IRDA penalised the second largest life insurer ICICI Prudential Life Insurance by levying a fine of Rs 118 Lakh for paying agents and brokers commissions exceeding the permissible limits.
During an inspection in November and December 2010, IRDA observed 42 possible violations by ICICI Prudential Life. The insurer was charged for six of them. The penalties include Rs 40 lakh for paying commissions above the permissible limit to nine corporate agents during fiscal years 2010 and 2011.
According to IRDA regulation, “a corporate
agent can be paid only the approved commissions and no other fees or charges or
rewards whatsoever except reasonable expenses for co-branded sales literature.”
The insurer had claimed that these expenses were
for various services like banking services, web promotional space, office space for employees of insurer, other joint sales campaigns, etc
and not for procuring business. But the regulator in its reply made the following points:
(i) The insurer has not produced any agreement with the Corporate Agent specifying
the service for which the payments are made;
(ii) Heavy payments are paid towards marketing/logistic support and non -competing
fee which are specifically against the
provisions of the Act.
The insurer was also found to have entered into various incomplete agreements with its group companies without specifying the fees, though they were acting as corporate agents and referral partners of the insurer and were receiving commissions and referral fees.