The regulator has imposed a fine of Rs. 55 lakh on Max Life Insurance and Rs. 31 lakh on Canara HSBC Oriental Bank of Commerce for violation of various norms.
IRDA has imposed a fine of Rs.55 lakh on Max Life Insurance for outsourcing the work to collect renewal premium without taking prior approval and paying flat fees to such agencies (irrespective of premium amount) in the form of service charges.
The insurance regulator found that the insurance company has outsourced the work to collect renewal premium from small cities and town. Further, the insurer was found to have paid flat fee of Rs.600 for collection of renewal premium and Rs.1,700 for proposal form in the form of processing fees, irrespective of premium amount. The insurer had not taken IRDA’s approval to carry out such activities.
In its order, IRDA said, “On an examination of the fee paid vis-à-vis the services outsourced, it is considered that service fee agreed and paid to the service provider is disproportionate to the nature of services and the life insurer did not carry out any cost-benefit analysis as envisaged in the guideline, thereby violating the provisions.”
In another such move, IRDA has imposed a fine of Rs. 31 lakh on Canara HSBC OBC Life Insurance for violation of various norms such as luring employees of corporate agents with gifts/reward and discrepancies in claim settlement.
The insurance regulator found that the company had lured unauthorized sales persons of their corporate agents with gifts and rewards. The payout was over and above the commission. Also, the insurer was found to have spent close to Rs.14 crore on training programs for unauthorized sales persons and staff of the corporate agents.
In a circular, the regulator said, “Rewarding of specified persons, other employees and senior management with gifts/foreign tour, the qualifying criteria being achievement of campaign targets, cannot be construed as training imparted. The life insurer is further directed to discontinue the practice of gifts/rewards and recognition programs in the name of training the staff of corporate agent and ensure strict compliance with the regulation.”
Meanwhile, IRDA found that the company had settled the claims in favour of master policyholder under group insurance policy as against the beneficiary of such policies.