Mr.S.S.Gopalratnam
Managing Director
Cholamandalam MS General Insurance Co Ltd
5th Floor, Tiam House,
72, Rajaji Salai,
Chennai – 600001

Authority has inspected the office of M/s Mankad and Associates Insurance Broking Private Ltd, Mumbai from 22^nd July, 2009 to 24^th July, 2009 to examine the market conduct affairs and compliance to IRDA Regulations for the years 2006-07 to 2008-09.

On examining the inspection observations, it was observed that your company has paid brokerage beyond the permissible limits in the name of overriding commission.   Authority vide letter dated 26^th July, 2010 and SCN dated 23^rd Nov, 2010 had sought your comments on the matter. Your company vide replies dated 11^th Aug, 2010 & 2^nd Dec, 2010 has informed that the amount paid was for utilizing the office space and internet facilities of the intermediary and the expenses incurred for the same have been reimbursed.

The documents on record prove that the company has paid payouts apart from/over and above the commission to the broker M/s Mankad & Associates Insurance Broking Pvt Ltd. The broking entity has also accepted that the amount was received from your company apart from the accepted brokerage.   It is also on record that the payment is given on the basis of policy premium.

Hence, the Authority doesn’t find your company replies dated 11^th Aug, 2010 & 2^nd Dec, 2010 as acceptable. As per circular 011/IRDA/Brok-Comm/Aug-08 dated 25-08-2008, no payment of any kind, including “administration or servicing charges” is permitted to be made to the agent or the broker in respect of business in respect of which he is paid agency commission or brokerage.

Your action, thus reveals that your company has not exercised greater professional care, skill and diligence and hence amounts to a violation of the circular no 011/IRDA/Brok-Comm/Aug-08 dated 25-08-2008and Regulation 19 (1) (A) of IRDA (Insurance Brokers) Regulations, 2002 thereby making your company liable for action under the relevant provisions of the Insurance Act, 1938.

Having regard to the facts of the case and the gravity of the violations committed by the company, the Authority in exercise of powers vested in it under section 102 of the Insurance Act, 1938 imposes a penalty of Rs.5 lakh on M/s Cholamandalam MS General Insurance Company for above mentioned violation. Your company is directed to remit the penalty of Rs.5,00000 (Rupees five lakhs only) within a period of 15 days from the date of receipt of this Order through a cross demand draft drawn in favour of Insurance Regulatory and Development Authority and payable at Hyderabad which may be sent to Shri Randeep Singh Jagpal, JD (Non-life) at the Insurance Regulatory and Development Authority, 3^rd floor, Parisrama Bhavan, Basheer Bagh, Hyderabad-4.

Further, the Company is directed not to pay or offer to pay any extra payouts which are not provided for in the Insurance Act, 1938, Regulations made there under, Guidelines and Circulars issued in this regard from time to time.

(M.Rama Prasad)

Member (NL)