Insurance regulatory and development authority (IRDA) has imposed 31 lakhs fine on M/s Canara HSBC Oriental Bank Of Commerce Life Insurance Company Limited for violation of certain insurance laws.
IRDA has carried out an onsite inspection of M/s Canara HSBC Oriental Bank Of Commerce life Insurance Company Limited from 31st July 2012 to 9th August 2012. Based on the inspections report, the life insurer has replied back on 21st November 2012.
As per the final order of IRDA, the insurer has expended 13.78 crores in rewards and recognition program on three corporate agents for the year 2010-2011 and 2011-2012 on sales campaigns floated to the employees of corporate agents who were not the licensed specified person (SPs).
IRDA has decided that Rewarding of Specified Persons, other employees and senior management (as mentors) with gifts/foreign tour, the qualifying criteria being achievement of campaign targets, cannot be construed as training imparted.
IRDA considered it as failure to comply with Section 40 (1) of Insurance Act, 1938 and Clause 21 of Guidelines on Licensing of Corporate Agents issued vide Circular No. 017/IRDA/Circular/CA Guidelines/2005 dated 14/07/2005.
Having regard to the facts of the case and the gravity of the violations committed by the Life Insurer, the Authority, in exercise of powers vested under section 102(b) of the Insurance Act, 1938 imposes a penalty of Rs. 30 lakhs for the said violation on M/s Canara HSBC Oriental Bank Of Commerce life Insurance Company Limited.
IRDA has further directed The Life Insurer to discontinue the practice of gifts /rewards and recognition programs in the name of training the staff of Corporate Agents and ensure strict compliance with Section 40 (1) of Insurance Act, 1938 and Clause 21 of Guidelines on Licensing of Corporate Agents – Circular No. 017/IRDA/Circular/CA Guidelines/2005 dated 14/07/2005.
Additional One lakhs ruppes of fine has been imposed for violation of the provisions of Clause C-7 of Guidelines on Group Insurance Policies issued vide Circular No: 15/IRDA/Life/Circular/GI Guidelines/2005, dated 14/7/2005.
IRDA has directed to pay penalty amount of Rs. 31 lakhs within a period of 15 days from the date of receipt of the order though NEFT/RTGS
In other charges, IRDA has warned the insurer on the inadequacies observed in the internal processes/systems/controls and is directed to strengthen the internal processes to ensure compliance with the mandate.
Canara HSBC Oriental bank of commerce Life Insurance is a joint venture between Canara bank holding 51% share, HSBC Insurance (Asia Pacific) ltd holding 26% share and Oriental Bank of Commerce holding 23% share. Its launched in the year 2008.
link to final order of IRDA