The Department of Financial Services (DFS) in India has proposed stringent penalties for insurance companies and intermediaries, including banks and insurance brokers, for mis-selling. The proposed fines range from Rs.1 crore to Rs.5 crore, with penalties for false statements or documents. However, individual agents will be exempted as insurers will be responsible for their actions.
Furthermore, the DFS proposes imposing penalties ranging from Rs.10 lakh to Rs.1 crore for selling insurance policies without registration or invalid license. The government also proposes penalties for non-compliance with IRDAI norms of up to Rs.10 crore on insurance companies and intermediaries. Daily non-compliance fines will be increased to Rs. 1-5 lakh per day, with a maximum cumulative penalty of Rs. 10 crore.
Indian Finance Minister Concern on Mis-selling of Insurance by Banks
Union Finance Minister Nirmala Sitharaman has expressed concerns about mis-selling, stating that banks should focus on mobilizing deposits and lending money. Insurance intermediaries include insurance brokers, re-insurance brokers, corporate agents, third-party administrators, surveyors, and loss assessors.
Key proposals of DFS
Key proposals include allowing foreign investors to hold up to 100% stake in Indian insurance companies, reducing the minimum net owned fund requirement for insurers, modifying investment requirements, allowing mergers of insurance businesses, allowing health insurance companies to sell personal accident and travel insurance, and reducing the representation of agents, intermediaries, and policyholders in the general insurance council.
