Document Detail

Title: Penalty
Reference No.: IRDA/Life/ORD/Misc/228/10/2012
Date: 05/10/2012
Directions under Section 34 of the Insurance Act, 1938In the matter of M/s
Whereas Clause C-4 of Guidelines on Group Insurance Policies given in Circular No. 015/IRDA/Life/Circular/GI Guidelines/2005 dated 14th July 2005prescribes that there shall be no other payment whether as management expenses or documentation expenses or profit commission or bulk discount or payment of any description, to the agent or corporate agent or group organizer or group manager.
Whereas M/s SBI Life Insurance Company Ltd hereinafter called Life Insurer had made certain payments towards reimbursement of Group Administration Expenses to various master policy holders.
Whereas the above payments made by the Life Insurer were in violation of Clause C-4 mentioned above, for which the Authority had imposed a penalty of Rs 70 lakh vide Order dated 8th July 2011.
Whereas the above Order of the Authority was without prejudice to initiate further action onthe Corporate Agents and the Master Policy Holders, the onus of which it was stated, equally lies with the Life Insurer.
Whereas the Authority has taken note of the submissions of the Life Insurer in this regard vide letters dated 17th February 2011, and 30th March 2011 and also both written and oral submissions made during the personal hearing accorded on 9th May, 2012 which are as under:
1.                  that Life Insurer has entered into arrangements / agreements with Master Policy Holders and agreed to pay administrative fee in consideration of various services, inter alia, dispatching mailers to customers, collecting membership forms, remitting premia, to make aware the members their rights and obligations, maintenance of customer data, answering customer queries and facilitating claim process are found not agreeable.
2.                  that the said payments relate to a product called ‘Super Suraksha’ that was launched in the year 2002, well before issuance of the Group Insurance Guidelines is considered.
3.                  that it has filed a new product with the Authority to replace the then existing one on 28th September, 2006 for which a final approval was received from IRDA on 05th November, 2007 is also taken into consideration
4.                  inability expressed by the Life Insurer to recover the wrongful payments from respective Master Policy Holders
Whereas upon taking note of the Life Insurer’s submissions, it has come to the following conclusions
a)      that majority of the functions stated to have been assigned to Master Policy Holders was anyway part of their Master Policy Holders’ responsibility for administering a Group Insurance Scheme.
b)      thatthere was no case for the Insurer to assign core activities to Master Policy Holders that are to be discharged by themselves during the course of their doing Group Insurance business. Even if such activities were assigned to the Master Policy Holders, the guidelines specifically prohibit payment of monies of any sort to Master Policy Holders.
c)      that the explanation offered by the Life Insurer for not replacing the then existing product, immediately on getting approval for a new product by the Authority is also not tenable in view of the fact that the insurer continued to sell the old product much beyond the date of approval accorded to the new product. Such explanation cannot legalize a payment which is prohibited in the guidelines.
 
However owing to the nature of the business, with regard to the payment made upto the date of approval of the new product, i.e. upto October 2007 a considerate view may be taken. However, such a dispensation cannot be accorded to the following payments made subsequent to October 2007 and the Authority treats such payment as wrongful payments violative of the guidelines mentioned above.
Sl No.
Master Policy Holder
2007- 08     (Nov - Mar)
2008-09
2009-10 (April- Aug)
Total
1
State Bank of India
1695.11
3081.56
432.03
5208.70
2
State Bank of Hyderabad
159.43
354.05
61.00
574.47
3
State Bank of Indore*
50.91
125.01
12.21
188.13
4
State Bank of Mysore
133.57
204.59
14.15
352.31
5
State Bank of Patiala
78.43
79.01
2.00
159.44
6
State Bank of Travancore
218.99
472.08
62.26
753.34
7
State Bank of Bikaner and Jaipur
68.44
215.25
34.36
318.04
8
Dewan Housing Finance
48.58
169.62
111.84
330.04
9
Federal Bank
86.43
1.68
0.00
88.11
10
Kerala Transport Development Finance Corporation Ltd.
0.20
0.50
0.04
0.73
11
Sundaram Home Finance
25.04
58.12
21.91
105.07
12
Union Bank of India
126.33
195.77
18.07
340.18
13
United Bank of India
3.13
8.07
1.99
13.19
Grand Total (Rupees in lacs)
2694.59
4965.29
771.86
8431.74
 
The above payments are not in the interests of the policyholders.
Now, therefore, the Authority, after consultation with the Consultative Committee constituted under Section 110 G of the Insurance Act, hereby directs as under:
        i.            Identify the members/beneficiaries as the case may be of each Master Policy against which the Life Insurer has reimbursed the administrative expenses as a percentage of premium. A list of master policy is attached to this order as Annexure A;
      ii.            Distribute the wrongful administrative charges paid, amongst the respective members/beneficiaries of each Master Policy by way of refund to the respective members/beneficiaries;
    iii.            For this purpose, recalculate the premium chargeable for each member of each Group Insurance Scheme of the Life Insurer without taking into consideration 20% of premium that is paid to Master Policy Holders.
     iv.            Difference between the original premium and the recalculated premium as in (iii) above to be refunded back to the respective members/beneficiaries
       v.            The amount to be refunded as directed in these orders shall be made good by the shareholders.
     vi.            The above action to be initiated immediately and shall be completed within 6 months from the date of receipt of this order.
   vii.            Cost of the regulatory compliance of this order to be borne by Shareholders of the Life Insurer.
The above directions are issued in exercise of the powers vested in the Authority under Section 34(1)(b) of the Insurance Act, 1938.
 
 
Dated 05th October, 2012                                                                                                                             (J. Hari Narayan)
Chairman
 
 
 
 
 
Nov - Mar 2008
2008-09
2009-10 (April- Aug)
Master Policy
Entity
Brand
Admin fee (Actuals)
lives
Admin fee (Actuals)
lives
Admin fee (Actuals)
lives
83001000203
State Bank of India
Super Suraksha for Home Loans
   15,61,11,433
          35,786
     28,16,17,047
           62,097
       3,54,13,725
           7,736
83001000301
State Bank of Patiala
Super Suraksha for Home Loans
         69,83,211
             1,361
           65,94,680
             1,445
             2,40,038
                 59
83001000409
State Bank of Mysore
Super Suraksha for Home Loans
     1,11,28,854
             1,970
       1,74,49,657
             2,836
           10,77,796
              173
83001000507
State Bank of Hyderabad
Super Suraksha for Home Loans
     1,39,85,719
             2,983
       3,21,15,064
             5,757
           58,06,488
              988
83001000605
State Bank Of Indore
Super Suraksha for Home Loans
         44,35,089
                693
       1,16,83,617
             2,145
           11,44,668
              213
83001000703
Sundaram Home Finance
Super Suraksha for Home Loans
         25,03,566
                570
           58,11,875
             1,270
           21,91,145
              422
83001001002
State Bank of Travancore
Super Suraksha for Home Loans
     2,06,21,822
             4,577
       4,43,15,861
             9,791
           58,56,890
           1,365
83001001110
State Bank of Bikaner and Jaipur
Super Suraksha for Home Loans
         42,63,402
                941
       1,84,91,690
             4,009
           33,05,318
              611
83001001708
State Bank of India
Super Suraksha for Car Loans
         49,54,842
             6,315
       1,51,07,405
           21,509
           39,90,489
           5,706
83001002507
State Bank of Mysore
Super Suraksha for Car Loans
           2,95,005
                307
             5,11,743
                 649
                 38,868
                 46
83001002605
State Bank of Indore
Super Suraksha for Car Loans
               95,266
                125
             2,99,808
                 415
                 52,014
                 77
83001002801
State Bank of Patiala
Super Suraksha for Car Loans
           8,60,064
             1,156
           11,59,069
             1,794
                 15,490
                 17
83001003306
United Bank of India HL
Super Suraksha for Home Loans
           3,12,748
                   92
             8,06,825
                 238
             1,99,443
                 56
83001003404
State Bank of Hyderabad
Super Suraksha for Car Loans
               90,661
                   95
             5,13,558
                 571
             1,26,661
              141
83001003502
State Bank of Travancore
Super Suraksha for Car Loans
           7,73,636
                869
           24,69,447
             2,949
             3,69,426
              411
83001003610
State Bank of India
Super Suraksha for Tractor Loan
         10,72,178
                930
           18,21,951
             1,654
             3,28,554
              233
83001003904
Union Bank
Super Suraksha for Home Loans
     1,26,33,439
             2,768
       1,95,76,983
             4,119
           18,07,431
              348
83001004105
State Bank of Mysore
Super Suraksha for Tractor Loan
         11,68,219
                634
           19,11,225
             1,120
             3,36,921
              175
83001004203
State Bank of Patiala
Super Suraksha for Tractor Loan
 
                    -  
                   1,928
                      1
 
                  -  
83001004605
State Bank of Bikaner and Jaipur
Super Suraksha for Car Loans
           2,49,536
                312
             8,36,018
             1,082
             1,30,408
              174
83001004703
State Bank of Bikaner and Jaipur
Super Suraksha for Tractor Loan
           1,39,379
                   82
             3,75,931
                 259
                 42,513
                 27
83001004801
State Bank of Hyderabad
Super Suraksha for Tractor Loan
         16,14,475
                950
           12,25,395
                 782
             1,26,642
                 87
83001005306
Dewan Housing Finance
Super Suraksha for Home Loans
         48,57,816
             1,366
       1,69,62,069
             3,960
       1,11,83,648
           2,585
83001005404
Federal Bank
Super Suraksha for Home Loans
         86,43,177
             1,541
             1,67,544
                 135
 
                  -  
83001005502
Karnataka Transport Devlopment Finance
Super Suraksha for Home Loans
               19,801
                     7
                 49,709
                   11
                   3,688
                   2
83001004301
State Bank Of Indore
Super Suraksha for Tractor Loan
           3,74,108
 
             3,87,571
 
                 24,131
 
DEPOSITORS
State Bank of India
Super Suraksha for Deposit Holders
         51,97,032
          52,618
           78,00,240
           80,370
           32,85,096
        33,523
SELF HELP
State Bank of India
Shakti
         19,98,050
          31,833
           16,26,400
           32,528
             1,84,950
           3,699
FARMERS
State Bank of India
Super Suraksha for ADB
               82,494
             2,270
                 75,798
             2,078
                   1,080
                 16
SUPER SURAKSHA
State Bank of India
Super Suraksha
               94,750
             4,621
             1,00,008
             2,383
                   1,800
                   8
TDR
State Bank of India
Super Suraksha
               21,636
                253
                   7,227
                 102
 
 
DEPOSITORS
State Bank of Bikaner and Jaipur
Super Suraksha for Deposit Holders
         21,91,368
          24,280
           18,21,360
           19,234
                   4,992
                 54
DEPOSITORS
State Bank Of Indore
Super Suraksha for Deposit Holders
           1,86,648
             1,996
             1,29,648
             1,204
                       120
                   1
SELF HELP
State Bank Of Indore
Shakti
                     500
                   10
                   1,750
                   35
 
                  -  
FARMERS
State Bank Of Indore
Super Suraksha for ADB
 
 
 
 
 
 
SUPER SURAKSHA
State Bank Of Indore
Super Suraksha
 
 
 
 
 
 
DEPOSITORS
State Bank of Travancore
Super Suraksha for Deposit Holders
           5,03,856
             5,799
             3,70,392
             3,831
 
                  -  
SELF HELP
State Bank of Travancore
Shakti
               10,950
                324
                 14,150
                 283
                   3,150
                 63
FARMERS
State Bank of Travancore
Super Suraksha for ADB
                 5,580
                145
                   3,798
                   92
 
 
SUPER SURAKSHA
State Bank of Travancore
Super Suraksha
               38,496
                427
                 52,512
                 592
 
 
DEPOSITORS
State Bank of Mysore
Super Suraksha for Deposit Holders
           7,65,120
             8,202
             4,83,240
             4,630
                   6,384
                 63
SELF HELP
State Bank of Mysore
Shakti
               25,450
             1,449
             1,03,000
             2,060
                 35,600
              712
FARMERS
State Bank of Mysore
Super Suraksha for ADB
                 2,952
                   51
                   2,412
                   42
 
                  -  
SUPER SURAKSHA
State Bank of Mysore
Super Suraksha
               10,584
                   41
                   8,520
                   29
 
                  -  
DEPOSITORS
State Bank of Patiala
Super Suraksha for Deposit Holders
               17,232
                205
             1,47,216
             1,715
 
                  -  
SELF HELP
State Bank of Patiala
Shakti
 
                    -  
                   1,750
                   35
 
                  -  
FARMERS
State Bank of Patiala
Super Suraksha for ADB
                       72
 
                         72
 
 
 
SUPER SURAKSHA
State Bank of Patiala
Super Suraksha
 
 
 
 
 
 
DEPOSITORS
State Bank of Hyderabad
Super Suraksha for Deposit Holders
           2,51,856
             2,750
           13,87,296
           14,998
 
                  -  
SELF HELP
State Bank of Hyderabad
Shakti
                 5,850
                578
                 57,050
             1,141
                   9,750
              195
FARMERS
State Bank of Hyderabad
Super Suraksha for ADB
                     612
 
             1,06,290
             2,325
 
 
SUPER SURAKSHA
State Bank of Hyderabad
Super Suraksha
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
       2,04,282
 
       3,00,305
 
        59,986
 

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