IRDAI Fines UIB Insurance Brokers ₹1 Crore for Premium Remittance Delay

Insurance Regulatory and Development Authority of India (IRDAI) conducted an inspection of UIB Insurance Brokers Pvt. Ltd. in June 2022, revealing violations of the Insurance Act, 1938, and related regulations. Following a Show Cause Notice (SCN) issued in July 2024 and a personal hearing in October 2024, IRDAI found that UIB failed to remit reinsurance premiums on time, with delays ranging from 36 to 1151 days. The total overdue amount stood at ₹1.62 crore, with ₹73.44 lakh still pending at the time of inspection. While UIB argued that procedural complexities caused delays and that no unfair profits were made, IRDAI determined that the company failed to secure mandatory written consents for delays. Additionally, prior advisories on the same issue had not resulted in compliance improvements. Given the repetitive nature of the violation, IRDAI imposed a ₹1 crore penalty and advised UIB to review all pending remittances, strengthen internal controls, and submit an action plan by December 2024. The fine must be paid within 45 days.

Insurance Regulatory Development Authority of India

Ref: IRDAI/E&C/ORD/MISC/38/02/2025

Order in the matter of UIB Insurance Brokers Pvt Ltd.

1. Based on the

1.1 Show Cause Notice (“SCN”) reference No. IRDA/Enforcement/2022/754 dated 4th July, 2024 issued to M/s UIB Insurance Brokers Pvt. Ltd. (‘Broker’ or ‘Company’) in connection with the on-site inspection conducted by the Authority from 13th June to 17th June, 2022

1.2 Submissions made by the Broker vide email dated 2^nd August 2024 in response to the aforesaid SCN.

1.3 Submissions made by the Broker during the personal hearing held on 10^th October, 2024 at 11.30 AM, by the panel of Two Whole-Time Members of the Authority Comprising Shri Rajay Kumar Sinha-Member (Finance & Investment-“F&I”) and Shri Deepak Sood-Member (Non-Life).

2. Background

2.1 The Authority had conducted an on-site inspection on the Broker 13th June to 17th June 2022. The inspection report, inter alia, revealed certain violations of provisions of the Insurance Act, 1938 and Regulations and Guidelines issued thereunder.

2.2 A copy of the inspection report was forwarded to the Broker on 29th September 2022 seeking their response and their response was received vide letter dated 19^th October 2022.

2.3 On examining the submissions of the Broker, vide a letter dated 04.07.2024, the Competent Authority issued Caution and/or Advisory to the Broker in respect of 6 out of 9 observations, considering the severity of the violations and these not being repetitive in nature, thus granting an opportunity to the Broker to correct their systems and ensure compliance in future. The Competent Authority decided to drop 2 observations of the inspection report. There was only one issue (subject matter of the extant SCN) which was considered a potential case for further scrutiny, that too after examining the past record and finding that the issue is not a new one but continuous in nature and the Authority had already issued an Advisory for the same issue vide letter dated 02.07.2020. An SCN was issued on 4th July, 2024. The Broker replied to the SCN vide letter dated 2^nd August 2024. As requested for by the Broker, personal hearing was granted to the Broker on 10^th October, 2024.

2.4 The Personal hearing was granted by the Panel of two Whole Time Members of the Authority Shri Rajay Kumar Sinha-Member (Finance & Investment-“F&I”) and Shri Deepak Sood-Member (Non-Life).

2.5 On behalf of the Broker, Shri Naveen Jetly (Principal Officer) and Shri Suman Lahiri (Compliance Officer) and on behalf of the Authority, Shri R K Sharma (Chief General Manager), Shri TV Rao (General Manager), Shri Sanjay Kumar Verma (General Manager), Shri Manoj Asiwal (Deputy General Manager) and Shri Monu Moar (Assistant Manager) attended the hearing.

2.6 The submissions made by the Broker in its letter dated 19^th October 2022, submissions made after SCN vide email dated 2^nd August 2024, submissions during the personal hearing on 10^th October 2024 and those made vide letter dated 21^st October 2024 have been carefully considered by the Authority and are summarized below:

3. Charge-1

Violation of

Schedule II-Form U (f) of IRDAI (Insurance Brokers), Regulations, 2018 which reads as under:

“he shall take steps to promptly remit premiums/claims received to reinsurers/insurers/foreign insurance brokers, but not later than by fifteen days or as specified in the Terms of Business Agreement from the date of receipt of the monies into their Insurance Bank Account. Any delay in remittance shall be informed to the reinsurer/insurer / foreign insurance broker and shall take their written consent for such delay”

3.1. Inspection Observation 3

There are significant delays in remittance to Cedants / Reinsurers / Reinsurance Brokers. in 53 cases, where delay in remittances is observed, the delay is ranging from 36 days to 1151 days.

The total amount that was pending with the Broker beyond the due date is Rs. 1,62,70,784/- (Rs. One Crore Sixty Two Lakh Seventy Thousand Seven Hundred and Eighty Four only). (For details, reference is drawn to the table under paragraph 3.3.4 of this Order).

Also, many remittances are pending with the Broker beyond the due date. There was an amount of Rs. 73,44,640/- (Rs. Seventy Three Lakh Forty Four Thousand Sixty Hundred and Forty only) which was received by the Broker and was not settled till the time of the inspection in 14 sample cases.

3.2. Summary of the Broker’s Submissions:

3.2.1 The delays noted by the Authority in remitting reinsurance premiums are primarily a result of the complex interplay of reliance on third-party documentation, international transactions and practices, and certain stringent requirements impacting our authorised dealer banks governed by other sectoral regulators in India. No unfair profits were made or could have been made by the Company from these delays as these were stored in zero interest accounts for the duration of the delay, and additionally, no clients faced any impact to their insurance coverage.

3.2.2 The Company has taken concrete steps since the previous advisory in July 2020 to enhance its processes, resulting in a 50% reduction of delayed transactions from 2018-19 to 2020-21. The Company has 38% delayed remittances in the year 2018­19 which has been dropped to 19% in the year 2020-21.

3.2.3 The Company is in compliance with the requirements prescribed under Form – U under Schedule Il of the Brokers Regulations, 2018 specifically in terms of remittance of premium amounts within 15 days, or otherwise, obtaining a written consent from the foreign Reinsurer/insurance broker for such delay in accordance with the requirements of this provision.

3.2.4 The Broker stated that wherever delay occurred, the same is supported by TOBA, signed by both the parties and counter party provided consent for the delay.

3.3. Decision on Charge 1:

3.3.1. During the personal hearing, the Broker was asked to provide copy of TOBAs (Terms of Business Arrangements) for all the cases cited in the inspection report along with the consent provided for delay in remittance which is a requirement under Schedule II-Form U (f) of IRDAI (Insurance Brokers), Regulations, 2018 if the remittances are made beyond 15 days. The Broker’s submissions post personal hearing have been carefully examined and it is noted that:

i) The Broker has shared the emails sent by them to the recipients of the amounts due, but there is no email revert from the recipient acknowledging and consenting to the delays as claimed by the Broker during the personal hearing, thus the Broker has failed to establish that written consents of the parties were in fact obtained to satisfy the requirements of the provision as cited above.

ii) Further, a comparative study of a few emails attached by the Broker showcasing the remittance of premium only suggests that though the premiums were received as back in time as in 2017, the mails were sent as late as 2023 which was after the inspection period. This only indicates that such emails are sent to the recipients as an afterthought since there is no proper mechanism to ensure timely remittances of reinsurance premium in compliance with the regulations.

iii) The copies of TOBAs submitted by the Broker post personal hearing either pertain to a period post the inspection or are irrelevant to the sample cases cited. Therefore, the Broker has failed to establish that the delays in the sample cases were consented to by the counter parties by way of TOBAs. The TOBAs submitted pertain to year 2022 and 2023 and do not satisfy the Authority that there were in force TOBAs at the time of inspection for the cases identified.

iv) In view of the above, the Broker’s claim that the delays in remittances have been drastically reduced post Authority’s observation is questionable and without merit. Further, the Broker has failed to produce the written consent required under the regulations in event of delay in remittance.

3.3.2. The Broker’s argument that they did not earn interest on the amounts lying in their insurance bank accounts does not address the concern that the parties to which such amounts are due, are losing interest for months and in few cases, years together. Though the wrongful gain to the Broker cannot be established but certainly there is wrongful loss to the parties to which such amounts are due, namely re-insurers/insurers on account of delayed receipt of the premiums thereby losing an opportunity to generate investment income out of the same.

3.3.3. The Broker does not have any right over the insurance premiums so that the amounts are timely remitted to the respective parties to ensure the coverage and payment of claims and thus protect the interest of the policyholders. These are the reasons a broker is not expected to sit on monies beyond a reasonable time and such delayed remittance poses a systemic risk to entire insurance eco system.

3.3.4. An Advisory was issued to the Broker vide Order dated 02.07.2020 for the same violation on the basis of the assurance of the Broker in the then personal hearing; that since January 2020, the Broker has introduced a new system and have sensitised their marketing team also about the documentary requirements. The Broker had submitted on record that the remittance is now up to 3 days. However, the Broker has continued the violation even after years and has not demonstrated any system improvements to alleviate the concerns of the Authority. The inspection team has observed remittance beyond the allowed period as follows:

3.3.5. Further, the remittance of Rs. 73,44,640/- pertaining to 14 cases was not done by the Broker even after the expiry of 15 days at the time of inspection and the same was pending with the Broker.

3.3.6. In light of the same, the Authority is constrained to treat the extant violation as repetitive in nature. The delay in remittance is an evidence of operational inefficiency and also failure to comply with the regulatory obligations of the Broker. Thus, the Broker has violated Schedule II-Form U (f) of IRDAI (Insurance Brokers) Regulations, 2018.

3.3.7. In view of the above and a history of similar violations persisting for long, in exercise of the powers vested under Section 102 (b) of the Insurance Act, 1938, the Authority hereby imposes a penalty of Rs. One Crore (1 Crore) for the violation of Schedule II-Form U (f) of IRDAI (Insurance Brokers) Regulations, 2018 since the violation has continued to occur for more than three years.

3.3.8. The Broker is also advised to

a) undertake a review of all pending remittances and file an action taken report including the status of pending remittances as on 31-12-2024.

b) review internal controls and identify deficiencies in processes and draw an action plan to ensure that issues are addressed and corrective actions are implemented to bring average delay with mandated Turn Around Times as per Regulations.

4. Summary of Decisions:

5. The penalty amount of Rs. 1 crore (Rs. One crore) shall be remitted by the Broker within a period of forty-five days from the date of receipt of this order through NEFT / RTGS (details of which will be communicated separately). An intimation of remittance may be sent to Shri T. Venkateswara Rao, General Manager (Enforcement & Compliance) at the Insurance Regulatory and Development Authority of India, Survey No. 115/1, Financial District, Nanakramguda, Hyderabad 500032, email id enforcement@irdai.gov.in.

6. Further,

a) The Order shall be placed before the Board of the Broker in the upcoming Board Meeting and the Broker shall provide a copy of the minutes of the discussion.

b) The Broker shall submit an Action Taken Report to the Authority on the direction given within 90 days from the date of this Order.

7. If the Broker feels aggrieved by this Order, an appeal may be preferred to the Securities Appellate Tribunal as per the provisions of Section-110 of the Insurance Act, 1938.

Sd/
Deepak Sood
Member (Non-Life)

Sd/
Rajay Kumar Sinha
Member (F&I)

Place: Hyderabad
Dated: 19thFebruary, 2025