Sunday, 16 March 2014

IRDA has directed SBI life to refund Rs275 crores to the policy holders

IRDA has directed SBI life to refund Rs275 crores to the policy holders
The Insurance Regulatory and Development Authority (IRDA) has directed SBI Life to refund Rs 275.29 crores to the policyholders within six months for violating norms.
The IRDA issued this order after an inquiry revealed that SBI Life was charging the second year premium along with the first year premium on its Dhanaraksha Plus Limited Premium Paying Term, a group insurance policy.
IRDA asks SBI Life to refund Rs 275 crore.
MUMBAI: In a move that will benefit 7.5 lakh borrowers of State Bank of India Group, the insurance regulator has asked SBI Life to refund Rs 275 crore of premium collected from policyholders, which makes it the biggest refund order in insurance history. The life insurer, which was earlier fined for mis-selling its Dhanraksha Plus LPPT through SBI and associate banks, has now been asked to refund excess commission that it has paid out of premium collected under this policy. 

In its order, the regulator said that SBI Life had positioned this plan as a two-year premium paying term but collected premium upfront from policyholders. This was despite the fact that the insurance company had a single premium version of the product. IRDA said that by positioning the scheme as a two-year premium paying plan, the insurer was able to pay 40% of the first year premium and 7.5% of the second year premium as commission to the bank. "Had the single premium version of product been offered to the policy holders, the actual commission payable would have been only 2%. Hence, it can be concluded that the large scale sale as single premium payment policy has only facilitated higher commission payments to the insurance intermediaries involved who are predominantly SBI and its associate banks," IRDA said in its order.

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