IRDAI has imposed a fine of Rs.85 lakh on Reliance Life Insurance for violating various norms like making hefty payments to service providers for updating database, making payment to an unauthorized company to carry out such activities and making payment to a group company for sharing database. The company was found to have violated six such norms under IRDAI guidelines.
Of the total Rs.85 lakh, Rs.30 lakh was imposed for making high payments towards updating its database. The company was found to have paid Rs.500 per policy to the service providers just to collect contact details of the existing policyholders in the rural areas. The company failed to justify as to why it paid such a high incentive to carry out such activities from policyholders account.
Also, the insurance regulator has found that the company had not done a proper due diligence process before entering into agreement with such service providers. In one such example, Reliance Life had paid out huge amount to an entity which was not engaged in such a business. In its investigation, the insurance regulator found that the entity had passed on the amount received from Reliance Life to India Infoline Media and Research which has a distribution arm.
Also, IRDAI found that the life insurer had made hefty payments to a group company called Reliance Money Infrastructure for generating leads and giving referrals. The latter company had shared database with Reliance Life without entering into any agreement.
The regulator has advised Reliance Life to review its business activities and instructed it to pay the penalty money by August 22.