According to the IRDAI order, even where outsourcing is given to an intermediary, the insurer retains the responsibility for all regulatory obligations and proper due diligence and monitoring of the outsourced service provider and the services provided
Hyderabad/ Bengaluru: Acko General Insurance, with Narayana Murthy as one of the founders, has been fined Rs 1crore by insurance regulator IRDAI for multiple regulatory violations during FY 2019-20.
The insurer had flouted regulations relating to outsourcing and payment of commission to insurance Intermediaries, said an IRDA order on May 19, signed by Rajay Kumar Sinha, member, Finance & Investment, Deepak Sood, member, Non-Life.
The IRDAI has asked the insurer to put in place a comprehensive policy on outsourcing.
Insurers must avoid or mitigate any conflicts of interest while outsourcing, said the order.
According to the IRDAI order, even where outsourcing is given to an intermediary, the insurer retains the responsibility for all regulatory obligations and proper due diligence and monitoring of the outsourced service provider and the services provided.
“Adequate systems, policies and procedures to address potential conflicts of interest and compliance with the provisions of Companies Act, 2013 and the corporate governance guidelines of the IRDAI need to be established by the insurers. These include Board level review of key transactions, disclosure of any conflicts of interest to manage and control such issues,” said the order.
Acko General Insurer had engaged the services of Ola Financial Services Private Limited (OFSPL) (formerly known as ZipCash Card Services Private Limited) and made payments to the extent of Rs 13,32,81,382/- and Rs. 6,64,61,410/- during the financial years 2019-20 and 2020-21 respectively.
The purpose of payment to OFSPL appears to be for solicitation of insurance policies which the said vendor was not legally permitted to do. Further, Acko General Insurance did not file the outsourcing returns while the amount paid was above the threshold limit for both the years, as prescribed under the applicable regulations.
From FY 2018-19 to January 2021, OFSPL was neither a corporate agent nor an intermediary of the Company.
OFSPL was purely a service provider of the insurer appointed for technology and marketing services.