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Tata AIG Life Insurance has been penalised Rs 5 lakh by the insurance regulator for failing to adhere to guidelines relating to management expenses. In a statement issued on Thursday, Irda said management expenses of the life insurer for 2008-09 was 114.90% of the premium, which is beyond permissible limits under Section 40B of the Insurance Act, 1938, read with Rule 17D of Insurance Rules, 1939. Following this, the regulator directed Tata AIG on October 2009 to bring down its expenses of management below 110% by the year 2009-10 and below 100% by 2010-11.

However, the company expenses ratio actually increased to 117.28% for the year ended March 2010. Irda subsequently issued a notice to the company asking why action should not be taken for violating norms. Tata AIG Life’s explanation was that the company was compliant with the limits in the initial years and had started relatively late expansion and heightened focus on expenses rationalisation.

While the expenses of management are applicable to all companies, the regulations are applied only after a few years of operations. Tata AIG, however, has been in operation for close to a decade.

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