Insurance Broker

IILEGAL AND MALFILE ACTIONS BY CHAIRMAN IRDA TO FAVOUR A PARTICULAR INDUSTRIALHOUSE.

As you are aware that all the Regulations framed by the Authority has to be first discussed and approved by the Members of the Insurance Advisory Committee(IAC). Similarly, all the amendments which have been carried out by the Authority so far has been done first by getting it discussed and approved at the meetings of the Insurance Advisory Committee meetings, whether it is amendments to Investment Regulations, Agency Regulations, Micro Insurance, Social Sector and Rural obligations, etc. etc. all have been done with prior discussion and approval of Insurance Advisory Committee Members. Even the amendments to the Brokers Regulations regarding Annual and Renewal fee was carried out with prior discussion and approval of Insurance Advisory Committee.

But recently, the Authority has issued a Memorandum without consulting and rather bypassing the Members of the Insurance Advisory Committee and the August Institution of this Committee. I am sure this will come as a sure shock to all of you, because the Authority has not hosted this Memorandum on its website deliberately as it does not want anybody to know about this Memorandum rather it was sent only to the CEO’s of the Insurance Company. I am enclosing a copy of the said Memorandum for your information and taking preventive measures at your end so that you can stop its implementation. The reason behind the issue of this Memorandum in a very rush rush and clandestine manner is because the top man in the Authority is in a great hurry to rush through these things before he attains retirement so that before leaving the office of the Authority he can ensure his post retirement benefits from a particular Group. I also enclose a letter received through a very reliable source. A reading of that letter makes it very clear the malafide intention of that Gentleman.

At first glance, a reading of this Memorandum will not reveal anything except that Authority is worried about the entry of corporate houses promoting insurance broking companies in addition to doing broking business. But a reading of the first letter and then this Memorandum makes it crystal clear the whole idea behind issuance of this Memorandum and the reasons for by passing the Members of the Insurance Advisory Committee. The Top Man at Authority knows very well that he can easily hoodwink the Members of the Board of the Authority but will fail miserably if he tries to hoodwink all the 25 members of the IAC who have been selected as Members of the IAC by the Government of India because of their standing in public life, knowledge, wisdom and long standing experience and understanding of the subject of insurance.

I list out some of the changes being intended through this Memorandum which are intended to nullify and make ineffective the provisions of Brokers Regulations, 2002 :

Memorandum dated the 18th January 2008 was issued by the IRDA. In the said Memorandum vide clause ( C ) (vi) reads

"The broker shall ensure that not more than 25% of the insurances handled by it in any financial year is placed with the insurance company within the promoter group separately for life and for general insurance business. The broker shall establish internal machinery to monitor this on an ongoing basis"

Whereas the Regulation 20 of IRDA (Insurance Brokers) Regulations, 2002 reads as under :

"The business of the insurance broker shall be carried in such a manner that not more than 50% of the premium (quantum receipts, etc. as the case may be ) in the first year of business, 40% of the premium in the 2nd year of business, and 30% of the premium from the 3rd year of business onwards shall emanate from any one client"


Is the above para/clause of the memorandum not in contravention of Regulation 20 of IRDA (Insurance Brokers) Regulations, 2002 ? Certainly yes.

A reading of both the paras makes it clear that the Broker Regulations (A Gazetted document) a copy of which is placed before the Hon'ble Parliament, does not permit to do business beyond 30% of the premium from 3rd year onwards, how the Authority reduced that percentage from 30 to 25 in this Memorandum dated 18.3.08. Is it not amounting to circumventing of the subordinate legislation approved by the Members of the IAC.

You as Hon’ble Members of the IAC can stop this illegal actions of the top man of the Authority. I request you to kindly speak to other Members of the IAC so that you can unitedly confront the Authority’s top man and save the future of the Indian insurance industry otherwise lakhs of agents like me will suffer like anything when Big Indian Corporate houses will equip themselves as Insurers, Loan providers and Insurance Brokers. That kind of situation will be the death knell for lakhs of poor agents who cannot afford to match the financial power of these big corporate houses apart from being against the interests of the insurance industry at large. The effect of the memorandum though shown to be for the benefit of the industry has been issued with a particular group in mind so as to enable them to avail brokership which was earlier refused not only to the said group but also to other corporate houses on the ground of conflict of interest.