SBI Life to appeal against Irda's refund stand

Private life insurer SBI Life Insurance plans to appeal to the Insurance Regulatory and Development Authority (Irda) against the regulator’s directive to refund Rs 275.29 crore to the beneficiaries of the group insurance schemes. Irda is yet to pass the final order.

Atanu Sen, managing director and CEO of SBI Life Insurance, told Business Standard the insurance company would appeal in the next few days, after which the regulator would take a view on it.

On Tuesday, Irda had asked SBI Life to refund the prescribed amount to the policyholders of Dhanaraksha Plus Limited Premium Paying Term (LPPT), a group insurance policy. Here, Irda had said the life insurer had adopted business practices in violation of prescribed regulatory norms where the LPPT was sold as a single-premium policy in violation of approved ‘file-and-use’ features. Also, it said the insurer paid excess commission to ‘corporate agents’ over and above the eligible two per cent.

Under file-and-use policy, before launching a product, an insurer needs to first file an application with Irda and wait for the regulator’s approval before launching the product in the market. The insurer needs to justify the rates, terms and conditions of insurance policy to be offered while filing the product with Irda.

On Dhanaraksha Plus LPPT refund, Sen said: “We are confident that a fair outcome will prevail subsequent to the presentation of our case with the Appropriate Authority.”

SBI Life Insurance Company Limited (the Life Insurer) has offered Dhanaraksha Plus LPPT, a two-year premium paying term plan, by collecting the second year’s premium upfront along with the first year premium.

From the information furnished, Irda said it noticed 93 per cent of the second-year premiums were received in advance along with first-year premiums in 2008-09; 94 per cent in 2009-10; and, 97 per cent in 2010-11. Thus, the premium collected is more on the lines of a single premium than two yearly regular premiums against the approved ‘file-and-use’ features.

Sen added that SBI Life remains committed to ensuring the highest level of customer transparency and customer centricity. “Our efforts in the areas of intensive customer education programmes, service initiatives and robust financial disclosures reflect our strong ethical business operations,” he said.

The insurance regulator follows a system wherein if an insurer is dissatisfied with a particular order or directive, they can appeal to Irda. After a final hearing of the insurer's plea, the regulator passes the order.

Recently, Irda had asked private life insurer HDFC Life to comply with its earlier directions with respect to file-and-use norms. In September 2013, the insurance regulator had warned HDFC Life against violation of ‘file-and-use’ guidelines - that is, changing the terms and conditions of the approved versions of the products without prior approval from Irda.

Further, Irda had asked the insurer to provide similar death benefit to customers for two of its products, since those taking the policy on or after April 1, 2012 were given higher death benefits. After this, the insurer had sent a representation to Irda seeking modifications to the above directives. In reply, Irda said the firm has to comply with the earlier directions.