G. Naga Sridhar ( Hyderabad, Dec. 24)

The Insurance Regulatory and Development Authority (IRDA) has served a notice to SKS Microfinance Ltd on ‘violations' of some norms in the sale and management of insurance policies for its clients.

The notice was sent to the country's only-listed MFI for ‘collecting' higher commissions than permitted while acting as an agent and ‘not depositing' the money with the insurer as mandated.

The company has also been ‘found' to be receiving cheques of death claims on its name which is illegal.

According to the rules, the cheques should be issued only in the name of beneficiaries.

“We have received the notice and also responded to it,” Mr M.R. Rao, Chief Executive Director and Managing Director of SKS Microfinance, told Business Line here on Friday. Under Section 102 of the Insurance Act, the ‘violations' once established would entail a penalty of Rs 5 lakh a policy and could run into crores of rupees given the large customer base of the Hyderabad-based company.

Further, the largest MFI would also stand a chance of losing its licence to offer insurance to its members.

A team from IRDA inspection department had in November visited SKS office here and spent a day examining the records.

SKS has tie ups with with the Life Insurance Corporation and Bajaj Allianz for insurance of its members. It offers two products, Group Level Term (GLT) Assurance Plan and Swayam Shakti Suresh (SSS).

For GLT, the quantum of sum insured for the last 12 months from November 30, 2009, was Rs 10,143 crore. For SSS, it had about 20 lakh active clients.

Over the last two years, it had paid Rs 347 crore as premium to Bajaj Allianz after collecting it from its members.
Source :- Business Line