Insurance regulator Irdai has imposed Rs 15 lakh fine on DHFL Pramerica Life Insurance Company for violation of guidelines on outsourcing norms for corporate agents licensing.
Insurance Regulatory and Development Authority of India (Irdai) said the company entered into outsourcing agreement with entities owned or related to individual agents and extra payouts were done under this guise.
“From the data and agreements available on record, it can be safely construed that the extra payouts were channelised under the guise of the service level agreements. The Authority as per the powers vested…Levies a penalty of Rs 5,00,000 for the violation,” Irdai said in its order.
Irdai further advised the company to be vigilant in future and not to enter into such agreements.
While, in two cases of corporate agents licensing, Irdai imposed a fine of Rs 5 lakh each on DHFL Pramerica Life.
Irdai said the Life Insurer entered into agreements with the related parties of the corporate agents for obtaining services and making payment to those entities, which violated the Corporate Agency Guidelines.
“Entering into additional relationships with corporate agents is in violation of extant guidelines in respect of licensing of corporate agents. The Authority…Levies a penalty of Rs 5,00,000 for the violation,” it added.
In another case of corporate agent licensing during 2007, Irdai found that the company named an individual holding a licence as individual agent as Corporate Insurance Executive (CIE) without issuing any certificate to act as CIE on behalf of the corporate agent.
An individual agency licence and a certificate to act as CIE are distinct from each other, Irdai said, adding that if an agent wants to become CIE of an insurer he shall surrender his individual agency license and obtain a CIE certificate.
DHFL Pramerica in its reply to the Authority said the reason for not issuing a CIE certificate was on account of the fact that these transfers took place in 2009 prior to issuance of Irda’s circular in 2010.
“Therefore, the contention of insurer which states that there was no regulatory mechanism prior to 2009 which differentiates CIE and agency license is not tenable. The Authority levies a penalty of Rs 5,00,000 on life insurer.”
“In conclusion, as directed under the respective charges, the penalty of Rs 15,00,000 shall be remitted by the Life Insurer by debiting shareholders’ account,” Irdai said.