Financial Express, 29 December, 2011
Place : Mumbai
In a development reminiscent of the turf battle between Sebi and Irda over Ulips, the latter appears to be on a collision course with the ministry of finance (MoF) over the payment of obligatory commission by GIC Re, the state-owned reinsurer to general insurers.
GIC Re - which had stopped paying commissions to general insurers on obligatory business on MoF’s instructions - has been asked by Irda to continue doing so.
An Irda order signed by its chairman, J Hari Narayan, said the "plea taken by GIC Re - that such action was taken under the direction of the government - cannot be accepted", as it is Irda, which is vested with the powers to regulate, promote and ensure the orderly growth of the insurance and reinsurance businesses.
"It is not disputed that the action of the GIC Re, in unilaterally varying the terms of the contract entered into, is violative of the provisions of the contract. The terms and conditions of any insurance contract are spelt out within the contract and both parties are bound by terms of the same," the order said.
"GIC Re's decision not to pay obligatory commission is null and void and the authority advises GIC Re to restore the commission and profit commission on obligatory cessions for the year 2011-12 at the mutually agreed levels on October 11, 2011," added the order.
The Irda had earlier said that it received communication from direct insurers about GIC Re withdrawing the payment of the commission in October.
The insurers pointed out that GIC Re, having agreed in writing to certain commission and profit commission, could not unilaterally withdraw it as such an action was in violation of theterms and conditions of the agreement entered into.
Irda, by its letter dated December 1, advised GIC Re to comment on the complaints received from the insurers.