The Securities Appellate Tribunal (SAT) has to decide on the refund of around Rs 275 crore to policy holders, a senior official of SBI Life Insurance Company said on Thursday.
“The case is pending in SAT. We have no say on it now,” SBI Life Insurance President M. Anand told reporters here.
It has been more than two years since the Insurance Regulatory and Development Authority of India (IRDAI) ordered SBI Life Insurance to refund Rs 275.29 crore collected in excess commission to holders of Dhanaraksha-Plus Limited Premium Paying Term policy.
In March 2014, IRDAI ordered SBI Life to refund Rs 275.29 crore excess commission collected to holders of Dhanaraksha-Plus Limited Premium Paying Term policy.
In February 2015, IRDAI chairman T.S. Vijayan again directed SBI Life to implement its March 2014 order.
SBI Life’s policy in question has two premium payment options — single-premium and two-year premium paying plan.
In the case of single-premium policy, the premium for the entire policy period is collected upfront. The commission paid on that cannot be more than two per cent as per the Insurance Act.
On the other hand, the premium under the two-year premium paying plan is slightly higher and the commission rate is 40 per cent on the first year premium and 7.5 per cent on the second year premium.
According to IRDAI, SBI Life’s corporate agents — mostly State Bank of India and its associate banks — did not reveal to the policy holders the availability of the single-premium option.
The corporate agents sold the two-year premium payment plans. They collected the premium for two years in advance. This is done mainly to pocket 40 per cent commission on the first year premium and 7.5 per cent on the second year premium.
The IRDAI found out this practice during its on-site inspection of SBI Life’s books.
According to the Red Herring Prospectus of SBI Life, the SAT in its April 2015 order noted that the counsel for the IRDAI stated: “Till next date of hearing, no coercive steps would be taken by IRDAI in relating to impugned orders and thus an ad-interim relief has been granted and such order continues to be valid till the date of the Red Herring Prospectus.”