SBI Life Insurance to appeal against the order of IRDA to refund Rs.275 crore
The Private sector life insurer, SBI Life Insurance would appeal against the order of Insurance Regulatory and Development Authority (IRDA) to refund Rs.275 crore to the policy holders of Dhanaraksha Plus Limited Premium Paying Term (LPPT), a group insurance policy.
Why IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six months?
The insurance regulator, IRDA charged SBI Life of violation of various norms by mis-selling the policy and payment of higher commission to agents. The order was issued after an enquiry that disclosed SBI Life Insurance was charging the second year premium along with the first year premium on its Dhanaraksha Plus Limited Premium Paying Term (LPPT).
- IRDA spotted that 99.99 % of the total premium procured under the LPPT product was sourced by corporate agents of the life insurer belonging to SBI Group. The insurer has paid 40 % of first year premium as ‘first year commission’ and 7.5 % of second year’s premium as ‘second year commission’.
- Though, the single premium version of product been offered to the policy holders, the actual commission payable would have been only 2 %.
- Thus, it can be concluded that the large scale sale of LPPT as single premium payment policy has only facilitated higher commission payments to insurance intermediaries involved who are predominantly SBI and its associate banks.
- It relates to polices issued during FY9, FY10 and FY11.
- Thus, IRDA directed SBI Life Insurance to refund Rs.275.29 crore to policy holders within six months, as the amount was collected from them in violation of norms.
Note: SBI Life Insurance is a joint venture between country’s biggest lender, State Bank of India (SBI) and BNP Paribas Cardif.