Insurance Regulatory Development Authority of India (IRDAI) has slapped a penalty of over Rs 2 crore on India Infoline Insurance Brokers for violating various norms.
The regulator has imposed penalty on the broker with a fine of Rs 1 crore each for violating norms on related party transactions and not having its own office infrastructure. A fine of Rs 4 lakh has also been levied for using unqualified people for soliciting business.
"As directed under the respective charges, the penalty of Rs 2,04,00,000 shall be remitted by the insurance broker within a period of 15 days from the date of receipt of this order through NEFT/ RTGS," IRDAI said in an order.
The IRDAI said that the insurance broker does not have the infrastructure of its own for running its operations. It is evident from their financial statements that the infrastructure is shared among the group companies and there is no clear demarcation of space and facilities made available to the insurance broker. The sub-lease agreement does not specify all these details.
IRDAI added that "For the purpose of sharing infrastructure, the insurance broker is paying a rent of Rs 9.85 crore to their group companies. It is also evident from the telephone bills that the telephone lines are registered in the name of their group company and were being used by the insurance broker for their telemarketing activities”.
The insurance regulator further shared that the reasoning provided by the broker, for utilisation of varying office area every month, does not appear credible enough to conclude that the broker indeed has their own office infrastructure.
This is a repeat offence for the company which was penalised with Rs 5 lakh fine in November 2014 for violating the same norms during the time of licence renewal as IRDAI found that broker did not have necessary infrastructure to effectively discharge their activities.
In the second charge, the regulator said that from the financial statements of the company it was evident that there were number of transactions between related parties and the broker did not share the note pertaining to related party transactions with the inspection team.
The sub-lease agreement provided by the broker did not specify the services obtained from the related parties for which huge amount of sum is paid.
On the charge pertaining to use of unqualified and unlicensed people by the broker for solicitation of insurance business, it said employees of other group companies were involved in solicitation of company's operations.
"Utilisation of services of other than licensed and qualified persons for solicitation of business is violation of regulation 8(2)(xiv) of IRDA (Insurance Brokers) Regulations, 2013 which envisages requirements to be fulfilled by individuals, who solicit business for the broker.
"The broker shall confirm compliance in respect of all the directions within 21 days from the date of receipt of this order. The order shall be placed before the Audit committee of the broking firm and also in the next immediate board meeting".
IRDAI has asked the insurance broker to submit to the authority a copy of the minutes of the discussion.
The matter relates to onsite inspection of India Infoline Brokers during January 23-25, 2017 to examine the overall regulatory compliance by the company.
The regulator forwarded a copy of the Inspection Report to the Broker on 15th June 2017 seeking comments and the Broker’s response was received vide their letter dated 7th August 2017. After examining the documents and submissions made by the Broker, the Authority issued Show Cause Notice on 26th February 2019.