Max Life to pay Rs 3 cr penalty imposed by Irdai to avoid legal escalations

The regulator indicated that the deal between Max Life and Axis Bank circumvented regulations on commission limits

Private sector insurer Max Life Insurance on Monday said it will pay the penalty imposed on it by the Insurance Regulatory and Development Authority of India (Irdai) to avoid unnecessary and long legal escalations. However, it does believe that it has not committed any wrongdoing in its share sale transaction with Axis Bank.

The regulator imposed a Rs 3 crore penalty on the life insurer last week and a Rs 2 crore fine was imposed on the bank for the share sale deal that saw the bank acquiring 12.99 per cent stake in the life insurer and becoming a co-promoter of the company.

“With a view to pave the way for the future including strengthening the long-term strategic partnership with Axis Bank and avoid unnecessary and long legal escalations, Max Life has decided to pay the penalty imposed by the Irdai, while it is of the belief of not committing any wrongdoing,” said Max Life in a statement.

“The transactions were undertaken in a bonafide manner. However, keeping the best interest of the company and its stakeholders in mind, we have resolved to remit the payment towards the penalty,” said Analjit Singh, Chairman of Max Life Insurance.

The regulator, in its order last week indicated that the deal between Max Life and Axis Bank circumvented regulations on commission limits. There were three charges — misrepresentation to the regulator, higher-than-permitted compensation to the corporate agent, and not following fair market value in share transactions — made out against the insurer by the authority and in each of the charges it found the company guilty and imposed a fine of Rs 1 crore each.

An email sent to Axis Bank did not elicit a response.

"Irdai has imposed a penalty aggregating to Rs 2 crores on Axis Bank alleging certain violations of directions issued by Irdai on account of transaction of transfer of shares of Max Life Insurance Company Limited between Max Financial Services Limited and Axis Bank/its subsidiaries. In this regard, please also note that the said penalty does not have any material impact on the Bank or its corporate agency operation," the bank said in a statement to the exchanges.
 

Axis Bank together with its subsidiaries Axis Capital Limited and Axis Securities is the co-promoter of Max Life Insurance following the acquisition of a 12.99 per cent stake in April 2021. Axis Bank is expected to raise its stake in the company in the coming quarters.

“Over the next few quarters, Axis Bank will increase its stake. It holds 13 per cent in Max life. Axis Bank is a very large financial services conglomerate. We will go through the process to increase that to up to 20 per cent,” Prashant Tripathy, managing director and chief executive officer of Max Life Insurance told Business Standard in an interview in August this year. Private sector insurer Max Life Insurance on Monday said it will pay the penalty imposed on it by the Insurance Regulatory and Development Authority of India (Irdai) to avoid unnecessary and long legal escalations. However, it does believe that it has not committed any wrongdoing in its share sale transaction with Axis Bank.

The regulator imposed a Rs 3 crore penalty on the life insurer last week and a Rs 2 crore fine was imposed on the bank for the share sale deal that saw the bank acquiring 12.99 per cent stake in the life insurer and becoming a co-promoter of the company.

“With a view to pave the way for the future including strengthening the long-term strategic partnership with Axis Bank and avoid unnecessary and long legal escalations, Max Life has decided to pay the penalty imposed by the Irdai, while it is of the belief of not committing any wrongdoing,” said Max Life in a statement.

“The transactions were undertaken in a bonafide manner. However, keeping the best interest of the company and its stakeholders in mind, we have resolved to remit the payment towards the penalty,” said Analjit Singh, Chairman of Max Life Insurance.

The regulator, in its order last week indicated that the deal between Max Life and Axis Bank circumvented regulations on commission limits. There were three charges — misrepresentation to the regulator, higher-than-permitted compensation to the corporate agent, and not following fair market value in share transactions — made out against the insurer by the authority and in each of the charges it found the company guilty and imposed a fine of Rs 1 crore each.

An email sent to Axis Bank did not elicit a response. The exchange has also sought clarification from the bank but so far, the bank has not responded. Both Axis Bank and Max Life have to pay the penalty within 21 days from the date of issuance of the order.

Axis Bank together with its subsidiaries Axis Capital Limited and Axis Securities is the co-promoter of Max Life Insurance following the acquisition of a 12.99 per cent stake in April 2021. Axis Bank is expected to raise its stake in the company in the coming quarters.

“Over the next few quarters, Axis Bank will increase its stake. It holds 13 per cent in Max life. Axis Bank is a very large financial services conglomerate. We will go through the process to increase that to up to 20 per cent,” Prashant Tripathy, managing director and chief executive officer of Max Life Insurance told Business Standard in an interview in August this year.