IRDA slaps Rs 55 lakh fine on Max Life Insurance Company for violating rules

Max Life Insurance Company LogoInsurance sector regulator Irda has slapped a penalty of Rs 55 lakh on Max Life Insurance Company for violating clauses under outsourcing guidelines.

“The penalty of Rs 55 lakh shall be remitted by the Life Insurer by debiting the shareholder’s fund within a period of 15 days from the date of issuance of this order,” Insurance Regulatory and Development Authority (Irda) said in an order. 

IRDA LogoIrda penalised Max Life with Rs 50 lakh fine as it fixed a flat services fee for various activities to outsourced firm (or service provider) Diganta Multi Services, irrespective of premium size and without adopting risk management principles.

“The submissions of the life insurer that the service fee is based on the location vis-a-vis the ability of the service provider is not acceptable,…it is considered that service fee agreed and paid to service provider is disproportionate to the nature of services and the life insurer did not carry out any cost-benefit analysis,” it said. 

The regulator slapped another penalty of Rs 5 lakh as the outsourced party –Diganta Multi Services–to collect renewal premium did not comply with norms in outsourcing guidelines. 

Irda said the life insurer did not submit any reasons for not having specific mention in written agreement with service provider for collecting premiums.