Despite examining 41 violations of LIC, IRDAI has imposed a lenient fine of Rs.10 lakh on the insurance behemoth. This moderate fine was primarily due to violation of two norms.
While a fine of Rs.5 lakh was imposed for tampering with the proposal form without the consent of policyholders, IRDAI has imposed another Rs.5 lakh on LIC for non-compliance of investment norms.
The company was found to be involved in violation of certain norms like paying out excess commission to agents arising out of mis-calculation, modifying policy offer document during policy term and deviating from scheme’s objective while deploying funds (file and use norms). However, after seeking clarification, the insurance regulator has let go the company for violation of these norms.
Earlier, IRDAI had imposed fines on a few companies like Max Life and Bajaj Allianz for violation of similar norms. In fact, IRDA had imposed a whopping Rs. 3.10 crore fine on Bajaj Allianz Life Insurance for violation of various norms such as file and use guidelines, pattern of investment and payment to referrals in 2013.
A few months back, IRDAI had imposed a fine of Rs. 5 lakh on Aviva Life Insurance for revising mortality charges and modifying terms and conditions of its policies without taking prior consent of its policyholders in November. The insurance regulator had said that such violation is against the fundamental principles that govern the contract of life insurance. However, IRDAI has not pressed any charge on LIC for similar violations. In an order issued by IRDAI, it has said, “Considering the insurer’s submission that the said modification were made in the interest of the policyholders and were made applicable to all the policyholders without any discrimination, charges are not being pressed.”
Similarly, IRDAI had imposed a fine of Rs. 40 lakh on Aegon Religare Life Insurance for violation of various distribution norms like soliciting business with unauthorized agents and luring employees of broking firms with gifts/rewards on September. LIC was too found to be sold policies without name and contact details of agents in the policy documents. The insurance regulator has let go LIC after directing it to ensure compliance at the operating units.
Meanwhile, the regulator has found that LIC had charged Rs. 250 for registering change of nomination from policyholders. “The authority notes the corrective action brought in by the insurer as regards alteration fee charged for effecting change of nomination. Insurer is reprimanded for this violation,” said IRDAI.
The insurance regulator has asked LIC to submit the penalty amount within 15 days from the date of order i.e. on or before February 27.