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.