The insurance regulator has continued its crackdown on the industry practice of paying higher commission to distributors for motor insurance. After penalising a host of insurance brokers linked to auto dealerships, the regulator has pulled up state-owned Oriental Insurance Company for disguising commissions in 2016-17, reports The Economic Times.
In its charges, the Insurance Regulatory and Development Authority (Irdai) noted Oriental had made a payment of Rs 137 crore to motor dealers, but listed it as “infrastructure expenses”. Further, payouts of Rs 85 crore to agents were reported as “operating expenses”.
Oriental has in its response said it will ensure that it will not refer to commissions or payouts by “generic references” in its financial reports for FY20. And it will be restating its financials for FY17 and FY18, if needed. The regulator said Oriental had violated its “guidelines for corporate governance for insurers in India, 2016” and rules under its master circular on “preparation of financial statements, Irdai regulations, 2002’.
Irdai criticised Oriental for gaps in its internal controls, delay in submission of financial information and lack of segment reporting. The regulator also reprimanded Oriental for not reconciling running balances in inter-office balances. The insurer, in its response, said that most of the balances have been reconciled and the remainder will be done by March 2020. Oriental also said it would be reviewing its internal audit system