and secure infrastructure. IRDAI grants registration after evaluating operational readiness. TPAs serve as intermediaries between policyholders and insurers for claims.
• Other Specialist Licenses: Specialized licenses include Surveyors and Loss Assessors (for claim assessment) and Insurance Marketing Firms (IMFs) that offer multi-insurer policies and financial products. Each role has specific eligibility criteria and must be registered with IRDAI. Engaging in any insurance-related activity without the proper license is strictly prohibited.

HOW LAWFNITY CAN HELP YOU ESTABLISH YOUR INSURANCE BUSINESS

Embarking on the journey to start an insurance business can feel overwhelming – but you don’t have to do it alone. Lawfinity specializes in helping entrepreneurs and companies navigate the legal and regulatory maze of setting up businesses in India, including in the insurance sector. Our team of experts can assist you every step of the way, making the process smoother and ensuring full compliance with all requirements:

• Business Incorporation & Structuring: Lawfinity helps you choose the ideal business structure (public company, LLP, etc.), secures IRDAI/MCA name approvals, drafts insurance-specific MOA/AOA and completes company registration. We ensure compliance with IRDAI norms, including shareholding, FDI caps and director requirements from the very beginning of your venture.
• Regulatory Approvals & Documentation: We handle end-to-end IRDAI approval processes, from preparing Form R1 and R2 applications to compiling financials, business plans and affidavits. Our team liaises with IRDAI, responds to queries and manages deadlines—ensuring your application is complete, compliant and aligned with regulatory expectations at every stage.
• Licensing & Post-License Support: Lawfinity guides you through obtaining IRDAI licenses for insurers or intermediaries, ensuring tailored, accurate submissions. Post-licensing, we assist with product filings, compliance manuals, staff training and ongoing regulatory updates—keeping your insurance business compliant, future-ready and aligned with changing IRDAI policies.

Lawfinity can be your trusted legal hand in establishing your desired insurance business. We take pride in making the complicated process easy to understand for our clients – explaining the rationale behind each requirement (so you are not just filing papers blindly) and providing human-centric guidance with a friendly approach. By engaging Lawfinity, you free yourself to focus on the bigger strategic aspects – like developing your insurance products or distribution network – while we handle the heavy lifting of approvals, paperwork and compliance. Our goal is the same as yours: to see your insurance venture successfully launched and thriving, with full peace of mind that everything is done “by the book.”

This line graph captures the revenue growth of the Indian Insurance Industry over the last decade, combining life insurance and general (non-life) insurance premium collections.

In FY 2014–15, the total industry revenue stood at ₹3.8 lakh crore. Over the next five years, it grew consistently, reaching ₹6.4 lakh crore by FY 2019–20. This was largely fuelled by:

• Increasing awareness of life insurance products
• Government schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Ayushman Bharat
• Rising demand for health and motor insurance

However, the pandemic year FY 2020–21 caused a temporary dip in revenues to ₹6.1 lakh crore, due to reduced economic activity and falling sales in segments like motor and travel insurance.

Post-COVID, the industry rebounded strongly, reaching ₹8.4 lakh crore in FY 2023–24, led by a surge in health insurance, term policies and digitized policy distribution. The future of Indian insurance appears increasingly digital, data-driven and health-centric.