Three years into the insurance broking business may not seem much but brokers are already perceiving a shakeout in the industry.

An IRDA progress report on the status of the industry shows that the number of licences (for insurance brokers) has started declining sharply in the last three years from 138 in 2003 to 48 in 2004 and further down to 26 in 2005.

The number of licensed brokers stands at 212 till date of which 181 are into direct broking, four in re-insurance and 27 in composite broking.

No re-insurance licence has been issued after 2003. Even the number of composite licences has dropped steadily from 22 in 2003, four in 2004 to just one in 2005.

Insurance broking firm, India Insure Risk Management Services Pvt. Ltd. has attributed the steady drop in the number of aspirants to a progressively stricter process followed by the regulatory authority.

A region-wise analysis of licensed brokers shows that the West leads with 81 licences, followed by North at 72 and South and East at 43 and 16 respectively.

Despite whispers that many small brokers are dormant and on the exit path, the survey shows that almost all brokers (barring a few suspended licences) are operational.

While brokers worldwide are known to focus on commercial non-life business, with `retail' and `life' left to agents or their equivalents, in India the trend appears mixed. A study by India Insure Risk Management Services shows that most brokers have dabbled in `retail' and `life' to some extent and the degree of involvement varied. "This anomaly could be because of the presence of tariffs and the consequent slower penetration of the corporate market by brokers and the more attractive, highly under-insured retail market in India," sources at India Insure maintained.

On business volume, the firm noted that on an aggregate market-size of around Rs 18,000 crore of non-life premium, brokers volumes had aggregated to below Rs 3,000 crore (excluding re-insurance premium) in 2004-05, which is nearly 15 per cent.

It further noted that while direct broking had taken a while to settle, re-insurance brokers had done reasonably well and had consolidated their position not only in Treaty business, but also in Facultative business.

On challenges, India Insure conceded constraints imposed by tariffs, especially when all rates and clauses/coverages were frozen, allowing very little value-addition by the broker, coupled with the limitations placed on broker's jurisdiction and compensation.

(http://sify.com)