New Delhi: Insurance regulator Irda has imposed a penalty of Rs 15 lakh on IndusInd Bank for violation of norms related to receipt of commission.
The fine relates to IndusInd Bank’s receipt of commission as corporate agent of Cholamandalam General Insurance Company.
In its order, Irda said on review of the data submitted by Cholamandalam General Insurance, it was observed that “the corporate agent (IndusInd Bank) has received payments from the insurer over and above the permissible commission limits…”.
The payments received by the IndusInd Bank was in the form of “data base sharing/incentives to the employees of the corporate agent and infrastructure setting up costs” for financial years 2007-08, 2008-09 and 2009-10.
Accordingly, the Insurance Regulatory and Development Authority said, “a penalty Rs 5,00,000 each for financial years 2007-08, 2008-09 and 2009-10 totalling of Rs 15,00,000 is imposed”.
Replying to the Irda’s show-cause notice, IndusInd Bank said the insurer had entered into an infrastructure services agreement with the bank and it was a co-incidence that the lender was also a corporate agent to the insurer.
The bank further said the payments, which were alleged to be in excess of the commission caps, were not in the nature of commission and were not received in their capacity as the corporate agent.
It said the payments were for infrastructure services which cannot be characterised as disguised commission.
However, after examination of the reply to show-cause notice and other documents, Irda concluded that “there was no infrastructure agreement per se between the two parties”.
Further, Irda said the other payout details submitted by the insurer were bifurcated into each line of business and these payments together with commission had crossed maximum prescribed commission limits under each line of business.
“It is, therefore, evident from the above that the payouts made in the form of infrastructure services were linked to the premium income generated by the corporate agent. The charges are, therefore, established that the payments were received by the corporate agent apart/over and above the permissible commission rates…,” Irda added.