The broker did not remit the premium to the insurer/reinsurer within the time limit of 15 days. In view of the above and a history of similar violations persisting for long, where in some cases, the delay in remittance of premium was observed to be more than 900 days, in exercise of the powers vested under Section 102(b) of the Insurance Act, 1938, the IRDAI is imposing a penalty of Rs One crore (1 crore) for the violation of clause (f) of Schedule II-Form U of IRDAI (Insurance Brokers) Regulations, 2018 since the violation has continued to occur for more than three years,’’ said IRDA in its order

Hyderabad: The Indian insurance regulator IRDAI has slapped a fine of Rs one crore against Marsh India Insurance Brokers, an outfit US based largest international re/insurance broker Marsh Mclennan,for violating several norms in its local operations.

Marsh India Insurance Brokers is the largest re/insurance broker in India.

The IRDAI order, on Monday, said insurance regulator had conducted a remote inspection of M/s Marsh India Insurance Brokers from 10th to 18th January, 2022. The inspection report, among other issues, had revealed certain violations of provisions of the Insurance Act, 1938 and other regulations including Schedule II-Form U (f) of IRDAI (Insurance Brokers) Regulations, 2018.

`It was observed that the broker held the premium received from the clients in Insurance Bank Account (IBA) for more than 15 days. The broker did not remit the premium to the insurer/reinsurer within the time limit of 15 days, said the IRDA’s order adding that it is pertinent to mention that on the said violation, an earlier advisory was  already issued on 19 Oct,2019 for delay in remittance of amounts to the tune of Rs 76.95 crores.

In view of the above and a history of similar violations persisting for long, where in some cases, the delay in remittance of premium was observed to be more than 900 days, in exercise of the powers vested under Section 102(b) of the Insurance Act, 1938, the IRDAI is imposing a penalty of Rs one crore (1 crore) for the violation of clause (f) of Schedule II-Form U of IRDAI (Insurance Brokers) Regulations, 2018 since the violation has continued to occur for more than three years, said the IRDA in its order signed by Rajay Kumar Sinha, Member (Finance & Investment) and PK Arora Member, Actuary.

The IRDAI in its order has listed instances 826 cases involving a total amount of over Rs 1, 253 crore where Marsh has violated norms over a period three years from Fy19 to fy 22.

Remittances done up to 15 days are not considered as delayed, the order has clarified.

The IRDAI had rejected the argument put forward by Marsh that the amounts were lying in non-interest bearing account and it did not earn any money on the amounts.

`The broker’s submission that the amounts are lying in a non-interest bearing account does not address the concern, as the broker was under obligation to remit the dues within stipulated time unless it has taken written consent of reinsurer for the delay,” said the IRDAI’s order.

According to the IRDAI’s order, a re-insurance broker is not expected to sit on monies which are due to the reinsurers beyond a reasonable time.

“Precisely, for this reason, Marsh was advised to remit the reinsurance premiums within time. Though, Marsh had confirmed their compliance of IRDAI’s advice in its mail to the regulator on 11^th November, 2019,  it has failed to improve the systems even after five years from the date of issuance of the erstwhile advisory, as far as the remittance of monies/premium is concerned,” said IRDAI’s order.

The delay in remittance is an evidence of Marsh’s operational inefficiency and also failure to comply with the regulatory obligations, added the order.

IRDAI has further directed that Marsh should undertake a review of all pending remittances and file an action taken report including the status of pending remittances as on Sept 30,2024 and review internal controls and identify deficiencies in processes and draw an action plan to ensure that issues are addressed and corrective actions are implemented to bring average delay with mandated Turn Around Times as per Regulations.

The regulator has also asked Marsh to place the order before the board of the broker in the upcoming board meeting and the broker has to provide a copy of the minutes of the discussion. The broker has to submit an Action Taken Report to the IRDAI on direction given within 90 days from the date of this order.

On behalf of Marsh, Sanjay Kedia, principal officer & director; Joseph Lonappan, head of specialities & placements, Jerry Flahive, general counsel, India, Middle East & Africa and Prashant Pandey, chief legal & compliance Officer and Jayenthy Rodrigues, head of compliance, had appeared before the IRDAI for clarifying their side of the allegations.