Mumbai: Stressing that monetary penalty is not the solution to ensure compliance, IRDAI on Monday revised norms relating to insurance brokering firms, under which repeat offences could lead to cancellation of licences. The reworked graded approach to be followed in the case of non-compliance of Broker Regulations is based on the experience gained over the last six years.
The Insurance Broker Regulations were amended in December 2013 and new rules notified in January 2014, which are aimed at encouraging good behaviour among insurance brokers and foster better compliance.
“Generally, a warning is given for first-time non-compliance,” it said. And in the case of second-time non-compliance, the firm cannot undertake a placement of new business till such time the problem is rectified or for two-four months, whichever is later.
ALSO READ: IRDAI asks insurers to report ownership structure by January 18
Further, IRDAI will initiate steps for suspension or cancellation of the licence “with the condition that the broker will not undertake a placement of new business till such time the problem is rectified or six months, whichever is later for third-time non-compliance”. However, if the regulator considers the violation committed by the insurance broker is grave, then it may initiate steps for suspension/cancellation of a licence at the first stage itself.
The revised rules are intended to simplify the application of penalties in the case of non-compliance or violation of regulations, Insurance and Regulatory Development Authority of India (IRDAI) said in a notification. In order to achieve the objective, IRDAI said, “Imposition of monetary penalties is not the solution to encourage good behaviour and foster compliance.”
Besides, if the broker financially benefited, then such benefits will be neutralised or set off by fines.