IRDA found that the insurer has delayed claim settlement of over 3 lakh polices for more than three years.
IRDA has imposed a fine of Rs.15 lakh on Birla Sun Life Insurance for delaying claim settlement of Birla Sun Life’s Bima Kavach Yojna (BKY) and distributing this product through micro insurance agents.
BKY is a single premium endowment policy which was launched in September 2001.
Of the BKY 6.70 lakh policies which matured, Birla Sun Life is yet to settle claims of over 4 lakh policies as on March 2014, said IRDA. In fact, the company had delayed the claim settlement of over 3 lakh policies for more than three years. IRDA norms require insurers to settle claims within 30 days from the date of receipt of all necessary documents.
The company has collected gross premium of Rs. 6.14 crore through this policy. IRDA has estimated that the claim amount of Rs. 4.14 crore or 67% of total premium collected under the policy is outstanding.
The insurance regulator has instructed Birla Sun Life to settle these claims within 3 months.
In a circular, IRDA said, “A maturity claim for which life insurer is supposed to be proactive in settling the claim is expected to process the settlement without any delay. Where a policy of life insurance is due for maturity, there is no case for the life insurer to wait till the receipt of the claim from a policyholder.”
Meanwhile, IRDA found that majority of policies under BKY were distributed by micro insurance agents. Micro insurance agents can only sell products which are specifically approved for rural population. In a circular, IRDA said, “The micro insurance agent shall not distribute any product other than a micro insurance product. Hence, allowing a micro insurance agent to sell other than micro insurance product is a violation of the regulation.”
The insurance regulator has asked Birla Sun Life Insurance to pay the penalty amount before December 16.