Page 14 - Insurance Times September 2015 SAMPLE

16 insurance firms under
FinMin scanner
A probe was conducted by the
Chennai Zonal unit of the Directorate
General of Central Excise Intelligence
under summons against 16 insurance
companies engaged in providing mo-
tor-vehicle insurance policies for
wrongly availing cenvat credit on the
bogus invoices of the car dealers.
A revenue intelligence agency has
found that some 16 insurance com-
panies engaged in motor-vehicle in-
surance have been wrongly availing of
cenvat credit worth around Rs.2,500
crore by producing fake invoices.
The estimated incorrect cenvat credit
involved in this case is Rs.1,200 to Rs 20 percent (around Rs.22,000 crore) of
2,500 crore as per the statement of
the finance ministry. Detailing the
modus operandi, the DGCEI said that
the car manufacturers were entering
into agreement with the insurance
companies for appointing them as
Preferred car Insurance Companies
(PICs) and instructing their car deal-
ers to sell their insurance policies to
these companies only.
Such PICs were paying commission on
the value of the insurance policies to
the car companies in the range of 2-
3 percent while 15-45 percent to the
car dealers.
The IRDAI regulations do not allow
any person other than insurance
agents and insurance brokers ap-
proved by it to sell vehicle insurance
policies and the maximum brokerage
or commission payable for selling in-
surance policies is capped at 10 per-
cent of the premium.
As these services were never provided
by the dealers, the invoices raised
were not permissible documents un-
der the CENVAT Credit Rules, 2004
and the Service Tax Rule, 1994 for
availing cenvat credit.
10 The Insurance Times, September 2015
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IRDA restores representative body and excludes brokers
The IRDAI has revamped the General
Insurance Council (GI Council), the offi- IRDAI on this matter and expressed our
cial representative body of 29 general
insurers, with the addition of five new
members but excluded the broking
community from the proposed Self-
Regulatory Organization (SRC).
The Insurance (Amend-
ment) 2015 Act provides
for restructure of existing
official representatives
bodies like GI Council and
Life Insurance Council to enable them
to operate more like a SRO.
However, insurance brokers have pro-
tested the move as despite the fact that
total industry's premium passes through
brokers, none of their representatives
have found a place in revamped GI Coun-
cil. Sohanlal Kadel, president, Indian
Brokers Association of India, has
claimed that the brokers are real rep-
resentative of insuring public and has
taken up the issue of non-inclusions of
IRDAI to accelerate online approvals
The Insurance Regulatory and Devel-
opment Authority of India (IRDAI)
plans to make the approval process for
online products simpler and faster.
The IRDAI authorities are trying to en-
sure that they do not undergo the
same rigorous process as offline prod-
ucts to get approved, and are ap-
proved within 30-40 days.
As insurance product first goes to the
regulator, which approves the features
and pricing, after which it can be
brought to the market for sale.
"Offline products take at least four to
six months to be approved. The same
process might not be viable for an
online insurance market, where cus-
tomers look for new products and rid-
ers on regular basis. Hence, the port-
brokers. "I have met the chairman of
displeasure. I have also explained that
the brokers are real representative of
insuring public.
IRDAI chairman explained that the
nomination by the IRDAI to the GI Coun-
cil is as per the Insurance
Act (Amendments 2015)
and IRDAI has no role in
it. However, I have re-
quested him to consider
inclusion of IBAI in the General Council,
Chairman has promised to look into the
matter. We don't mind knocking, at the
door of Parliament to see our represen-
tation in IBAI", said Kadel.
New members of GI Council are - Girish
Rao, representing Third Party Adminis-
trators, Sanjeeb Choudhury (policy hold-
ers), Adil Frenchman (intermediaries),
Yogesh Gandhi (Surveyor & Loss Ad-
juster) and Indu Sawhney (person of
eminence but not part of the insurance
industry).
folio requires to be updated every few
months", said the head of products in
a mid-size life insurance company.
For customers, too, the proposal form
would get simpler, with fewer ques-
tions, so that the turnaround time to
buy insurance is considerably reduced.
The regulator has also constituted two
groups, one in life insurance and one
in general insurance, to explore oppor-
tunities in e-commerce. It is also ex-
pected to clarify on the presently grey
area of digital signatures.
"Life insurer said reforms in the sector
are needed. The online market is distinct
from offline space. Based on customer
feedback, we should be allowed to tweak
product pricing and features in online
products", said the Chief Executive.