In a rarest of the rare move, the Union Finance Ministry has asked IRDAI to reconsider its decision to impose a fine of Rs. 84 crore for allegedly violating various norms, reports ‘The Hindu BusinessLine’.
Industry officials say that this is the rare intervention of any government body into the decision of the regulator.
The newspaper reported, “In its order dated November 2015, the Finance ministry said that the main contention of SBI Life is that the policyholders interest was not adversely affected at any point nor was there any loss to the policyholders of SBI Life-Super Suraksha as the same loading of 20 per cent administration expenses was considered in the replacement product, SBI Life-Dhanaraksha. The Ministry then referred the case back to the IRDA.”
In June 2008, IRDAI found that SBI Life 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 (claim settlement) to the agent or corporate agent, group organizer or group manager (master policyholder). IRDA alleged that SBI had flouted this rule.
The said payments were made for a group insurance policy called ‘SBI Life Super Suraksha’ that was launched in 2002. Typically, the organization or company buy such policies for their employees as an employee retention strategy. Under this arrangement, the company or organization is the master policyholder and its employees are beneficiaries.
In its reply to IRDAI, SBI Life said, “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.”
Last year, IRDAI had rejected a plea made by the company regarding the insurance regulator’s direction to cough up Rs.84 crore for flouting IRDAI norms relating to payment of money to agents.