IRDAI Slaps Rs1 Crore Penalty on UIB Insurance Brokers’ Repeated Delays in Remitting Premiums

Moneylife Digital Team 20 February 2025

Investor Interest

Coming down heavily on UIB Insurance Brokers Pvt Ltd for repeatedly failing to remit insurance premiums and failing to protect policyholders' interests, the insurance regulatory and development authority of India (IRDAI) has imposed a penalty of Rs1 crore on the insurance broker. The fine comes after an on-site inspection revealed persistent violations of the Insurance Brokers Regulations, 2018.

In an order, a bench of whole-time members (WTMs) Rajay Kumar Sinha (member -finance & investment) and Deepak Sood (member- non-life) says, "The broker does not have any right over the insurance premiums so that the amounts are timely remitted to the respective parties to ensure the coverage and payment of claims and thus protect the interest of the policyholders. These are the reasons a broker is not expected to sit on monies beyond a reasonable time and such delayed remittance poses a systemic risk to the entire insurance ecosystem."

"An advisory was issued to UIB Insurance Brokers on 2 July 2020 for the same violation on the basis of the assurance of the broker in the then personal hearing that since January 2020, the broker has introduced a new system and have sensitised its marketing team also about the documentary requirements. UIB Insurance Brokers had submitted on record that the remittance is now up to three days. However, the broker has continued the violation even after years and has not demonstrated any system improvements to alleviate the concerns of the Authority," the IRDAI order says.

An investigation conducted by IRDAI from 13th June to 17 June 2022, highlighted significant delays in remitting reinsurance premiums, with some cases extending up to 1,151 days. The total amount of delayed remittances stood at Rs1.62 crore, while Rs73.44 lakh remained unsettled even at the time of inspection.

IRDAI had previously issued an advisory to the broker in July 2020, cautioning against such delays. However, the latest inspection revealed continued non-compliance, prompting the regulatory body to take strict action. The broker failed to produce adequate documentation proving that written consent was obtained from reinsurers for the delays, a requirement under the regulations.

During the hearing, UIB Insurance Brokers argued that it did not earn interest on the amounts lying in their insurance bank accounts. However, the bench says it (the argument) does not address the concern that the parties to which such amounts are due, are losing interest for months and, in a few cases, years together. "Though the wrongful gain to the broker cannot be established but certainly there is a wrongful loss to the parties to which such amounts are due, namely reinsurers and insurers on account of delayed receipt of the premiums, thereby losing an opportunity to generate investment income out of the same."

"...the Authority is constrained to treat the extant violation as repetitive in nature. The delay in remittance is evidence of operational inefficiency and also failure to comply with the regulatory obligations of the broker," the order says.

As part of the ruling, IRDAI instructed UIB Insurance Brokers to review all pending remittances and submit an action-taken report by 31 December 2024. Additionally, the broker has been directed to strengthen internal controls to ensure future compliance with regulatory timelines.

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