IRDA slaps a fine of 15 lacs on Indusind bank

M/s Indusind Bank Ltd. which is a corporate agent of MS Cholamandalam General Insurance Co. Ltd. and Aviva Life Insurance Co. Ltd has been penalised an amount of Rs.15 lacs by IRDA for violating rules.

IRDA reviewed the data submitted by MS Cholamandalam General Insurance Co. Ltd and observed that Indusind Bank has received payments from the Chola MS over and above the permissible commission limits. These payments were received in the form of “Data base Sharing / incentives and infrastructure setting up costs” during the financial years 2007-08, 2008-09 and 2009-10.

After a detailed scrutiny, IRDA found the below mentioned gaps -

  1. There was no infrastructure agreement per se between the two parties.
  2. The infrastructure arrangement was discussed in a meeting held between the two parties on 12th December 2008. However, in the minutes of the meeting, there is no mention on the exact cost structure for the infrastructure services.
  3. Whereas the infrastructure arrangement was discussed in the meeting held on 12th December 2008, payment to a tune of Rs.499.69 Lakh was made by the insurer during the year 2007-08 i.e. even prior to the meeting date.
  4. Further these payments together with commission have crossed maximum prescribed commission limits under each line of business.

IRDA therefore concluded that the payouts made in the form of infrastructure services were linked to the premium income generated by the Corporate Agent Indusind bank. Thus, in violation of Section 40A(3) of Insurance Act, 1938, a penalty Rs.5,00,000 each for financial years 2007-08,  2008-09 and 2009-10 totalling of Rs.15,00,000 (Rupees fifteen lakh) is imposed on Indusind Bank.