The policies routed through this were sourced by the Business Development Managers on the references of bank employees and commission was paid to the respective corporate agents (Banks), the bancassurance partner in this case.
Insurance regulator IRDA today slapped a penalty of Rs 65 lakh on IndiaFirst Life Insurance Company for violation of various regulatory provisions.
"As directed under the respective charges, the penalty of Rs 65 lakh shall be remitted by the life Insurer by debiting shareholders' account within a period of 15 days," IRDA said in an order.
IndiaFirst Life is a three-way joint venture between Bank of Baroda, Andhra Bank and Legal & General of the UK.
It was observed that the life insurer had created some dummy codes in their new business processing or policy administration systems (Life Asia) and good number of policies were logged under such dummy codes, the order said.
The policies routed through this were sourced by the Business Development Managers on the references of bank employees and commission was paid to the respective corporate agents (Banks), the bancassurance partner in this case.
"Having regard to the facts of the case and the gravity of the violations committed by the life Insurer, considering the same as two violations (with respect to two corporate agents)...a penalty of Rs 10 is levied on the life insurer," it said.
Commenting on the order, IndiaFirst Life Insurance Company Secretary K R Viswanarayan said, "We will abide by their directive. The lapses mentioned in the order are procedural violations that occurred during the initial years of the company's inception when processes were being stabilized."
The company has initiated corrective action and are committed to adhere to the principles of corporate governance and there has been no loss caused to customers, he said.
The regulator also found that various sales campaigns to the employees of corporate agents were floated which were in the nature of 'Gift Cards', 'online redemption points' and 'foreign trips'.
The beneficiaries of sales campaigns were in thousands whereas the number of specified persons is only around 300 and 700 with Andhra Bank and Bank of Baroda respectively, it said.
The amounts spent on such campaigns during 2010-11 and 2011-12 were debited to Rewards and Recognitions Account and Sales Promotion Expenses, it said.
It is evident that in view of restrictions on remunerations or rewards other than commission to corporate agents, they have resorted to arranging foreign trips and distribution of gift cards or online redemption points schemes to the employees of banks in the contravention to the regulation, it added.
Considering violations in this regard, it imposed a penalty of Rs 20 lakh.
The regulator also found the insurer guilty of three more violations, imposing penalty of Rs 5 lakh each aggregating to Rs 15 lakh.
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