New Delhi (ABC Live India): The Insurance Regulatory and Development Authority of India (IRDAI) penalized Bharti Axa General Insurance for Non-Compliance with minimum obligations under Motor Third Party business as specified in IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015 for the financial year 2017-18 on 31/12/2020.
According to the Order passed by IRDA the penalty of Rs. 10, 00,000/- (Rupees ten lakh only) was imposed and authority directed Bharti Axa General Insurance that the order shall be placed before the Board of the insurer in the upcoming Board Meeting and the insurer shall provide a copy of the minutes of Board meeting to the Authority.
Facts of the Case
On examination of the data submitted by Bharti Axa in accordance with IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015, it was observed that Bharti Axa did not comply with the Motor Third Party Obligation for the FY 2017-18.
As regards possible violation of Section 32D of Insurance Act, 1938, the matter was referred on 8th April, 2019 to the Adjudicating Officer appointed by the Authority as per the provisions of Section 105C of the Act as amended from time to time.
The Adjudicating Officer issued an SCN vide letter ref. no. IRDAI/ADJ/Bharti Axa//2019-20/ dated 4th February, 2020 under Rule 4 of the Insurance (Procedure for Holding Inquiry by Adjudicating Officer) Rules, 2016 (hereinafter referred to as “AO Rules”) to Bharti Axa.
Bharti Axa vide its letter dated 17th February, 2020 submitted its response to the SCN and as per the request of Bharti Axa, the Adjudicating Officer granted a personal hearing in the matter on 18th June, 2020.
The Adjudicating Officer submitted the inquiry report along with recommendations to the Authority on 18th August, 2020.
On examination of the Adjudicating Officer’s report, the Authority issued a letter dated 07th October, 2020, offering another opportunity of personal hearing to Bharti Axa under section 105C (2) of Insurance Act, 1938.
Bharti Axa vide its mail dated 08th October, 2020 opted for Personal hearing, which was held by the undersigned on 12th November, 2020 virtually. Shri Sanjeev S, CEO & MD, Shri Milind Kolhe, Chief Underwriting Officer, Shri Jignesh Sangoi, Chief Risk Officer, Shri. Amit Raheja, Chief Compliance Officer of Bharti Axa were present in the hearing. On behalf of the Authority, Smt. Yegnapriya Bharat, CGM (Non-Life), Smt. Anita Josyula, GM (Non-Life) and Shri. A. Shrihari, Manager (Non-Life) were also present.
The charges mentioned in the SCN dated 4th February, 2020, recommendations of the Adjudicating officer, submissions of Bharti Axa to the SCN vide letter dt: 17th February, 2020 and during personal hearing 18th June 2020 & 12th November, 2020 are as follows:
a) Violation of Sec 32D of Insurance Act, 1938: The Insurer did not comply with the Motor Third Party Obligation for the FY 2017-18 calculated as per Regulation 3 of IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015. During the FY 2017-18, the Insurer has underwritten Rs. 380.00 crore as against the minimum obligatory Motor Third Party Insurance business of Rs. 399.94 crore resulting in a shortfall of Rs. 19.94 crore. In percentage terms, the shortfall works out around 4.99% of the Motor Third Party Insurance business obligation.
Summary of Insurer’s submissions:
The Motor Business of the insurer was adversely impacted during the FY 2017-18 due to implementation of Guidelines on Motor Insurance Service Providers. The insurer has achieved significant growth in MTP business during the period April 2017 to October 2017 (peaking at 26.4% YoY in October). However, the implementation of the aforesaid Guidelines effective November 2017 adversely impacted the Motor Third Party insurance business
During the FY 2017-18, the Insurer achieved a growth of 34% with Gross Direct Premium Income (GDPI) of Rs. 1754 crores, primarily on account of crop insurance business. The Insurer has achieved TP premium growth of 4% against an overall de-growth of 6% in Motor Own Damage Segment.
The insurer has complied with the said obligations in the financial years 2018-19 and 2019-20 by bringing in business of Rs. 2 crore and Rs. 57 crores more than the minimum required obligations in the FY 2018-19 and 2019-20 respectively
The insurer further submitted that they may not be able to make good the shortfall of FY 2017-18 in FY 2020-21 since this period is a special year due to Covid-19 pandemic. However, the Insurer has assured compliance of the Motor TP Obligation Regulation in the future.
Due to repetitive nature of non-compliance, Adjudicative Officer recommended a penalty of Rs. One crore.
Decision of the Authority:
Taking into consideration the submissions made by the insurer, the shortfall of the insurer during the financial year 2017-18 being less than 5% and the fact that the insurer has conducted business of Rs. 2 crores and Rs. 57 crores in excess of the minimum required obligations during the FY 2018-19 and 2019-20 respectively, the Authority, in exercise of its power vested as per the provisions of Section 105C of the Insurance Act, 1938, hereby imposes a penalty of Rs. 10,00,000/- (Rupees ten lakh only)
Further, the insurer is advised to ensure strict compliance in future with minimum obligations under Motor Third Party business as specified in IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015.
