Articles 2104 views January 31, 2020

IRDAI Slaps Rs 1 Crore Penalty on Both ICICI Lombard and Tata AIG for Violation of Norms

The IRDAI (Insurance Regulatory Development Authority of India) has imposed a heavy penalty of Rs. 1 crore each on the ICICI Lombard GIC and Tata AIG for the defiance of certain norms. The IRDAI has issued this penalty on ICICI Lombard due to certain violations that were related to health insurance policies. Along with the penalty, the regulatory body has issued some directions and advisory to the company.

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The ICICI Lombard General Insurance Company offers various insurance products related to travel, motor, health, home, etc. The insurance products of the company included two-wheeler insurance, car insurance, complete health insurance, personal accident insurance, marine insurance, etc. The IRDAI had carried out on-site inspection against ICICI Lombard GIC in August 2015 and the penalty order has been issued for this inspection.

The IRDAI has found out that the insurance company had violated the regulations associated with the maximum policy term which is allowable for Group and Individual health products. The company has issued Group insurance policies to a corporate client who was having a personal accident policy for a term of 2 years and 3 years and a personal protection cover for 5 years. But, ICICI Lombard had taken IRDAI’s approval for the issuing of those group insurance policies which have tenure of 1 year only. The IRDAI had issued a circular in which it had stated that ICICI Lombard had taken an approval in the form of a certificate from the IRDAI. This certificate stated about the compliance of the company for the regulations but it kept on selling those insurance products which should have been withdrawn much earlier. According to the orders of IRDAI, ICICI Lombard has violated Regulation 4(a, b) and 3(d) of the IRDAI Regulations, 2013. Under Section 102(b) of the Insurance Act, 1938 the penalty has been imposed as the company has been violating these norms for more than 100 days. IRDAI has instructed the company to deposit the penalty amount within 15 days.

IRDAI has also conducted an on-site inspection for the Tata Capital Financial Services Limited during March 2018. It has been found out that the insurance advisors of Tata AIG GIC had violated the provisions of Regulation 3(2) and 3(3) of the IRDAI (Protection and Policyholders Interests) Regulations, 2002. Based on these violations and defiance of norms, the IRDAI has charged the penalty of Rs. 1 crores on Tata AIG as well.

Hence, with these stringent actions taken against both these insurance companies by the IRDAI has affected their share values. The share values have gone down steeply after the issue of these orders of penalty.

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