IRDAI penalises Bagic and Go Digit for violating its norms
In one of the findings, the IRDAI has said that the number of offices (financial year wise) indicates that the actual number of offices as per the records of Bagic varies with the number of offices as per the records of the IRDAI and public disclosures. There is noticeable increase in the number of offices and staff after MISP guidelines have come into effect.
The insurance regulator IRDA has slapped a penalty of Rs 7 lakhs against Bajaj Allianz General Insurance Company(BAGIC) for violating various regulatory norms including provisions of the guidelines on Motor Insurance Service Provider(MISP) enforced since 31st August, 2017.
IRDAI had conducted an onsite inspection of Bagic, the second largest private sector general insurer,from 12th to 14th February, 2018 and the inspection report, among other issues, revealed several violations, said IRDAI on Friday.
This may be the first instance regulatory action against any general insurance company for violating MISP norms that detail the overall arrangements between a general insurers and authorised motor dealers including the amount of commission to be paid to the dealers. .
The PSU general insurers have been alleging that most of the private sector general insurers are violating the MISP norms by striking fraudelent deals to incentivise the auto dealers illegally to grow their motor business.
In one of the observations, the IRDAI has said that the number of Bagic offices (financial year wise) indicates that the actual number of offices as per the records of the company varies with the number of offices as per the records of the IRDAI and public disclosures. There is noticeable increase in the number of offices and staff after MISP guidelines have come into effect.
Further,the company's number of locations with one employee posting have drastically increased in 2017-18. The information about these offices was not furnished to the IRDAI in violation of requirement of IRDAI (Places of Business) Regulations, 2015, said the IRDAI.
Pointing another instance of violation of regulatory norms, the IRDA has said the insurer in its website has highlighted the DriveSmart service as a benefit and key feature of the product. Since, it is not filed as a product feature and there is a cost element to it,Bagic has clearly committed a violation in this matter, said IRDAI.
The isurer is also silent on booking of the cost of telematics devices under operational expenditure. Moreover, the said product feature was not filed under the product / add-on to include the cost of device under the relevant product / add-on operational expenditure, noted the IRDAI.
``It is noted from the records that the isurer has incurred a substantial amount for supply of these devices. As per the response of the insurer, 25,000 devices were procured and approximately 13000 devices were used for the experiment. The insurer has not sought any explicit permission for this experiment nor have they commented upon the expenditure head used for this.''
Therefore, the IRDAI in exercise of powers vested under Section 34 (1) of the Insurance Act, 1938 directs the insurer to calculate the total cost of devices procured since 2016 and carry out the necessary adjustment to debit the shareholders’ account and submit a certificate from a chartered accountant, confirming the accounting transaction,'' said the IRDAI's order.
The IRDAI has also charged a penalty of Rs 1,00,000/ against the newly set up general insurance company Go Digit General Insurance Ltd(GDGIL) , in which Canadian billionaire Prem Watsa and Kamesh Goyal, a former employee of the Allianz have stakes, for violating product filing norms.
``The insurer is hereby directed to scrupulously adhere to guidelines on product filing procedures for general insurance products and ensure that the necessary mechanism is put in place for compliance in future. Any failure to comply with these directions may entail the IRDAI to take action as deemed necessary,'' warned IRDAI.
Describing the namture of violations, IRDA has said GDGIL had filed ‘Digit Protection Plus’ and ‘Standard Fire and Special Perils Policy (‘SFSP) products under ‘Use & File’ procedure and generated automatic Unique Identification Number (UIN) for the said products.The IRDAI, while examining the said product applications, observed that requirements of Product Filing Guidelines and provisions of erstwhile tariffs including All India Fire Tariff, 2001 (AIFT) had been violated.
Further, the isurer had generated UIN for ‘Digit Protection Plus’ under Automatic UIN generation, without disclosing the fact that it had already filed the same product under ‘Use and File’ before automatic UIN generation was introduced.
After detecting the lapses, the isurer was advised by the IRDAI not to market Digit Protection Plus and SFSP products.