IRDAI tells SBI Life again to refund policyholders

MUMBAI: SBI Life Insurance has once again been asked to refund policyholders the excess commission the company paid banks for selling life covers to home buyers.

In 2012, the Insurance Regulatory and Development Authority of India (IRDAI) had found SBI Life guilty of violating its rule on paying commission on single-premium policies. The product in question was a group term insurance policy called Super Suraksha.

The regulator had said that the company overpaid the master policyholders (banks and housing finance companies) between November 2007 and August 2010. As against 2% commission payable of single-premium plans, the company had paid 20% commission. The difference at that time had worked out to Rs 84 crore. Over 90% of the commission under the policy was paid out to SBI and its associate banks. The rest was paid to other home finance providers.


At the time of the order, there was no appellate authority and SBI Life had made a representation to the department of financial services (DFS) in the finance ministry. The DFS had directed IRDAI to reconsider its decision. IRDAI, in its review order released last week, has stood by an earlier order and asked SBI Life to refund the difference with interest at the rate of 2%.

But policyholders are unlikely to be getting any refund soon. The amendment of the insurance laws in 2015 provided for the Securities Appellate Tribunal (SAT) as the appellate authority for those aggrieved by IRDAI orders. Since the order by IRDAI is a fresh judgment, SBI Life would have the freedom to again appeal to the SAT.

The life insurer's defence of the excess commission paid to the banks was that these were, by nature, reimbursement of administrative expenses. However, the IRDAI held that the pricing of the policy included administrative costs and there was no case for additional payment.