In one of the biggest penalty levied by IRDA for violation of IRDA regulations, IRDA has imposed a fine of Rs.3.10 crores on Bajaj Allianz Life Insurance Company.
The Insurance Regulatory and Development Authority carried out an onsite inspection of M/s. Bajaj Allianz Life Insurance Company Limited from 03rdAugust 2011 to 12th August, 2011. IRDA had pressed charges on 34 counts for various violations of IRDA Regulations and unethical practice.
In many charges IRDA issued a caution note to the company and did not levy a penalty, otherwise the penalty would have been much more.
These charges were those which came under the notice of IRDA. There would have large number of cases which did not came to notice of IRDA and IRDA did not levy penalty.
This speaks of volumes of the way the life insurance business is being carried out by the Insurance Companies in India. The management of Bajaj Life should give a rethink on the business practices being followed by the company. This was the reason our companies were nationalized in the year 1956. I am not sure whether we are going towards the same arena when need of nationalization will be felt.
The major charges that were pressed by the IRDA included
- Violation of IRDA Circular 021/IRDA/LIFE/PAN/JUL-2009 dated 23.07.2009
- Violation of Point no. 3.2 (i) (b) of IRDA’s AML Master Circular IRDA/F&I/Cir/AML/158/09/2010 dated 24/09/2010.
- Violation File and Use guidelines and Clause 6 of Annexure II of Corporate Governance Guidelines No. IRDA/F&A/CIR/025/2009-10 dated 05.08.2009 – Penalty 25 lakhs
- Violation of Section 27A (5) of the Insurance Act, 1938 – Penalty – 1 lakh
- Referral arrangements were entered into with some entities for the sale of group insurance products and referral fee payments were made. Violation of Clause B (2) of Group Insurance Guidelines No. IRDA/Life/Circular/GI Guidelines/2005, dated 14/07/2005 – Penalty Rs.70 lakhs
- Certain early death claims were rejected as “un-concluded contracts” where life assured died after the date of commencement of risk under the policy but before receiving the policy document.Violation of File and Use Guidelines and Regulation 8 of IRDA (Protection of Policyholders’ Interests) Regulations, 2002 – Penalty of Rs.78 Lakhs
- Extra payouts were made to the related partiesof some of the Individual Agents and Corporate Agentsunder the head “Dissemination of information” during 2010-2011.Violation of Section 40(1) of Insurance Act, 1938 – Penalty of Rs.15 Lakhs
- It was observed that payments were made to Group Master Policyholders towards reimbursement of expenses of training, facilitation fee, infrastructure facility fee, fee for display of Logo/Banners, fee for using web space for display of logo of insurer etc. to the Group Master Policy holders.It was also observed that service level agreements were entered with various Master policy holders. Violation of Clause C (4) of IRDA’s guidelines on group insurance policies, 2005 – Penalty of Rs.20 Lakhs
The company has found to be violating several regulations blatantly which is not expected from Bajaj group.
Earlier this year in a sting operation carried out by our portal www.bimabazaar.com an insurance broker based at Delhi who was working for Bajaj Allianz Life Insurance was found selling insurance policies on frivolous ground claiming to calling on behalf of Finance Ministry. They had a unique modus operandi in which they assured the new customers of getting their money back in case of any lapsed policy.
Once caught in their net, they used to sell a new policy. After few weeks they would just change the mobile number and stop responding to customer calls. This too was being carried on illegally by a sub agent of Insurance broker who cannot appoint a subbroker. The company cannot deny not knowing these facts while doing business with such fraudulent companies.
Earlier also an IRDA accredited training institute based at Kolkata had complained of not paying their training dues for the training conducted on their behalf. Bajaj Allianz did not pay training charges to the tune of approx 10 lakh to the training centre citing various frivolous reasons for the not paying the dues.
The top management must seriously think of their strategy of operation and try to set high standards of ethical business practices instead of relying on short term gain.
