The IRDA order clafrified that the submission of the insurer failed to adequately demonstrate and provide evidences regarding the authenticity and legitimacy of the payments made to the Glitterbug Technologies, an individual agent, Suvidhaa Infoserve and Aditya Birla Housing Finance Limited (outsourcing vendors). The insurer has shown significant negligence in its process of selecting and managing these vendors for outsourcing services.
Hyderabad:Insurance regulator, IRDAI has imposed a fine of Rs one crore against Reliance General Insurance(now IndusInd General Insurance) for violating various regulations.
The IRDAI had conducted a remote inspection of the insurer from 27th December, 2021 to 31st December, 2021. The inspection report among other issues revealed certain violations of provisions of the Insurance Act, 1938 and Regulations, Guidelines and Circulars issued thereunder, said the IRDAI order signed by two Whole Time Members of the Authority- Deepak Sood, Member (Non-life) and Rajay Kumar Sinha, Member (F&I).
The IRDAI report found out the insurer had made pay outs of approximately Rs.5.16 crores during FY 2018-19 to Glitterbug Technologies Pvt Ltd (GTPL) the parent company of Coverfox Insurance Broking Pvt Ltd (CIBPL). From the invoices furnished by the insurer, it was observed that the services for which GTPL raised invoices had no bearing with the scope of services specified in the agreement and were paid on account of “Consumer Awareness Programme”. It was also observed that one of the directors in GTPL named Sanjib Jha was holding directorship in CIBPL.
Secondly, the insurer made arbitrary pay outs to an individual who is agent of Oriental Insurance Company Limited. The payments of approximately Rs.1.14 Cr, Rs.27 Lakhs and Rs.28.67 Lakhs were made by the insurer to the said agent during the financial year 2018-19, 2019-20 and 2020-21 respectively.
Thirdly, RGI made payments of approximately Rs. 2.92 Cr, Rs. 5.33 Cr and Rs. 9.45 Lakhs during financial years 2018-19, 2019-20 and 2020-21 respectively to an unlicensed entity, Suvidhaa Infoserve Pvt Ltd. purportedly for marketing and advertisement services under the terms of the agreement. However, on visiting the web page of SuvidhaaInfoserve (https://www.suvidhaa.com/) under the Services Tab (https://www.suvidhaa.com/services.html), it was observed that Suividhaa Infoserve was rendering services for general insurance and life insurance business. Further, in the website, inside “About Us” link under “Our Company” tab, it was stated that, inter alia, the company was engaged in collection of insurance renewal premium and there was no mention about the activities stated under scope of work in their Agreement with RGICL.
Fourthly,insurer made payouts of approximately Rs. 2.89 Crores and Rs. 2.36 Crores to corporate agents – Aditya Birla Housing Finance Limited ABHFL) and Induslnd Bank Limited respectively, which were in the nature of other than corporate agency commission
The IRDA order clafrified that the submission of the insurer failed to adequately demonstrate and provide evidences regarding the authenticity and legitimacy of the payments made to the Glitterbug Technologies, an individual agent, Suvidhaa Infoserve and Aditya Birla Housing Finance Limited (outsourcing vendors). The insurer has shown significant negligence in its process of selecting and managing these vendors for outsourcing services.
These lapses raise concerns about the insurer’s due diligence procedures when it comes to outsourcing. The Insurer has violated Regulation 26 of IRDAI (Insurance Brokers) Regulations, 2018 by making payments to GTPL which are evidently extra pay-outs to CIBPL.
The submission of the insurer that the payments made to the said outsourcing vendors were genuine cannot be accepted as the insurer failed to provide any supporting evidences, be it approvals of the board committee for payments to the said vendors, location wise details where consumer awareness programmes were performed, or whether insurer obtained comparative quotation for similar services from other parties, added the report.
In the absence of such compliance, the insurer failed to: Classify these activities as outsourced; Assess the materiality of the outsourced activities; Undertake a cost-benefit analysis; and Effectively implement the Board-approved Outsourcing Policy. Accordingly, the insurer failed to implement the Board approved Outsourcing Policy which constitutes a violation of Regulations 8 (i) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
Earlier, the insurnace regulator had penalised stand alone health insurer Care Rs 1 crore of fine for various violation of regulations.