For the first time in India, a financial sector regulator has had a police complaint filed against it on criminal charges. A Hyderabad-based insurance broking company has filed the FIR against insurance regulator, Insurance Regulatory and Development Authority of India (Irda).
Excellent Insurance Broking Services has alleged that Irda has not renewed its annual licence, without offering any substantive reasons. The case comes just ahead of a national meet called by the regulator with brokerage companies to improve insurance penetration, which is at an abysmally low 3.6% of the country’s population.
Confirming the development, Irda chairman TS Vijayan said, “The case is in the high court. Since the matter is sub judice, we cannot talk about this issue.”
Insurance brokers work as intermediaries between insurance companies and clients to offer underwriting besides rendering advice on appropriate insurance cover and terms. While there are a large number of them the scope of their services has remained limited.
Irda for instance has yet to come up with measures to popularise their role. An insurance expert said “It is unfortunate the benefits available to policyholders if they avail the services of the brokers is still not happening. To spread the message of insurance, sub-broking should be introduced which would generate employment opportunities to relatively less educated youth in villages and suburbs also to earn a decent living thus addressing the unemployment problem in the country,” he added.
Excellent Insurance is one of the largest brokers registered with Irda and is also one among the first batch of licensee holders. It was granted licence as a direct broker in 2003. However, Irda objected to the renewal of its licence for 2015. The company on its part claims to have adhered to all the regulations, including applying for renewal a month prior to the due date.
The FIR was filed at the Saifabad police station, Hyderabad, has instead alleged that there was a caste issue for the non-renewal which Irda has vigourously denied.
In the process Irda had to present its case before the National Commission on SC&ST. The licence has been renewed since.
Company chairman V Sudhakar said, “I was harassed by Irda officials only because I am an SC entrepreneur and requested chairman to take action. The licence was due for renewal on January 29, 2015”.
The incident, according to some of the subject experts, calls for a relook at the ability of the regulator to police the sector. Complaints by affected parties are expected, but for those to escalate into criminal charges need to be carefully analysed, they said.