LEVY OF PENALTY UNDER SECTION 105B OF THE INSURANCE ACT, 1938

ORDER NO. IRDA/F&I/ORD/RSS/114/06/2011, DATED 7-6-2011

The insurer was obliged under sections 32B and 32C of the Insurance Act, 1938 read with the IRDA (Obligations of Insurers to Rural or Social Sectors) Regulations, 2002, as amended from time to time, to cover prescribed percentage of Gross Direct Premium in the Rural Sector and prescribed number of lives in the Social Sector of its general insurance business.

On review of the data submitted by the insurer with the Authority, it was observed that the insurer was non-compliant with the Rural and Social Sector obligations for the financial year 2009-10. The company procured only 6.29 per cent as against an obligation of 7 per cent of Gross Direct Premium in rural sector and covered only 9548803 lives against a target of 16870908 lives in social sector. The resultant shortfall in target during the year 2009-10 was 0.71% Gross Direct Premium in Rural Sector and 7322105 lives in Social Sector.

In response to the Authority’s show-cause notice vide No. 430/4/F&A/RSSO-NL/191/Jan-11, dated 5th January, 2011, the insurer vide its letter dated 24th January, 2011 acknowledged the non-compliance of Rural and Social Sector Obligations for the financial year 2009-10, and came up with the plea that the company was implementing a new IT system and switching over to CWISS from the present GENISYS and requested for more time to collect the data and submit consolidated report to the Authority.

The Authority does not accept the plea of the insurer that it had any reasonable cause for not fulfilling its obligations in the rural and social sectors.

The Authority hereby, holds the insurer responsible for failure to comply with its obligations towards the rural and social sectors in 2009-10 and levies a penalty of Rs. 10 lakh under section 105B of the Insurance Act, 1938 for non-compliance with the provisions of sections 32B, 32C and the Regulations framed thereunder. The penalty shall be remitted to the Authority within 15 days of the receipt of this Order.

In addition to the above, the insurer is also required to meet the unfulfilled part of the rural and social sector obligations of the year 2009-10 in the next two financial years.

More Under Corporate Law

Posted Under

Category : Corporate Law (3523)
Type : Notifications/Circulars (30678) Orders (505)
Tags : IRDA (282) IRDA Notifications (274)

Leave a Reply

Your email address will not be published. Required fields are marked *