IRDAI Slaps Rs 1 Crore Fine On SBI Life Insurance For Violating Regulations

New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a fine of Rs 1 crore on SBI Life Insurance for breaking rules related to its dealings with insurance web aggregators and outsourcing activities. Additionally, the insurance regulator has issued a warning to SBI Life for denying several insurance claims without sufficient grounds.

Violations In Outsourcing And Web Aggregator DealsAccording to IRDAI's investigation, SBI Life Insurance worked with various web aggregators like Policybazaar, MIC Insurance, Compare Policy, Easypolicy, and Wishfin. However, the insurance company did not clearly outline the services provided or the fees paid to these aggregators. Moreover, the company failed to report its outsourcing payments to the IRDAI, which is a legal requirement.One significant issue highlighted by the IRDAI was a payment of Rs 1.93 crore to Extent Marketing and Technologies Pvt. Ltd. during the financial years 2017-18 and 2018-19. The company did not report these payments, and the vendor itself had no infrastructure, relying heavily on third-party outsourcing. Nearly 95 per cent of the revenue generated by the vendor was transferred to third parties.IRDAI found that SBI Life's outsourcing agreements lacked transparency and were not in line with regulations regarding conflicts of interest. The company was also found to have paid unreasonably high fees to web aggregators. Advisory For Stronger Outsourcing PoliciesThe IRDAI has directed SBI Life to establish a detailed outsourcing policy that complies with current regulations and guidelines. The insurer must present this policy to its board of directors to review its effectiveness in managing outsourcing transactions and resolving conflicts.

Warning On Claim Repudiation PracticesAnother serious issue flagged by the IRDAI was related to how SBI Life Insurance handled death claims. The regulator found that the insurer had rejected 21 death claims, citing non-disclosure of information or deaths that occurred within three years of issuing the policy. However, the IRDAI found that SBI Life had not provided enough proof to justify these rejections.The IRDAI reminded the insurer to strictly follow Section 45 of the Insurance Act, 1938. According to this section, no life insurance policy can be questioned after three years from its issuance, the commencement of risk, or the rider to the policy, whichever is later. The IRDAI discovered that SBI Life had already settled 86 claims, amounting to Rs 10.21 crore, which included Rs 5.78 crore in claim amounts and Rs 4.43 crore in penal interest.