The Insurance Regulatory and Development Authority (IRDAI) has imposed a penalty of Rs.25 lakh on non-life insurer SBI General Insurance Company Ltd. It also penalised Chennai-based Royal Sundaram General Insurance Company Ltd by levying a penalty of Rs.3 lakh for breach of Motor Insurance Service Provider (MISP) guidelines.
According to IRDAI, there was a failure on the part of SBI General Insurance to fulfil its minimum obligation relating to underwriting motor third party insurance during financial year 2017-18. Looking at the nature of non-compliance being of repetitive nature and magnitude of violation, the adjudicating officer had earlier recommended a penalty of Rs.1 crore.
The IRDAI imposed a penalty of only Rs.25 lakh, after taking into consideration the submissions of the insurer that they are committed and are entering into various tie-ups to fulfil the motor third party (MTP) obligation.
The IRDAI had said in its order that considering the repetitive nature of the violation and the magnitude of violation, a penalty of Rs25 lakh is levied on SBI General Insurance. Accordingly, the penalty should be paid online after debiting the company shareholder’s account.
As per the order, the Insurer did not comply with the MTP Obligation for the FY 2017-18 calculated as per Regulation 3 of IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015. Also, during the FY 2017-18, the Insurer has underwritten Rs.329.73 crore as against the minimum obligatory MTP Insurance business of Rs.434.33 crore resulting in a shortfall of Rs.104.60 crore. Shortfall works out around 24.08% of the MTP Insurance business obligation.
Additionally, it said that failure to fulfil the obligation and a shortfall of Rs104.6 crore (24.08%) for the FY 2017-18 amounts to non-compliance of Regulation 3 of IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015. The Insurer had not fulfilled the MTP obligations during the immediate previous financial year 2016-17 with a significant shortfall of Rs146 crore (38.59%).
In its arguments the insurer said that it has never refused any “liability only” policy and there was no mollified intention on their part. The insurer added that it has not made any disproportionate gain or unfair advantage because of the shortfall in complying with motor third party (MTP) obligation and it has not caused any loss to policyholders insured by it due to the shortfall.
The IRDAI penalised Royal Sundaram General Insurance for violation of MISP guidelines via a separate order. Royal Sundaram has been warned for non-submission of information that was sought by the regulator and directed to ensure submission of information and documents sought during its inspections.
Again, the penalty should be paid online by Royal Sundaram General Insurance after debiting the company shareholder’s account as per IRDAI.
The insurance regulator has taken the decision on the show cause notice dated 8 August 2020 issued to Royal Sundaram following its onsite inspection of the insurer during August 2018.
Smrutirekha Bhoi