IRDAI chief Subhash Khuntia warns insurance industry of action on low pricing
Citing examples of the state of Telecom and Aviation sectors due to below cost tariffs, Insurance regulator Subhash Khuntia on Friday said the health insurance industry should not indulge in predatory pricing which will harm the industry and the policy holders and make businesses unviable. He warned of actions if they don't mend their ways.
 
"Of course (they are indulging in predatory pricing) and the Regulator will have to ensure that the industry runs sustainably. There will be basket of actions not one kind of action (to check predatory pricing) but we ensure that the health of insurance industry does not deteriorate you think they are engaging in predatory pricing to up their volume", he said on the sidelines of 16th Annual Insurance Brokers Summit here. 
 
Earlier, he said the group health insurance sector has high business volumes but the losses are also high. "I would like to give a word of caution here though your share is very high in group health insurance, the loss ratio in group health insurance is also very high and probably it is not very sustainable at present.
 
"So the insurance companies' intermediaries and policy holders need to unite to create a sustainable atmosphere because in other industries if there is unfair competition industry suffers but the clientele don't suffer. While this has happened in Airlines and telecom industries but we cannot afford that kind of a situation in the insurance industry because insurance is an industry for protection," he further said. 
 
"So if the industry suffers, then clientele also suffers. And as a regulator we would not like that to happen. One should not overcharge and also not undercharge," Khuntia said.
 
On the issue of state life insurer LIC paring its stake in IDBI Bank, he said "We have reminded the LIC. They have not come forward yet. We made a roadmap then. Hopefully it will be done quickly".
 
On proposed FDI hike in insurance sector, from 49 per cent to 74 per cent, he said "We have sought opinions of stakeholders on raising foreign holding to 74 per cent. According to the Act 49 per cent is the maximum limit for foreign direct investment. If it goes to 74 per cent naturally the Act has to be amended", he said.
 
On the issue of Ownership and management change that has to be changed in case FDI hike takes place, he said, "That I don't know. No decision has been taken. We have communicated for stakeholders view to the government".
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User

    Motor Insurance Monopoly: IRDAI Allows SMC Insurance Brokers to Walk Away with Just Rs3 Crore Penalty Despite Serious Violations of MISP
    The Insurance Regulatory and Development Authority of India (IRDAI) while trying to act tough on violations of its guidelines on Motor Insurance Service Provider (MISP) continue to allow insurance brokers with miniscule penalty. In recent order, the IRDAI has levied a penalty of just Rs3 crore on SMC Insurance Brokers Pvt Ltd and ordered no performance incentives for SMC's principal officer for one year, for serious violations of its MISP guidelines. SMC Insurance Brokers provide motor insurance for vehicle sold by Honda Cars Ltd and KIA Motors.   
     
    As reported by Moneylife, the insurance regulator has been giving leeway to insurance brokers like Maruti lnsurance Brokers Pvt Ltd (penalty of Rs3 crore) Hero Insurance Brokers Pvt Ltd (penalty of Rs2 crore), and Toyota Tsusho lnsurance Broker India Pvt Ltd with a penalty of only Rs3 crore.
     
    By not following the MISP guidelines, these brokers have created a monopoly and allegedly earned profits of crores of rupees. According to sources, the profit earned by these motor insurance brokers could be about 10 times the penalty levied by IRDAI.
     
    In an order issued on 8 January 2020, Sujay Banarji, member for distribution at IRDAI, says, "SMC was expected to act diligently and with utmost care and responsibility giving no room for error. Unfortunately, SMC failed in complying with the MISP guidelines, which had been created to protect the interest of the policyholders and other stakeholders. This is evident from the penalties imposed for the violations of various provisions of the MISP guidelines."
     
    Mr Banarji asked SMC Insurance Brokers to pay a penalty of Rs3 crore, dismantle its panel of insurers and empanel all insurers on its platform, redesign its systems of seeking consumer consent for buying motor insurance, and submit a quarterly audit report from an auditor with Diploma in Information System Audit (DISA) or Certified Information Systems Auditor (CISA).
     
    IRDAI has received complaints from policyholders about MISP sponsored insurers forcing customers to buy motor insurance policies of the insurers who are on their panel, are having uniform premium rates of different insurers for same motor vehicle and are discriminating between insurance policyholder, who has bought motor insurance from that motor dealer as against who has not bought from them.
     
    Some agents association also filed complaint with the insurance regulator about apparent conflict of interest in the role of MISP in selling insurance policies and servicing and repairing motor vehicles under the insurance policies sold by SMC, high claims ratio under the MISP channel, extra payments made to MISPs by insurers, and disparity of treatment to agents.
     
    In its submission, the insurance broker stated that it has appointed eight general insurers out of 25 on its panel for selling motor insurance policies. SMC Insurance Brokers also stated that has achieved information technology (IT) integration with 10 insurers for 'Honda' category and with five insurers for 'other than Honda' category. 
     
    IRDAI observed that "SMC has sold only six policies of Honda cars through the manual process. As against this the number of policies of insurers who are IT integrated with SMC are very high. lt proves that the insurers who do not have IT integration are excluded from selling motor insurance policies, thereby creating a panel of insurers."
     
    SMC also submitted that the President's Award Guide Book is between the Honda Cars (OEM) and the dealers (MISP) and it has nothing to do with it. "It is observed that the President's Guide Book is an agreement in the form of a guide book between Honda (OEM) and the dealer (MISP) in which the MISP has agreed to perform tasks for which he is rewarded, one of which is the sale and renewal of insurance policies. Since the MISP is sponsored by SMC, it is responsible for acts of omission and commission of the MISP. The MISP guidelines do not allow OEMs to set targets or offer incentives to MISP in meeting sales targets of insurance policies. By doing so the MISP and consequently SMC, being the sponsor of the MISP, has violated the MISP guidelines," Mr Banarji observed in his order.
     
    SMC also submitted that is there is agreement between the broker and KIA Motors. As advised by the insurance regulator, SMC submitted a service level agreement between itself and one of the insurers with regard to KIA motors. "The agreement is broadly in line with the conditions put in the MISP Guidelines," IRDAI said.
     
    IRDAI also noted that SMC being a representative of the customer, has a responsibility to ensure that he gets the best terms, benefits, coverages and render proper advice on appropriate insurance cover and terms. By having a uniform rate across all insurers, SMC has not performed the functions of the direct broker and violated Regulation 4 of IRDAI (lnsurance Broker) Regulations 2018, it said.
     
    Taking serious note of the affidavit submitted by principal officer of SMC, the insurance regulator says it was found to be contrary to facts. It says, "Considering the seriousness of the issue, the Authority under Guidelines 15(d)(1) of MISP Guidelines directs that SMC shall not release performance incentives to the principal officer for one year from the date of this order."
     
    Here is the orders issued by IRDAI against SMC Insurance Brokers Pvt Ltd...
     
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    SAN-Geetha Raj

    1 month ago

    My concern is insurance ombudsman giving judgement based on open lied and The Ombudsman judge are corrupt,I was surprised when the judge lied even when I had submitted the documents,the judge saw signatures where there there no signature ,the judge saw non existent KYC also ,the judge ignored all violations of rule .we should remove ombudsman .consumer courts are only option .difficult to write in few sentences but our law and government is failing .

    Crop Insurance Fraud: Tata AIG Duped in Re-insurance; IRDAI Bans Malaysian Confiance Brokers and GMC
    The Insurance Regulatory and Development Authority of India (IRDAI) has penalised Unison Insurance Broking Services, and barred from Indian insurance and re-insurance market, Malaysian Confiance International Reinsurance Brokers LLC and Jaipur-based Global Master Consultant (GMC) for their involvement in a fraudulent crop re-insurance deal with Tata AIG General Insurance Co Ltd.  
     
    In two separate orders issued last week, Sujay Banarji, member (distribution) of IRDAI barred Malaysia-based Confiance International Reinsurance Brokers, its managing director Steven Chetty, as well as Dr Mukesh Ranwan and Sachin Agarwal, both directors of GMC, which is the official representative of Confiance, from doing any insurance or re-insurance business in India. Mr Banarji also levied a penalty of Rs1 crore on Unison Insurance Broking for its failure to verify re-insurance slips provided by Confiance and GMC. 
     
    Coming down heavily on the Malaysian re-insurance broker, IRDAI observed that "Confiance betrayed the trust of the re-insurance market and caused damage to the financial strength of Tata-AIG in India, which cannot be ignored by the IRDAI. The IRDAI is of the firm view that the actions of Confiance were deliberate and harmful. Such actions cannot under any circumstances be tolerated as it put the existence of general insurance companies in peril. During the entire episode, Confiance made no efforts to clarify its stance and simply return the premium, which in turn proves that Confiance intentionally committed this act by not placing the risk with the foreign reinsurers and issued forged re-insurance slips to the Indian re-insurance broker."
     
    Insurance or re-insurance business is based on trust. A cedant (a party in an insurance contract that passes financial obligation for certain potential losses to the insurer) relies on the re-insurance slip submitted by the re-insurance broker to assume that the risk is placed and there is no gap in re-insurance protection. lf the re-insurance protection is found to be non-existent, the entire risk that was supposed to be passed on to the reinsurer falls into the lap of the direct insurer who is obliged to make good the loss, as he has issued an insurance policy to the policyholder. It is because of this important nature of transaction that utmost care has to be exercised by the insurer and the insurance broker. Any shortcomings can have very serious consequences even to the extent of a failure of an insurance company.
     
    The regulator found that the Malaysian re-insurance broker has cheated Unison Insurance Broking Services as well. It says, "The actions of Unison put Tata-AIG in a difficult position. They suffered a loss because they did not have adequate re-insurance protection as a result of which their financials were impacted. However, given the documents shared by Unison with the Authority, it appears that Unison were themselves cheated by Confiance. Confiance who could not place re-insurance for crop insurance, forged the re-insurance slip and submitted as original to Unison."
     
    During FY18-19, Unison lnsurance Broker made facultative re-insurance arrangements to support crop re-insurance risk cover of Tata AIG through Confiance International involving its Indian representative GMC. In two emails, Confiance gave Tata AIG, terms for placement with two reinsurers, Tokio Marine Kiln Syndicate 510 (TMK) and US-based Best Meridian lnsurance Co (BMI). 
     
    The re-insurance placement was confirmed with copies of signed slips of the participating re-insurers, one slip signed and stamped by TMK on the letter-head of ARB International and another one from BMl. Unison then remitted re-insurance premium of Rs1.13 crore and Rs6.17 crore to Confiance after deducting its brokerage in two transactions in September and October 2018.
     
    However, during November, officials of Tata AIG found that TMK was not participating in facultative placement of its crop business. When asked about this, TMK told Tata AIG that it has not provided any support for re-insurance and the slip was not issued by them. Similarly, the official of BMI also denied issuing any slip for the crop re-insurance of Tata AIG.
     
    Tata AIG later found that the fraudulent slips were provided by GMC, the Indian representative of Confiance. It filed a complaint to IRDAI against Unison lnsurance Broker on 21 December 2018 alleging fraud in re-insurance placement pertaining to crop insurance in Rajasthan cluster for Kharif 2018. 
     
    Unison Insurance Broker informed Confiance about the fraud. Mr Chetty, MD of Confiance, accepted full responsibility for the fraud and on 26 November 2018 refunded the re-insurance premium paid. 
     
    Unison lnsurance Broker also filed a first information report (FIR) against Confiance and its Indian representative GMC in the economic offences wing (EOW) of Mumbai police. The case is under investigation.
     
    Here are the orders passed by IRDAI…
     
     
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    m.prabhu.shankar

    1 month ago

    When an Insurance company itself can be duped by another Insurance company think about the status of Ordinary Citizen customers like us. Regulators should be more punitive when such cases come up so that rest of them fear to even think about such malpractices.

    Meenal Mamdani

    1 month ago

    It is wrong of IRDAI to blame Confinance as they themselves were duped by GMC who are based in Jaipur. Confinance paid up the amount when presented with proof of the fraud.
    I hope now that it is easier to keep track of such scamsters, GMC will be barred from the insurance field. Also the individuals in GMC who perpetrated this fraud should be tagged as well so that they do not join another insurance company and continue their devious dealings in another firm.

    B. Yerram Raju

    1 month ago

    IRDAI deserves congratulations for the way the issue has been dealt with giving full opportunity for the reinsurer to explain its stand. The order is very comprehensive.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone