According to the IRDAI, the broker does not have any right over the insurance premiums so that the amounts are timely remitted to the respective parties to ensure the coverage and payment of claims and thus protect the interest of the policyholders. These are the reasons a broker is not expected to sit on monies beyond a reasonable time and such delayed remittance poses a systemic risk to entire insurance eco system

Hyderabad: After Marsh India Insurance Brokers, an affiliate of the world’s largest broker Marsh, the Indian Insurance regulator IRDAI has once again slapped a fine of Rs one crore on another foreign broker operating in India, UIB Insurance Brokers (India) Private Limited, for violating regulations by delaying premium remittance to cedants / reinsurers / reinsurance brokers.

UIB Insurance Brokers (India) Private Limited is an affiliate of London based UIB Group, ranked as one of the top 10 largest reinsurance brokers in the world.

The IRDAI, in its inspection of broker’s operations, had found out that there were significant delays by the foreign broker in its remittance of premium to cedants / reinsurers / reinsurance brokers.

In 53 cases, the delay in premium remittance is ranging from 36 days to 1151 days and the total amount that was pending with the foreign broker beyond permissible period of 15 days was in excess of Rs 1.62 crore.

There was an amount of over Rs 73 lakh premium which was received by the broker and was not settled till the time of the IRDAI’s inspection in 14 sample cases, revealed the IRDAI.

The IRDAI said it is constrained to treat such violations as repetitive in nature. The delay in remittance is an evidence of operational inefficiency and also failure to comply with the regulatory obligations of the broker, added the broker.

The broker in its stand had said that the delays noted by the IRDAI  in remitting reinsurance premiums are primarily a result of the complex interplay of reliance on third-party documentation, international transactions and practices, and certain stringent requirements impacting our authorised dealer banks governed by other sectoral regulators in India.

The broker had further defended that no unfair profits were made or could have been made by the company from these delays as these were stored in zero interest accounts for the duration of the delay, and additionally, no clients faced any impact to their insurance coverage.

Rejecting the argument by UIB Insurance Brokers that they did not earn interest on the amounts lying in their insurance bank accounts, the IRDAI said it does not address the concern that the parties to which such amounts are due, are losing interest for months and in few cases, years together.

Though the wrongful gain to the broker cannot be established but certainly there is wrongful loss to the parties to which such amounts are due, namely re-insurers/insurers on account of delayed receipt of the premiums thereby losing an opportunity to generate investment income out of the same, said the IRDAI..

According to the IRDAI, the broker does not have any right over the insurance premiums so that the amounts are timely remitted to the respective parties to ensure the coverage and payment of claims and thus protect the interest of the policyholders. These are the reasons a broker is not expected to sit on monies beyond a reasonable time and such delayed remittance poses a systemic risk to entire insurance eco system

The IRDAI has said that the broker’s claim that the delays in remittances have been drastically reduced post its observation is questionable and without merit. Further, the broker has failed to produce the written consent required under the regulations in event of delay in remittance.\

The IRDAI has asked the broker to undertake a review of all pending remittances and file an action taken report including the status of pending remittances as on 31 Dec,2024.
The broker also has to 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.

A team led by broker’s principal officer Naveen Jetly had deposed before IRDAI’s two members- Rajay Kumar Sinha,(Finance & Investment) and Deepak Sood,(Non-Life) for the case.