IRDAI slaps ₹1 cr. penalty on Cholamandalam MS


Insurer violated governance norms

IRDAI has imposed a penalty of ₹1 crore on Cholamandalam MS General Insurance Company (Chola MS) holding that the firm had violated certain provisions of corporate governance guidelines for insurers.

The trigger for the action was an analysis of 2016-17 financial statements and specifically, advance payments of about ₹115 crore made by the insurer to four entities who, IRDAI said, were corporate agents, related parties and auto original equipment manufacturers (OEM).

Chola MS said that the advances were paid towards advertisements, manpower supply and risk assessment services.

In the order, the Insurance Regulatory and Development Authority of India Chairman Subhash C. Khuntia said three of the payments — ₹22.98 crore to Ashok Leyland; ₹9.39 crore to Chola MS Risk Services and ₹40.96 crore to DHFL Sales and Services — raise concerns on whether they were genuine business transactions.

On the ₹42.47 crore paid to Chola Insurance Distribution Services Pvt. Ltd. (CIDSPL) for branding services, IRDAI observed that CIDSPL was a group company of the insurer and also a corporate agent.

Chola MS had not submitted the entity’s memorandum/articles of association.

“By making these payments… the general insurer had contravened the provisions of Paragraph 6 of Guidelines for Corporate Governance for Insurers in India, through improper use of funds from the policyholders’ account and having inadequate control over the administration of funds. In view of the violation observed, the Authority… imposes a penalty of ₹1 crore,” the order, issued on January 7, said.

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Printable version | Jan 27, 2020 1:52:33 AM |

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