Insurance Regulatory Development Authority (IRDAI) levied a fine of Rs. 5 lacs on IndiaFirst Life Insurance. IndiaFirst is a joint venture between Bank of Baroda, Andhra Bank and Legal & General.
IndiaFirst had made payouts apart from commission to their Corporate Agent Andhra Bank. The payouts made were:
4.09 crore towards Advertisement,
0.33 crore towards sales promotion incentive
The Life Insurer clarified that the payments were incurred to help bank staff increase their domain knowledge of life insurance and the bank staff was provided additional training programs to help them improve their performance. Also the expenses incurred towards recognition, training and promotion programs are within the limits of sales related expenses mentioned in file and use documents of the products.
But IRDAI did not accept the clarifications provided by IndiaFirst citing the following reasons:
Clause 21 of Corporate Agents Guidelines clearly prohibit insurer to pay the corporate agent or incur expenses towards them other than towards co-branding advertisements (apart from permitted agency commission).
Non-financial incentive given to the staff of the corporate agent is accounted as under the head commission which clearly show violation of Sec 40(1) of the Insurance Act, 1938.
The insurance regulator has asked the insurer to pay a penalty of Rs. 5 lacs within 15 days from date of receipt of the order.
