Finance

SAT asks IRDAI to reconsider disgorgement order against SBI Life

Updated : January 29, 2020 02:13 PM IST

The tribunal has asked IRDAI to re-calculate the commission and interest element of the disgorgement amount

IRDAI in 2014 had asked SBI to refund the excess commission of Rs 275.29 crore to the policyholders of the Dhanaraksha Plus Term Policy

After a six-year-long legal battle, SBI Life has finally managed to get some relief from Securities Appellate Tribunal (SAT) on the disgorgement order passed against the company. SAT passed an order in the matter on Wednesday asking IRDAI to reconsider its order. The Insurance Regulatory and Development Authority of India (IRDAI) had directed SBI Life to disgorge and refund an amount of Rs 275.29 crore to policyholders.

The tribunal has asked IRDAI to re-calculate the commission and interest element of the disgorgement amount charged to SBI Life. The ball is now in the insurance regulator’s court which will have pass a fresh order against SBI Life if any change is found in the disgorgement amount.

SBI Life Insurance will also have the option to challenge the fresh order if the company is still not satisfied with the revised disgorgement amount.

IRDAI in 2014, had asked SBI to refund the excess commission of Rs 275.29 crore to the policyholders of the Dhanaraksha Plus Term Policy. The policy in question had two payment options -- single premium and two-year premium paying plan.

In a single premium policy, the premium for the entire policy is collected in advance. The commission paid cannot be more than 2 percent as per the Insurance Act. For the two-year premium paying plan, the first year premium is much higher with a commission rate of 40 percent in the first year and 7.5 percent in the second year.

As per IRDAI, SBI Life Insurance’s corporate agents did not inform policyholders about the single premium paying plan. The intention of the agents was to get a 40 percent commission in the first year and 7.5 percent commission in the second year. IRDAI found this practice in its on-site inspection of SBI Life Insurance’s books.