The IRDAI has asked HDFC Life to review its vendor management policy and review all its existing vendors’ agreement to make necessary changes to its policy in line with the regulations on outsourcing.
Mumbai: The IRDAI has slapped fine of Rs 2 crore against HDFC Life, the second largest private life insurer in the country, for violating its various regulations.
On the basis of its inspection report, in connection with its on-site inspection from 14 Sep 2020 to 25 Sept 2020, which had revealed certain violations of provisions of the Insurance Act 1938 by the company, the IRDAI had framed as many as 14 charges on various grounds against the life insurer.
Signed by RK Sinha, member, Finance, IRDAI and BC Patnaik, member, Life, IRDAI, the regulator has slapped a fine of Rs 1 crore each on two charges and has directed the company to take corrective steps in other matters.
Particularly, the IRDAI has asked HDFC Life to review its vendor management policy and review all its existing vendors’ agreement to make necessary changes to its policy in line with the regulations on outsourcing.
“Engaging related parties of the brokers, master policy holders and making huge pay-outs as mentioned the inspection report, indicate that the insurer channelised extra pay-outs in the name of services procured. More so when the pay-outs are made in the name of the activities in which these entities are not predominantly engaged to,” said the IRDAI.
Further in one of the charges the IRDAI has mentioned, “While it may be legal to use entities related to the intermediaries as mentioned in the inspection report for the purpose of advertisements and publicity, the amounts involved are exorbitant and are apparently for channeling excessive payments over and above commission/brokerage for the business sourced by them. Two master policy holders Tata Motor Finance(TMF) Holdings and PHFL Home Loans (subsidiary of PNB Housing Finance) are in finance business and not in media business. The pay-outs to these entities are nothing but indirectly offering rebating to the policies placed with HDFC Life which is in violation of Section 41 of the Insurance Act 1938.”