ICICI Prudential Life fined record Rs.1.18 cr

ICICI Prudential Life fined record Rs.1.18 cr Anirudh Laskar mint See similar story in: The Times of India India’s insurance regulator imposed a record Rs.1.18 crore penalty on the nation’s second-largest private life insurer ICICI Prudential Life Insurance Co. Ltd for violations that include paying agents and brokers commissions exceeding the permissible limits. The penalty is the highest imposed by the Insurance Regulatory and Development Authority (Irda) on a life insurer. During an inspection in November and December 2010, Irda observed 42 possible violations by ICICI Prudential Life. The insurer was charged for six of them. The penalties include a Rs.40 lakh fine on ICICI Prudential for paying commissions above the permissible limit to nine corporate agents during fiscal years 2010 and 2011. ICICI Prudential paid commissions higher than permissible limits to nine of its corporate agents, including India Infoline Insurance Services Ltd and Sharekhan Financial Services. An email sent to India Infoline Insurance after a phone call didn’t elicit a response at the time of going to press. Calls made to Sharekhan Financial remained unanswered after office hours. In fiscal 2011, ICICI Prudential paid India Infoline a commission of Rs.36.26 crore, above the maximum payable amount of Rs.31.68 lakh. NetAmbit was paid Rs.26.52 crore, higher than the permissible commission of Rs.13.48 crore. In fiscal 2010, India Infoline was paid Rs.49.33 crore in commissions, above the limit of Rs.2.97 crore. There were eight such instances, and the regulator said it may take action against the corporate agents as well. “This is an exceedingly serious violation,” Irda said in its order on Wednesday. Rajiv Adhikari, vice-president, corporate communications, ICICI Prudential Life, said, “Our managing director is abroad and I don’t know what to comment immediately.” Telephone calls made to Sandeep Bakhshi, CEO, ICICI Prudential Life, were not answered. ICICI Prudential Life was found to have entered into various incomplete agreements with its group companies without specifying the fees, though they were acting as corporate agents and referral partners of the insurer and were receiving commissions and referral fees. Also, the company was found to be making payments to its distribution channel partners in the name of “sales, marketing and business support expenses” and “agents incentives.” Irda imposed a penalty of an additional Rs.40 lakh as the insurer was found to have given incentives to its referral partners in the name of infrastructure support, violating norms during fiscal 2010 and 2011. Furthermore, the company was found to have given incentives to brokers beyond the legal limits. During fiscal 2010, ICICI Prudential remunerated Bajaj Capital Insurance Broking Ltd and Standard Composite Insurance Brokers Ltd 152.94% and 402.53% of the legal limit, respectively, higher than prescribed limits. There were seven such instances in fiscal 2010 and 2011, involving six insurance brokers. Irda imposed a fine of Rs.20 lakh, stating that action would be taken against the brokers as well. The regulator was concerned about the insurer creating multiple code numbers for a single corporate agent or a broker based on the locations of the business procured. While penalising ICICI Prudential with an additional Rs.11 lakh, Irda said, “from the inspection, it is evident that there are several similar cases where the number of specified persons is grossly disproportionate to the number of locations in which the corporate agent is functioning. “This violation is a significant violation because it encourages sale of insurance by unqualified persons and opens gates to several malpractices such as mis-selling, multiple level marketing, etc. For all these reasons, Irda is satisfied that this is a grave matter and a deterrent punishment must be imposed on the insurer,” Irda said in its order. Irda chairman J. Hari Narayan directed ICICI Prudential Life to pay the penalty within 15 days. In April, ICICI Prudential Life insurer collected a premium of Rs.168.54 crore, 43.15% less than what it garnered in April last year.