IRDA as the supreme Insurance Regulator regularly conducts Onsite inspections of Insurance companies, be it Life or Non-Life.
The regulator derives this power under Legislation (Sec. 14(2)(h) of IRDA Act & Sec. 33 of Insurance Act). This piece of Insurance Act empowers IRDA to call for information and undertaking inspection and conducting enquiries/investigations of insurers and (insurance) intermediaries and other organizations connected with insurance business.
In order to maintain a level playing field, the highlights of the Onsite inspection report are made available on public domain. This not only enhances transparency, but also enables the respective Insurance Companies/intermediaries to minimize such future adverse observations.
Based on the nature of observations, monetary penalties are levied.
A total of 36 observations were made
The monetary penalties were for violations of six types. Of this, Rs 20 lakh has been levied at the rate of Rs 5 lakh each, for four major instances in which the company paid excess commission to agents.
In another single instance, the regulator has levied Rs 8 lakh for paying advertisement charges to banks in violation of the existing guidelines. The rest of the instances largely pertain to sale of insurance policies, such as acquiring business through unlicensed persons.
As is the norm, the final order was made after verifying the company’s submissions, including in-person submissions.
The on-site inspection was carried out between 16/08/2010 and 20/08/2010. Over the next two years, the final report was issued, submissions examined, personal hearings completed.
The penalty has to be remitted within 15 days via Demand Draft. Yes, you have read it rightly, the old fashioned paper way, instead of via ePayments. The penalty has to be paid by way of debit to Shareholders account and not the Policy Holders account.