Insurance sector regulator Irda has slapped a penalty of Rs 55 lakh on Max Life Insurance Company for violating clauses under outsourcing guidelines.
"The penalty of Rs 55 lakh shall be remitted by the Life Insurer by debiting the shareholder's fund within a period of 15 days from the date of issuance of this order" Insurance Regulatory and Development Authority (Irda) said in an order.
Irda penalised Max Life with Rs 50 lakh fine as it fixed a flat services fee for various activities to outsourced firm (or service provider) Diganta Multi Services, irrespective of premium size and without adopting risk management principles.
"The submissions of the life insurer that the service fee is based on the location vis-a-vis the ability of the service provider is not acceptable,...it is considered that service fee agreed and paid to service provider is disproportionate to the nature of services and the life insurer did not carry out any cost-benefit analysis," it said.
The regulator slapped another penalty of Rs 5 lakh as the outsourced party --Diganta Multi Services--to collect renewal premium did not comply with norms in outsourcing guidelines.
Irda said the life insurer did not submit any reasons for not having specific mention in written agreement with service provider for collecting premiums.
"Allowing the service provider who is not complying with the prescribed requirements to collect the premiums is in violation...therefore a penalty of Rs 5 lakh is levied on the life insurer for the violation."
It warned the company to insert the clause in agreement and advised to examine existing agreements and ensure they are in compliance with guidelines.
Irda directed the company to ensure compliance by carrying out due diligence when entering into agreements with service providers while outsourcing any activity.
Updated Date: Dec 24, 2014 14:32:22 IST