Insurance sector regulator Irdai has slapped a penalty of over Rs 2 crore on India Infoline Insurance Brokers for violating various norms, including those related to office infrastructure.
The regulator has penalised the broker with a fine of Rs 1 crore each for violating norms on related party transactions and not having its own office infrastructure. A fine of Rs 4 lakh has also been imposed for using unqualified persons for solicitation of business.
"As directed under the respective charges, the penalty of Rs 2,04,00,000 shall be remitted by the insurance broker within a period of 15 days from the date of receipt of this order through NEFT/ RTGS," Irdai said in an order on Tuesday on its website.
The insurance broker does not have the infrastructure of its own for running its operations, Insurance Regulatory and Development Authority of India (Irdai) said.
It is evident from their financial statements that the infrastructure is shared among the group companies and there is no clear demarcation of space and facilities made available to the insurance broker. The sub-lease agreement does not specify all these details, it said.
"For the purpose of sharing infrastructure, the insurance broker is paying a rent of Rs 9.85 crore to their group companies. It is also evident from the telephone bills that the telephone lines are registered in the name of their group company and were being used by the insurance broker for their telemarketing activities," said the regulator.
The reasoning provided by the broker, for utilisation of varying office area every month, does not appear credible enough to conclude that the broker indeed has their own office infrastructure, it added.
Notably, the company was penalised with Rs 5 lakh fine in November 2014 for violating the same norms during the time of licence renewal as Irdai found that the broker did not have the necessary infrastructure to effectively discharge their activities.
In the second charge, the regulator said that from the financial statements of the company it was evident that there were a number of transactions between related parties and the broker did not share the note pertaining to related party transactions with the inspection team.
Also, the sub-lease agreement provided by the broker did not specify the services obtained from the related parties for which huge amount of sum is paid, Irdai said.
On the charge pertaining to the use of unqualified and unlicensed persons by the broker for solicitation of the insurance business, it said employees of other group companies were involved in the solicitation of the company's operations.
"Utilisation of services of other than licensed and qualified persons for solicitation of business in violation of regulation 8(2)(xiv) of IRDA (Insurance Brokers) Regulations, 2013 which envisages requirements to be fulfilled by individuals, who solicit business for the broker.
"The broker shall confirm compliance in respect of all the directions within 21 days from the date of receipt of this order. The order shall be placed before the audit committee of the broking firm and also in the next immediate board meeting," Irdai said.
The regulator has asked the insurance broker to submit to the authority a copy of the minutes of the discussion.The matter relates to onsite inspection of India Infoline Brokers during January 23-25, 2017 to examine the overall regulatory compliance by the company