SBI Life fined Rs 1 cr by insurance regulator for ‘violating norms’
Source: Business Standard
What is the case?
The Insurance Regulatory and Development Authority of India (IRDAI) in its order dated 6 September, 2024 said its investigation found that SBI Life Insurance collaborated with Policybazaar, MIC Insurance, Compare Policy, Easypolicy and Wishfin but failed to clearly specify the services provided by these aggregators or disclose the fees paid to them. SBI Life did not report its outsourcing payments to the Irdai, as required by law.
SBI Life Insurance was found to have made payments worth Rs 1.93 crore to Extent Marketing and Technologies in FY18 and FY19. These payments were not reported and the vendor itself lacked adequate infrastructure, relying heavily on third-party outsourcing. Approximately 95 per cent of the vendor’s revenue was transferred to third parties, according to IRDAI.
Irdai said it found that SBI Life’s outsourcing contracts lacked transparency and did not comply with regulations concerning conflicts of interest. Furthermore, the company was found to have paid excessively high fees to web aggregators.
The regulator has instructed the insurer to develop a comprehensive outsourcing policy in accordance with the latest norms. Additionally, the insurer must present the Irdai’s directive to its board to evaluate the efficiency of its systems and processes concerning outsourcing transactions and conflict resolution.
Death claim processing issues
IRDAI said SBI Life Insurance repudiated 21 claims based on non-disclosure or the death occurring within three years of policy issuance. It concluded that SBI Life had not provided sufficient evidence to justify these denials. The insurer’s practice of denying claims based on the timing of death relative to policy issuance was found to be inconsistent with the provisions of Section 45 of the Insurance Act, 1938, which protects policyholders from arbitrary claim rejections after a three-year period
The regulator issued a reminder to SBI Life regarding the strict adherence to Section 45 of the Insurance Act, 1938. This section stipulates that life insurance policies cannot be contested after a period of three years from the date of issuance, risk commencement, or addition of a rider, whichever occurs last. During its investigation, Irdai found that SBI Life had already resolved 86 claims, with a total payout of Rs 10.21 crore. This sum comprised Rs 5.78 crore in actual claim settlements and an additional Rs 4.43 crore in penal interest.
Selling insurance products after withdrawal
The insurer was cautioned for issuing policies after the withdrawal date and launching products prematurely. “There were a sample of seven instances where the proposal form was filled and subsequently policy issuance of insurance products was materialised after the date of withdrawal,” the regulator said.
The company said that it had streamlined its processes to prevent this in the future.
First Published: Sep 10 2024 | 11:20 AM IST
