Norms flouted to insure Reliance, Tata phones: CAG

Comptroller and Auditor General (CAG) has pulled up National Insurance (NIC) and Oriental Insurance (OIC) for failing to comply with regulatory norms while offering `tailor-made' risk covers for mobile phone handsets of Reliance and Tata Teleservices that led to losses of over Rs 180 crore to the general insurers.

"The two firms did not ensure compliance of guidelines issued by IRDA, General Insurance Public Sector Association and their respective head offices," CAG said in its report presented in the Parliament.

"This resulted in a huge loss of Rs 126.58 crore to NIC, Rs 16.05 crore to OIC and made General Insurance Corporation suffer a loss of Rs 41.37 crore," CAG said.

CAG observed that no responsibility has been fixed in regional and divisional offices for having exceeded their powers and exposing the companies to heavy losses and recommended thorough investigation and legal action into the matter.

The Mumbai divisional office of NIC issued two policies in 2002-03 and 2003-04 to Reliance and one to Tata Tele in 2004-05. The OIC divisional office also issued a policy during 2004-05 to Reliance to underwrite risks associated with mobile handsets without careful evaluation of the risk involved and other technical aspects, CAG said.

The CAG audit revealed that the Special Contingency Policies issued to Reliance and Tata Teleservices were devised "primarily to suit the requirements of the insured without safeguarding the insurers' interest" owing to non-adoption of underwriting guidelines.