IRDA has imposed a fine of Rs 20 lakh on Aviva Life Insurance for disbursing higher commissions than what is permitted to its corporate agents - IndusInd Bank, Punjab & Sind Bank and Anagram Stock Broking. IRDA found that the insurer gave incentives to these corporate agents in the form of infrastructure support, advertisement and publicity expenses.
As per the Insurance Act 1938, an insurance company shall not pay any amount other than the permitted agency commission, whether as administration charge, reimbursement of expenses, profit commission or any other form to corporate agents. Also, an insurer cannot reimburse its corporate agents for co-branded advertisements.
IRDA data shows that the Aviva Life Insurance has paid an excess commission of Rs 16.28 crore and Rs 23.25 crore to IndusInd Bank in the financial years 2010-11 and 2011-12 respectively. Similarly, the insurer paid excess commissions of Rs 5.19 and 1.74 crore to Punjab & Sind Bank and Anagram Stock Broking respectively.
Earlier, the authority had sought explanation and clarification into the matter from Aviva Life Insurance. IRDA had also called for the invoice copies raised by the corporate agents. Aviva had presented their case before IRDA in January this year.
While examining the annual reports of IndusInd Bank and Punjab & Sind Bank, IRDA observed that these corporate agents had received fees in the form of workstation space, business promotion schemes and other advertisement expenses from Aviva Life Insurance which indicates that the payouts were nothing but disguised commission.
Out of Rs 20 lakh imposed on Aviva Life Insurance, Rs 10 lakh was charged for paying off of excess commission to IndusInd Bank and a fine of Rs 5 lakh each for additional commission to Punjab & Sind Bank and Anagram stock broking.
Meanwhile, IRDA has also imposed a fine of Rs 5 lakh on IndusInd Bank (Composite Corporate Agent of Aviva Life Insurance and Cholamandalam General Insurance) for accepting higher commissions from Aviva Life Insurance.
IRDA has asked both the companies to pay the penalty amount within 15 days from the date of order i.e. on or before July 13, 2013.