Sahara Life Insurance caught for multiple violations; penalised for a mere Rs12 lakh
Moneylife Digital Team 01 March 2012

Sahara Life Insurance has been caught for several violations which resulted in a Rs12 lakh penalty. There were 23 issues raised by IRDA, for which Sahara was let off leniently. Did Sahara Life Insurance get away too easily?



The Insurance Regulatory and Development Authority (IRDA) has slapped Sahara Life Insurance, promoted by Subrata Roy’s Sahara Group, with a Rs12 lakh penalty. While there were 23 issues discussed in the meeting with IRDA officials, the insurance company got away without much dent in its pocket. The violations for which a penalty was awarded are:  

  •   Delay in death claim payments and settling the delayed claims without penal interest. IRDA found that 30 of the 220 outstanding claims are pending beyond six months. The authority imposed a penalty of Rs2 lakh for this violation.
  • Allowing unlicensed entities to solicit business through dummy codes and paying commission to them—penalty of Rs5 lakh.
  •  The insurer is licensing ineligible entities as corporate agents—penalty of Rs5 lakh.

 The violations for which a penalty was not slapped are:  

  • The insurer is not maintaining separate trust for funding Gratuity, PF, Pension, etc, of the employees of Sahara India Life Insurance Co (SLIC)—violation prudent accounting practices.
  •   SILIC is not functioning as an independent accounting and legal entity. Stationery of group companies was used. Officials of group companies authorizing payments of SILIC—violation of prudent accounting norms.
  •   Rent payment to group companies without formal agreements. Other payments such as electricity, courier, and mobile expenses made to group companies—violation of accounting practices.
  •   There was heavy expenditure on publicity in 2008-09. Payments made to vendors through corporate communications department of Sahara group—violation of prudent accounting practices.
  •   Expenses on meetings/conferences went up from Rs20 lakh in 2008-09 to Rs1.04 crore in 2009-10. There were monthly payments to Sahara Care on this account while the agreement is available with Sahara Services for arranging conferences. Expenses were not shown in related party’s accounts—violation of prudent accounting norms.
  •  Short-fall in new business (NB) premium during year end collected from agents—violation of Section 41 of the Insurance Act (IA), 1938.
  •   Issuance of premium receipts based on oral information without actual receipt of premium by the company—violation of Section 64 VB of IA, 1938
  •  Original minutes of board meetings, audit and investment committee meetings were not submitted in the inspection period. They were submitted later—violation of Section 33 (3) of Insurance Act, 1938

In the next article we will give the investment related violations which were not penalised for some reasons.

Comments
prabhu
9 years ago
IRDAI is investigating TNT India P Ltd. which is a transport company, they are collecting insurance amt with out being registered with IRDAI.

This is a Criminal offence, this is a first time case.

Vikas Gupta
9 years ago
Sahara name is meant for Unethical Practices Whether it is Sahara Life or Sahara Financial, Whether it is Branch Staff or Higher Management, most of them are the most corrupt persons. I have experienced Mr. Pandey, Branch Manager of Sahara India Financial, Rohtak myself, A corrupt person. Even his Regional Manager & Kartaya Council Members all are in the same Viscious Nexus. All group Companies of Sahara should be heavily penalised & banned for their Anti Customers Attitudes.
Nagesh Kini FCA
9 years ago
The IRDA ought to come out with an explanation for not slapping heavier penalties for the offenses. Those let off are no less serious. Are they running an insurance co. or a family run business? At this rate it is totally risky to place funds at disposal hoping to get them at maturity.
Another Kingfisher or Satyam in the making?
The penalities ought to be stiffer a la US SEC in addition to the Co. those at the helm of affairs also should be penalized. Allowing them to go scot free with mere rap on the knuckles is allowing them to go with blue murder. These white collar crimes are serious as peoples' savings are involved.
Harsh Shah
9 years ago
When will IRDA impose penalties to General Insurance Companies for repudiating the Mediclaim policy claims on flimsy grounds and delay in settlement of claims which is paid with unreasonable deductions . When will IRDA announce TO IMPLEMENT claim settlement time and penalty for late settlement of claim. Come on IRDA. Tiger can still bite with some tooth left .
Deepak R Khemani
9 years ago
Private Insurance companies will always get away with anything, IRDA the toothless tiger can only roar and not take any credible action, recently Reliance General Insurance got away with meager penalty for marketing a mediclaim policy with conditions different than those that were approved by IRDA. Look at the number and type of violations and the amount of penalty imposed.
IRDA approves highest NAV guarantee policies and then says they are not good, single premium policies are approved and then they say they are not good, Variable Insurance policies are approved and then the same thing, Ulips which had high loading were tinkered around with have changed avatar many times, there is no clarity at all on pension policies.
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