IRDA to SBI Life Insurance: Refund Rs 275 cr to policy holders
New Delhi: Insurance regulator IRDA Tuesday asked SBI Life Insurance company to refund Rs 275.29 crore to the policy holders as the amount was collected from them in violation of norms.
SBI Life Insurance, a joint venture between State Bank of India and BNP Paribas Cardif, has been asked to refund the amount within six months.
"The amount of Rs 275,29,48,437 to be refunded as directed in these orders shall be debited to shareholders account. The above action to be initiated immediately and shall be completed within six months," IRDA (Insurance Regulatory and Development Authority) said.
The order was issued after an enquiry that revealed SBI Life Insurance was charging the second year premium alongwith the first year premium on its Dhanaraksha Plus Limited Premium Paying Term (LPPT), a group insurance policy.
It relates to polices issued during 2008-09, 2009-10 and 2010-11.
"...The premium collected in more on lines of a single premium than two yearly regular premiums against the approved file and use features," the order said.
Irda noticed that 99.99 percent of the total premium procured under the LPPT product was sourced by Corporate Agents of the Life Insurer belonging to SBI Group. The Life Insurer has paid 40 percent of first year premium as 'first year commission' and 7.5 percent of second year's premium as 'second year commission'.
"However, had the single premium version of product been offered to the policy holders, the actual commission payable would have been only 2 percent.
"Hence it can be concluded that the large scale sale of LPPT as single premium payment policy has only facilitated higher commission payments to insurance intermediaries involved who are predominantly SBI and its associate banks," the order said.
Irda order said the Life Insurer has "adopted business practices in violation" of prescribed regulatory norms.
"Thus it is concluded that these violations were detrimental to the interests of members of group insurance schemes of the concerned master policyholders," it added.