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To hHtltC,i INSURANCE REGULATORY AND ildai DEVELOPMENT AUTHORITY OF INDIA IRDA/ INT/ MISC/ ORD/ 014/ 01/ 2016 15/ 01/2016 CEO's/ Principal Officers Of All Insurance Broking Companies Re: Approach in case of non-compliance of IRDA's (Insurance Broker) Regulations, 2015 The Authority has evolved a graded approach for non-compliance / violation of Broker Regulations or its circulars, orders, directions etc. The approach elaborates the procedure and laid down the methodology in case of first time violation and second time violation of the regulations, circular, directions, orders, etc. However it may be recalled the Insurance Broker Regulations were amended in December, 2013 and new Insurance broker Regulations notified in January, 2014. Based on the experience gained over the last 6 years and given the fact that the new regulations have been notified, there is a need to revise the approach to be followed in case of non-compliance of Broker Regulations by the broking companies. The objectives behind the approach are two-fold namely: 1. To encourage good behaviour and foster better compliance of the regulations by the insurance brokers. 2. To simplify the application of penalties in case of non-compliance/ violation of regulations. In order to achieve the above objective the following approach has been adopted: 1. Imposition of monetary penalties is not the solution to encourage good behaviour and foster compliance. 2. A graded approach is proposed on the following lines: a. Generally a warning for first time non-compliance ll°ft"-llf 'lfc:R, cfmu cR-1, ~. ~-500 004. \lffif (f) : 91 -040-2338 1100, ~: 91-040-6682 3334 t-~: irda@irda.gov.in ~: www.irda.gov.in Parisharam Bhavan, 3rd Floor, Basheer Bagh, Hyderabad-500 004. India. Ph.: 91-040-2338 1100, Fax: 91-040-6682 3334 E-mail : irda@irda.gov.in Web.: www.irda.gov.in • ~I~ liHffl~ ~ f¾A~1qefi 3ffi i¾etim ~ ti1,1am INSURANCE REGULATORY AND inlai DEVELOPMENT AUTHORITY OF INDIA b. Largely not undertaking placement of new business till such time the problem is rectified or for 2/4 months whichever is later for second time non- compliance. c. Initiate steps for suspension/ cancellation of the license with the condition that the broker will not undertake placement of new business till such time the problem is rectified or 6 months whichever is later for third time non- compliance. 3. Greater onus on the Principal Officer to ensure compliance as he will be held personally responsible along-with the compliance officer. 4. Methodology to be followed for non-compliance of each and every regulation has been outlined. The approach to be followed in case of non-compliance of various sub-regulations of IRDA's (Insurance Broker) Regulations, 2013 is placed at Annexure "A" for necessary information. Encl.: Annexure "A" -qft:l',fl'.f '1-l""q.f, "<frnu<ffi, ~, ~ -500 004. m«r ((): 91-040-23381 100, ~: 91-040-6682 3334 {-~: irda@irda.gov.in ~: www.irda.gov.in Nilesh Sathe Member (Life) p.,p, Parisharam Bhavan, 3rd Floor, Basheer Bagh, Hyderabad-500 004. India. Ph.: 91-040-2338 1100, Fax: 91-040-6682 3334 E-mail : irda@irda.gov.in Web.: www.irda.gov.in Annexure "A" Approach in case of non-compliance of IRDA's (Insurance Broker) Regulations, 2013 Regulations No First Time violation Second Time violation Third Time Violation Relevant provision of the regulation I . Short title and commencement No action required 2. Definitions Compos ite Broker Direct broker Reinsurance Broker Insurer A composite broker who is not licensed for direct life or direct general insurance business yet undertakes soliciting of the said business shall be warned at the first instance. Further he shall not be allowed to carry on business for a period of 2 months or the period he was undertaking soliciting of the said business whichever is longer. The broker shall not be allowed to The broker shall not be allowed to carry on business for a period of 4 carry on business for a period of 6 months or the period he was months or the period he was undertaking soliciting of the said undertaking soliciting of the said business whichever is longer. business whichever is longer. The Authority may also initiate the process of suspension/ cancellation of the license of the Insurance Broker Regulations, 2015 as per the procedure laid down in Regulation 41. If the direct broker does reinsurance As above broking business in any form or manner, As above he shall be warned at the first instance. Further he shall not be allowed to carry on business for a period of 2 months or the period he was undertaking soliciting of the said business whichever is longer. If the reinsurance broker undertakes direct As above insurance broking business in any form or manner, he shall be warned at the first instance. Further he shall not be allowed to carry on business for a period of 2 months or the period he was undertaking soliciting of the said business whichever is longer. As above Any msurer who 1s found accepting business from an entity who is not licensed for soliciting, shall be asked to explain why compliance of the Act requirement is not met at their end. The insurer shall not be allowed to The insurer shall not be allowed to Based upon the reply and the intention of the company, the insurer shall be warned at the first instance. carry on business for a period of 2 weeks. Further he may be imposed a penalty of Rs 50 lakhs as stipulated under Section 42D of the Insurance Act, 1938. carry on business for a period of one month. Further he may be imposed a penalty of Rs I crore per day as stipulated under Section 42D of the Insurance Act, 1938. Still further, the Principal Officer / CEO of the insurer shall be removed Take on 3 4 Principal Officer If the principal officer, does not comply with the definition, he shall be warned in the first instance and asked to comply. He will not be appointed till such time he fu I fills the criteria. Categories brokers of Insurance No action required Functions of I . Direct broker 2. Reinsurance broker 3. Composite broker If there are complainants by the policyholder or it is brought to the notice that the broking company has not performed the functions detailed m the regulation, the broker shall be: a) warned and advised to take necessary steps to prevent its re-occurrence. b) The Principal Officer shall be held responsible for the lapse and shall be issued a warning letter. He shall also give an undertaking that the same shall not be repeated. c) the promoters and Board be apprised of the position. t) will not undertake placement of new business till such time the problem 1s rectified or 2 months whichever is later. and such shall not be considered for the post of principal officer/ CEO of the insurer for a period of atleast 5 years. The Principal Officer / CEO of the The Principal Officer / CEO of the broking company shall be removed broking company shall be removed and and shall not be considered for the shall not be considered for the post of post of principal officer/ CEO of the principal officer/ CEO of the broking broking company for a period of company for a period of atleast 5 years atleast I year after completing the after completing the requirements. requirements. I. If the violations are repeated then the broker shall have to prove to the Authority that the violations were accidental not deliberate If the violations are found to be found accidental and one off then the broker shall a) submit a plan to set right the shortcomings b) The Principal Officer shall be held responsible for the lapse and shall be issued a warning letter. He shall also give an undertaking that the same shall not be repeated. c) the promoters and Board be apprised of the position. d) report monthly/ quarterly compliance of the steps taken/ measures put in place to prevent its reoccurrence by an independent person. II. If it is found that the violations were deliberate then the broker shall: a) submit a plan to set right the shortcomings b) identify the person(s) responsible for the violations and take necessary action as per the Rules of the If the violation is again repeated then initiate steps for suspension/ cancellation of the license under Regulation 41 & 42 in addition to steps mentioned in S.No. II of second time violation with the condition that the broker will not undertake placement of new business till such time the problem is recti fied or 6 months whichever is later. In addition the Authority shall record the fit & proper criteria applicable to directors/ shareholders/ promoters.
