New Delhi: CBI has started a probe into alleged under valuation of penalty to the tune of nearly Rs 17,500 crore on Reliance General Insurance Company Limited by the officials of Insurance Regulatory and Development Authority(IRDA) in 2009.
The agency has named Reliance General Insurance Company in its inquiry and "unknown officials" of the Authority, CBI sources here said today. "CBI has registered a preliminary enquiry against unknown officials of Insurance Regulatory and Development Authority and a private company on allegations that a penalty of Rs 20 lakh (approximately) was imposed on the said company instead of Rs 17,500 crore for 3.5 lakh instances of violations of IRDA guidelines," CBI spokesperson Kanchan Prasad said.
According to IRDA penalty order in 2009, the company had sold 3.5 lakh policies and each policy constituted a violation thereby making company liable for a penalty of Rs 17,500 crore. But only Rs 20 lakh of penalty was actually levied, it said. The then Chairman J Hari Narayan who signed the order has already been quizzed, CBI sources said, adding that they are trying to understand if there was a mala fide or a quid pro quo in the order.
The allegations relate to Reliance Health Care policy, which was sent to IRDA in 2005 for necessary clearances, which was cleared in? 2006. A Reliance General Insurance spokesperson said the allegation that penalties of Rs 17,500 crore could have been imposed in this matter is baseless, unfounded and devoid of any legal foundation. The total premium collected under the policies issued more than five years back was Rs 80 crore, against which claims of Rs 140 crore were paid, resulting in huge losses to RGCIL, the spokesperson said. The penalty of Rs 20 lakh imposed was itself thus highly excessive and unwarranted, and the allegation that this represented a 'favour' to RGCIL is far-fetched and imaginary.
"We welcome any enquiry into the exercise of discretion by IRDA in this matter, which is identical to penalties imposed on all leading insurers in the country," the spokesperson said. Narayan is reported having said that the insinuation that he had favoured RGICL was unfounded. In 2006, IRDA revised guidelines or 'File and Use' specifying various other procedural and other requirements to be followed by the insurers.? "These revised guidelines required the prior approval in case change in the name or any of the terms and conditions or an increase in the price of the product," the IRDA order had said.
