2024-09-10 06:15:28
New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a fine of Rs 1 crore on SBI Life Insurance. The company is accused of violating the rules. This includes matters related to insurance web aggregators and outsourcing activities. Insurance regulator IRDA has also issued advice to the company to reject several insurance claims. IRDA says that SBI Life did not clearly mention the services and fees while working with web aggregators. Apart from this, the company also showed negligence in reporting outsourcing payments to the regulator. The regulator’s inspection found that the company was working with several web aggregators including Policybazaar, MIC Insurance, Compare Policy, EasyPolicy and Wishfin. Although the company claimed to outsource post-sale activities such as premium reminders and policy service assistance, the agreements lacked specific details on the services offered and the per-seat per-month payment structure.
Too much reliance on outsourcing
The regulator also found that the insurer had paid Rs 1.93 crore to Extant Marketing and Technologies Pvt Ltd during 2017-18 and 2018-19. Despite being mandated to report these payments, the insurer company failed to do so. The vendor was found to have no infrastructure of its own and was heavily dependent on outsourcing. 95% of its revenue was transferred to third parties.
IRDA concluded that the insurer’s outsourcing arrangement violated rules related to conflict of interest, transparency and due diligence. The insurer was also found to be paying improper fees to web aggregators.
IRDA has directed SBI Life to establish a comprehensive outsourcing policy that is in line with existing regulations and guidelines. In addition, the insurer is required to place the IRDA order before its board to review the effectiveness of its systems and processes relating to outsourcing transactions.
Issues related to death claim settlement are also included
Another issue was related to the death claim process where IRDA warned SBI Life to strictly follow the provisions of Section 45 of the Insurance Act, 1938. As per IRDA’s inspection, SBI Life Insurance was found to have rejected 21 insurance claims on the grounds of non-disclosure or death occurring within three years of policy issuance. However, IRDA’s inspection revealed that the insurer had not provided sufficient evidence to support its claims.
In another case, the insurer submitted that the death occurred within three years of issuance of the policy but was reported after a period of three years. “In 17 other cases, the insurer submitted that it had rejected the claims because the date of death was within three years of issuance of the policy,” according to the IRDA order.
The insurer argued that it had complied with IRDA’s circular dated October 28, 2015. However, IRDA found that the insurer had settled 86 claims, aggregating to Rs 10.21 crore (claim amount of Rs 5.78 crore and penal interest of Rs 4.43 crore).