In an announcement by IRDA, the regulator has ordered the insurance companies to book all penalties under the Shareholders account and not to the policyholders account.
The Insurance Regulatory and Development Authority (IRDA) levies penalties on different insurance companies for various acts of omission and commission. In the past, several insurance companies have booked their penalties to their policyholders account. This act was not been appreciated by the IRDA and the other insurance councils. Ideally the booking of such fines and penalties should be done in the company’s shareholders account. By passing it on to the policyholders account, the shareholders of the company remain largely unaffected by any wrong doings on the company.
Therefore, IRDA has ordered the insurance companies that penalties levied by the Authority shall only be debited to the shareholders’ account. In the event any insurance company has inadvertently booked the penalties to its policyholders’ account, the entries shall be reversed. Action taken in this regard may be confirmed to the Authority.