Irda imposes Rs 40 lakh fine on Royal Sundaram insurance

Insurance regulator Irda has imposed Rs 40 lakh penalty on Royal Sundaram Alliance Insurance Company Ltd for violation of various guidelines related to outsourcing, advertisement and other norms.
The Authority imposed penalties of Rs 5 lakh each for paying to vendors in the name of advertising or publicity; making additional payment over and above commission; deviating from F&U (File & Use) guidelines for its fire and engineering policies and violating outsourcing guidelines.
"In conclusion, as directed under the respective charges, the penalty of Rs 40 lakh shall be debited to the shareholders' account of the general insurer", Irda said in its order released today.

Insurance Regulatory and Development Authority of India (Irda) said the amount shall be remitted to it within 15 days from the date of receipt of the Order.
Irda said the company was outsourcing core activities like policy servicing to its corporate agents, banks and brokers, which was in violation of outsourcing guidelines.
Imposing a penalty of Rs 5 lakh for the same violation, Irda asked the company not to outsource any of the core activities.

Also, a penalty of Rs 5 lakh was imposed for categorising all rubber and nylon or plastic parts as other items for motor insurance.
"It is observed from the agreements of Tata Motors and Honda Siel Cars Pvt Ltd with insurer that the insurer has categorised all rubber/nylon and plastic parts as 'other items' and applied depreciation based on age of vehicle. This is in contravention to provisions of Indian Motor Tariff wordings which provides a depreciation of 50 per cent to these items. This has led to inconsistent payment towards claims on partial loss to different customers."

Similarly, Rs 5 lakh fine each was imposed for violating guidelines on group insurance policies and not taking approval of the Authority for naming of product.