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On 4th May 2012, The Insurance Regulatory and Development Authority (IRDA) released an order whereby it has imposed a fine of Rs.28 lakhs on M/s Shriram Life Insurance Company Ltd
IRDA had conducted an onsite inspection of Shriram Life Insurance Company in 2010 which revealed certain violations of the provisions and regulations of the Insurance Act, 1938. There were several charges whereby Shriram Life Insurance Co was found in compliance of the rules barring a few observations for which the insurer has to pay a penalty.
IRDA observed that payments were made to M/s Shriram Chits (a group company) which are beyond the scope of Regulation 10 of the IRDA Regulations. Shriram Life has made these payments under 'Referrals' whereas the rule clearly says that Referral arrangements are to be entered only with Banks Moreover, the payout as referral fee show a percentages which varies from 37.69% in 2008-09 to 76.56% in 2010-11 which is far in excess of what is permissible. IRDA fines Rs.11 lakhs for violation of this regulation in two financial years.
The Insurer was found non compliant on 64VB time frames and ULIP guidelines where the credit of premium is given to policyholders only from the date of realisation of amount. Shriram has been giving credit of premium to only those policyholders who deposit renewal premium in cash. A penalty of one lakh was imposed because of not meeting this particular regulation.
The inspection report revealed few more lapses which resulted in a total penalty amount of Rs.28 lakhs which needs to be paid within 15 days of receiving the order from IRDA.