SBI had violated IRDA norms by paying Rs. 204 crore to 13 master policy holders.
Insurance Regulatory Development Authority (IRDA) has rejected a plea made by SBI Life insurance regarding an earlier order and directed it to cough up Rs. 84 crore to group insurance policy members for flouting IRDA norms relating to payment of money to agents.
During an onsite inspection at SBI Life in June 2008, IRDA found that the company had paid Rs.204.71 crore to 13 master policyholders which were against IRDA norms.
According to IRDA norms, an insurance company is not supposed to make any 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. IRDA alleged that SBI had flouted this rule.
The said payments were made for a product called ‘Super Suraksha’ that was launched in 2002. In its reply to IRDA, SBI said that it had entered into 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,” stated an IRDA circular.
SBI Life had made an appeal to the regulatory authority justifying its actions which was rejected by IRDA.
In its order dated October 20th, IRDA has asked SBI Life to immediately pay Rs. 84 crore and submit a compliance report within thirty days.