Moving SAT against Irda decisions could hit insurers

With the Securities Appellate Tribunal (SAT) empowered to deal with cases from refusal of registration to imposition of penalty by the Insurance Regulatory and Development Authority of India (Irdai), through the Insurance Laws (Amendment) Ordinance 2014, a host of cases will come to it.

“SAT has become the prevailing authority for the insurance sector, too. While we are awaiting an insurance expert in it for dealing with our cases, it is still unclear whether cases pending before the court will also be transferred to SAT,” said the chief executive of a private life insurer.

Set up under the Securities and Exchange Board of India (Sebi) Act, 1992, SAT has a three-member team of a presiding officer and two members. The United Progressive Alliance government had considered a common appellate authority for insurance and all instruments traded on stock and commodity exchanges.

This followed the formation of the Financial Stability and Development Council, a statutory body to coordinate financial market regulators.

Insurance executives say even in cases in which Irdai refuses to accept returns filed by companies due to inadequacies or further information sought, they would now have to approach SAT.

“According to the ordinance, we will have to appeal to SAT within four months of the receipt of the order and ask the authority to accept the returns. While such cases have been few, a SAT hearing on these matters is expected to take longer to be settled, especially as the number of cases dismissed by it is high,” said an actuary at a life insurance company.

  According to the ordinance, every appeal under the Act has to be made within 45 days from the date on which the Irdai order is received. For the insurance sector, penalties include a fine and, in various cases, the refund of excess premia to policyholders.

“In case refunds exceed Rs 100 crore, our books are hit. Therefore, such cases should be considered on an urgent basis by SAT,” said the chief financial officer of a mid-sized private life insurer. He added in case Irdai refused to grant a new company a certificate of registration, courts could help get better redress.

“Especially for international players who wish to enter India through a joint venture, there could be an option to move court if it isn’t granted registration. That would be quicker, given the limited members in SAT and the high number of cases transferred to it every month.”

In case the Irdai orders a search-and-seizure of documents for enquiry and regulation, aggrieved parties can approach SAT and request the books, accounts, receipts, etc, be returned.

If SAT thinks a life insurer’s operations are prejudicial to the interests of the policy holders, it can appoint an administrator to look into the affairs of the insurer.

Here, too, anyone aggrieved by an order of the administrator can approach SAT.

“There have been cases in courts in which an ex-parte order (in the interests of one side alone) has been for attachment of property, which have later been repealed. We do not know how this mechanism would work under SAT,” said the general manager at a state-own general insurer.