In the matter of M/S. Reliable Insurance Brokers Pvt. Ltd, Dec 2010

ORDER OF THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY UNDER REGUALTION 14 OF IRDA (INSURANCE BROKERS) REGULATIONS, 2002 In the matter of M/S. Reliable Insurance Brokers Pvt. Ltd Application dated 9-th - May-, 200-9 see-king-gra-nt of- Ren-ewal-of D-irect- Bro-king- Lice-nse 1. RELIABLE INSURANCE BROKERS PVT. LTD, (hereinafter referred to as the ‘Broker’) having its Registered Office at 102, Roop Kamal Apartments, C-55, Sarojini Marg, C-Scheme, Jaipur -302 001 have been granted a license by the Authority to act as a Direct Insurance Broker vide License No 159 on 16th day of May, 2003 and renewed till 15.5.09 pursuant to the provisions of the IRDA (Insurance Brokers) Regulations, 2002 (herein after referred to as the ‘Regulations’). 2. The Authority, in exercise of powers granted under Regulation 29 of the said Regulations, appointed its officers to conduct inspection of the Broker and the findings of inspection report were communicated to the Broker vide letter dated 10th September, 2009 under Regulation 32(1) of the Regulations for his information and comments. The explanation of the Broker to the findings of inspection report has been received on 26th October, 2009 and examined. 3. In the intervening time, the Broker submitted renewal application dated 9th May, 2009 since the license was falling due for renewal on 15-05-2009. The Authority while considering the said application for renewal of license under Regulation 13 took into consideration the matters emerged in the inspection. Considering the nature and the gravity of the violations found in the inspection and reply of the Broker, the Authority issued a show cause notice dated 3rd May, 2010 as to why renewal of license should not be declined. 4. The Broker submitted its reply to the show cause notice vide its letter dated nil received by the Authority on 28th May, 2010. The Broker while admitting violation of some regulations also denied the charges in the said notice.

The Authority subsequent to the reply of the Broker to the show cause granted them personal hearing opportunity on 20th July, 2010. The minutes of personal hearing are given to the Broker.

The Broker vide letter dated 23rd July, 2010 submitted additional documents and assured to present original shares alleged to have been under the possession of Mr. Kamal Jain and associates. But the said documents were not received till date. 5. The Authority has carefully gone through show cause notice, reply of the Broker, submissions made in personal hearing, written submissions thereafter and relevant material on record and have come to the conclusion that M/S. Reliable Insurance Brokers Pvt. Ltd have violated the following Regulations and code of conduct matters. i.) The Broker procured business through outside individual/entities that are not on the roll of the company and are being referred as ‘business procuring agents. The Brokers reply to the show cause notice, submissions made in the personal hearing and attendance register submitted substantiate that the company engaged the services of above persons like agents, introducers, /canvassers for procuring the business. The Broker, thus, violated the code of conduct 3 (b) under regulation 21 by engaging introducers/canvassers and business procuring agents. ii.)

The Broker advanced premiums on behalf of policyholders and this practice has been prevalent since 2005- 06.The Broker admitted the mistake and no proof of recovery of such premium subsequently from the clients is produced. The act of payment of premium on behalf of clients is not in conformity with the functions of a Direct Broker under Reg. 3. iii.) The Broker has no formal system of Internal Audit in the company. The issue of transfer of Office to Raipur from where business was also placed and closing of the same after internal disputes proves that there is no proper internal governance. The Authority received a letter dated 3rd April, 2008 from the Broker signed by Sri. Aditya Jain as Director, informing that there is change in shareholding and shares were brought by them and any other person representing the company should not be entertained. In the letter dated 1st May, 2008 the Broker informed that disputes between the shareholders of the company have been resolved and the group claiming to be the representatives of the company at Raipur will file an application to withdraw their case filed before IRDA.

However, the Authority did not receive any such communication. The Broker in personal hearing assured to confirm the physical possession of shares. The Broker vide letter dated 26th August, 2010 informed the matter is under progress. Till date, there is no confirmation on the physical possession of shares. The Broker, therefore, has not complied with Regulations 27 of said regulations as to the internal controls and systems. iv.) The Broker has arranged for insurance of Aircraft King Air B-200 VT-RJA belonging to Government of Rajasthan placed by State Insurance & Provident Fund Department, Govt. of Rajasthan with New India Assurance Co Ltd. The Principal Officer admitted that the Broker involved in placement of insurance of said aircraft with New India Assurance Co Ltd and the commission received for the transaction was allegedly passed onto the account of an employee of Willis India Insurance Brokers Pvt Ltd. WIIBPL denied this allegations in writing and the Broker has not forwarded any proof in support of the allegation.

Thus, the name of Willis India Insurance Broker Pvt Ltd had been misused by Reliable Insurance Brokers Pvt Ltd in the insurance of Aircraft King Air B-200 VT-RJA belonging to Government of Rajasthan. There is misrepresentation to State Insurance & Provident Fund Department that the Principal officer Mr. S. Govil is the local representative of Willis India Insurance Broker Pvt Ltd. Further, it is observed from inspection report that the Broker has arranged for reinsurance placement of aircraft pertaining to ‘First flight Courier Ltd’ for which Broker has claimed a service charge of Rs 19.80 lacs being 1.5% of settled claim amount. The license issued to the Broker is only for procuring Direct Business. During personal hearing, the Broker stated that the confirmation letter from First Flight Courier Services will be submitted to prove that Broker has not arranged for reinsurance placement of aircraft pertaining to ‘First flight Courier Ltd. In written submissions made in letter dated 23rd July, 2010 also, the Broker assured to send confirmation letter from First flight Courier Ltd. But no such document is submitted by the Broker till this day.

The actions of the Broker as per material on record are in violation of Regulation 9(2) (H), 10(1) (iv) and Regulation 3 and code of conduct clauses 2 (a,) (b, (c), (f) (g), 3 (d), (e) (f) and 12 (a) (b) (c) of Regulation 21. 6. In terms of Regulation 13(3) of the Regulations, the application seeking renewal is required to be dealt with in the same manner as is specified under Regulation 9 of the Regulations. In terms of Regulation 9 (1) & 9(2)(I) of the Regulations, the Authority while considering an application for grant of license is required to take into account all matters relevant to carrying out the functions by the broker and in particular whether the grant of license would be in the interest of the policyholders. 7. In view of the aforesaid violations committed by the Broker, the Authority is of the view that the application of the broker, seeking grant of renewal of license that was earlier granted to them to carry out the functions as a Direct Insurance Broker, be rejected. 8. Accordingly, in exercise of the power vested upon the Authority under section 14 of the IRDA Act, 1999 read with Regulation 14(1) of the Regulations, the Authority refuses to grant renewal of license to M/S. Reliable Insurance Brokers Pvt. Ltd to act as a Direct Broker.

9. If aggrieved by the decision of the Authority, the Broker may in terms of, Regulation 14(3) of the Regulations apply within a period of thirty days from the date of receipt of this communication, to the Chairman of the Authority for a reconsideration of its decision.

Sd/- (J. Hari Narayan) Chairman Date: 22nd December, 2010 Place: Hyderabad ``True Copy Forwarded By Order’’

(Suresh Mathur) Joint Director