TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 117
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....of Policyholders' Interest) Regulations, 2002. 2. The brief facts of the case are as under : (i) The appellant is an Indian Insurance company, engaged in general insurance business in India and registered with the respondent. (ii) Tata Capital Financial Services (TCFS) is a NBFC (Non-banking Financial Company) registered with RBI (Reserve Bank of India), which is engaged in granting loans and other financial products. TCFS is registered as a composite corporate agent with the respondent. (iii) Corporate agents are recognized as insurance intermediaries regulated by the respondent. The appellant and TCFS entered into a Corporate Agency Agreement on April 1, 2016 through which TCFS was permitted to solicit, procure and service the general insurance products of the appellant. (iv) TCFS, as a corporate agent of appellant, was engaged by appellant for distribution of the Home Guard Plus Policy product of the appellant. The term of this policy is three years. Allegedly, in 2016, with regard to Home Guard Plus policy, in addition to the premium for three years in terms of the policy, advance renewal premium for next three years was also collected by TCFS. The premium and the adva....
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.... of premium collected was deposited as advance renewal premium for an additional 3 years. These two policies were later got cancelled on receipt of request from the policyholders and the appellant promptly refunded the premium collected in advance. 4.3 With regard to the amount of interest collected @12.25% / 13% by the corporate agent on the loan advanced to policyholders to subscribe into policy for six years, it was submitted that the appellant has not received any part of it. He contended that the appellant has no control or supervision over the lending business of the corporate agent, which is a separate and distinct from its role as an insurance intermediary. He submitted that the respondent is the regulator of the corporate agent as well, but no action was taken against it. He also submitted that the imposition of interest by the corporate agent was subject to the loan agreements between the corporate agent and policyholders, where this appellant was not a party. Such interest on advance renewal premium was charged and collected with the consent of the policyholders. The loan sanction letters with respect to the two policies examined by the respondent clearly demonstrate th....
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.... to policyholder is that he protects himself against the risk of paying higher age-related premium at the time of renewal. 4.7 Mr. Seervai questioned the merit of the direction in the impugned order to pay penal interest on the ground that Regulation 9(6) of policyholder regulations authorises the respondent to impose penal interest when there is a delay in making payment to the insured after the insurer's settlement offer is accepted. There is no provision in the policyholder regulations or any other enactment which empowers the respondent to impose penal interest in the present case. 4.8 He also submitted that imposition of penalty of Rs.1 crore is excessive and unjustified and several factors need to be considered while imposing penalty and no penalty can be levied mechanically. For an alleged technical violation of the corporate agent, imposition of penalty only on the appellant and not on the corporate agent, is contrary to law. In view of this, the appellant prayed to set aside the impugned order. 5. In response, Mr. Mustafa Doctor, learned senior advocate appearing for the IRDAI submitted as under : 5.1 Evidently, the insurance policy in question was for a period of thre....
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....ce renewal premium. 5.5 The learned senior advocate also submitted that the documents produced by the appellant clearly demonstrate that appellant was at all times aware that its corporate agent was collecting advance renewal premium. The policy proposal forms filled in by the corporate agent were sent to the appellant, who was in fact the beneficiary of the advance renewal premium received. The advance renewal premiums were passed on to the appellant, who had the benefit of enjoying the same for a period of three years before it became due. The customer was paying interest on the advance premium to the corporate agents TCFS and appellant itself was beneficiary of the advance renewal premium. 5.6 With regard to allegations of excessive quantum of penalty, it was submitted that since the violation continued for a period of 292 days, for which penalty of Rs. 1 Lakh per day could be imposed, maximum penalty of Rs.1 crore was imposed on the appellant in accordance with Section 102 of the Insurance act, 1938. With these submissions, respondent prayed for dismissal of the appeal. 6. We have carefully considered the rival contentions and perused the records. 7. We note that there is n....
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....ium for future and thereby hedging the prospect from the price risk nor does it provide for the insurer to retain the advance renewal premium and enjoy the benefit for three years, without actually providing any insurance cover. No other documentary evidence suggesting clear consent of the prospects was brought before us. Under the circumstances, we find no weight in the plea of implied consent of the prospects for agreeing to pay advance renewal premium to ensure a valid policy cover after three years without getting any immediate benefit. Moreover, the said advance premium was funded by a loan extended by the corporate agent itself @ 12.25%/13%, as the said corporate agent is also an NBFC engaged in the business of financing. 7.3 In the circumstances, in the absence of clear stipulations with regard to the possibility of advance renewal premium on the prospectus or the application form or any other supporting documentary evidence suggesting consent from the prospects, it cannot be held that in choosing to pay renewal premium three years in advance by availing loan (alongside the premium for current three years), the appellant insurer or its agent had provided all material inform....
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.... Policy holders' Interests) Regulations, 2002, which provides as under: "(2) An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest". The appellant, as insurer, also has a responsibility to ensure that the corporate agent does not distribute policy in variance from the prospectus or in violation of the agreement with the corporate agent and ought to have placed appropriate controls in this regard. 8.2 The third argument that the said corporate agent was also providing similar insurance intermediary services to other two insurers is irrelevant, as the issue is limited to the violation in respect of the HGP policy of the appellant. 8.3 The appellant has also submitted that there was no bar in the applicable regulations for receipt of renewal premium in advance, prior to November 2019, when amendment was brought in regulation 13(iii) of the IRDAI (Health Insurance) Regulations, 2016. The Regulation 13 of the IRDAI (Health Insurance) regulations, 2016 relates to 'Renewal of Health Policies issued by General Insure....