The PSU bank has received an additional commission of 5.19 crore in the form of infrastructure support, advertisement and publicity expenses during the FY 2011-12.
IRDA has imposed a fine of Rs 5 lakh on Punjab & Sind Bank - a corporate agent of Aviva Life Insurance - for receiving excess commission from its insurer under Bancassurance model. IRDA found that the corporate agent had received incentives from Aviva Life in the form of infrastructure support, advertisement and publicity expenses.
Earlier, the insurance regulator had imposed fines of Rs 20 lakh and Rs 5 lakh on Aviva Life Insurance and IndusInd Bank respectively. The insurance company was fined for disbursing higher commissions than what is permitted to its corporate agents while the bank was penalized for receiving excess commission.
As per the Insurance Act 1938, a corporate agent shall not receive any amount other than the permitted agency commission, whether as administration charge, reimbursement of expenses, profit commission or any other form. Also, the corporate agents cannot receive any payments for co-branding of advertisements.
IRDA data shows that the Aviva Life Insurance has paid an excess commission of Rs 5.19 crore to Punjab & Sind Bank in the financial year 2011-12.
Earlier, the authority had sought explanation and clarification from Punjab & Sind Bank by issuing a show cause notice into the matter on February 8, 2013. IRDA had also called for a invoice copy raised by the corporate agent. The bank had presented their case before IRDA in March this year.
While examining the annual reports of Punjab & Sind Bank, IRDA observed that the PSU bank 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.
IRDA has asked the bank to pay fine within 15 days from the date of order i.e. on or before October 9, 2013.