New Delhi, Mar 10: Insurance sector regulator Irdai has imposed a fine of Rs 1 crore on Chola MS General Insurance Company Ltd for violating the guidelines on motor insurance service providers (MISPs).
The Insurance Regulatory and Development Authority of India (Irdai) had conducted an onsite inspection of Chola MS General Insurance from May 1-4, 2018, and found that there were violations of certain provisions of the guidelines on MISPs issued by the authority in August 2017.
A show cause notice was served on Chola MS in October 2020, followed by replies from the company and personal hearing, Irdai said in its order.
Irdai said the insurer violated guidelines with regard to payment, directly or indirectly, to MISP or any of its associate company.
The insurer made indirect payments to MISPs, automotive dealers and designated persons on the name of “advertisement” and “professional charges”, read the order.
“It is found that the engagement with and payments for ‘display of advertisement material’ made by the insurer to TVS, A M Motors, Indus, ERAM and Nippon during the period from November 2, 2017, to December 31, 2019, are in contravention of MISPs guidelines.
“The violation has continued for a period of more than two years. Therefore, the Authority in exercise of the powers under the Insurance Act, 1938, imposes a penalty of Rs 1 crore,” Irdai said in its order.
However, Irdai said there was no objection to payments done to these entities prior to November 2017, when the guidelines came into force.
“There cannot be any objection to receiving payment for a period prior to the MISP guidelines,” Irdai said.
The MISP guidelines of the authority stipulates the maximum distribution fees payable to MISPs. It specifically mentions that neither the insurer shall pay directly or indirectly to the MISP other payments including the advertising expenses nor the MISP shall receive such payments from insurers.
The Authority had brought MISP guidelines to recognise the role of motor dealers in distributing and servicing motor insurance policies to effectively monitor dealer’s activities connected to insurance.
It aims to check undesirable practices in the market like payouts to motor dealers by insurers at the expense of policyholders under different heads of management expenses.
In its second charge with regard to production of accounts, registers and other documents related to MISP guidelines, Irdai said the company provided partial data and documents to the Authority, and directed it to be prompt in furnishing such data in future.
“The non-submission of the documents by the insurer to enable proper inspection is viewed seriously and the insurer is hereby directed to ensure prompt submission of information/documents during the course of future inspections,” Irdai said.
Irdai said the fine of Rs 1 crore should be remitted by the insurer by debiting the shareholders’ account within 45 days from the date of receipt of the order through NEFT/RTGS. (PTI)
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