A recent inspection report by IRDAI shows that business commissions worth crores were paid to insurance broker even when premium cheques submitted by them bounced.
The inspection report, to which Sompo replied last month, pertains to accounting year 2016-17, where 4,059 premium cheques bounced, of which, 1,124 belonged to a single broker, Risk Care Insurance. The inspection report says the reason for the soft approach against Risk Care could be “close family connections” the broking company had with ON Singh, who has been the Non-Executive Chairman of Sompo for more than a decade now.
The report says that the family members of ON Singh are shareholders and board members of Risk Care, which gives rise to “conflict of interest.” In fact, Singh is also a director at First Advantage Finance & Investments, which holds a 4.39 per cent stake in Risk Care. Other shareholders of Risk Care include Singh’s wife, daughter, son and daughter-in law, investigations show.
In addition, payments made by Sompo to other vendors, including Adept Information Services, Mindpool Management Solutions, Krishi Care & Management Services, Principle Security and Allied Services, too, had links with the family members of Singh, the report shows.
Ram Nath was a common director in both Sompo and Krishi Care, which was paid Rs.24 crore by the insurance company. Mindpool Management, Krishi Care, and Adept Information all shared a common address at Virwani Industrial Estate, Goregon, Mumbai. Advika International and Principle Security shared a common address in Jogeshwari. Payments made to vendors include for housekeeping, rent, and professional charges for IT, apart from insurance. These transactions are worth more than Rs.100 crore.
Sompo, in its reply, said: “The IRDAI has observed certain operational issues that were responded and clarified with due details. The company strictly follows corporate governance in letter and spirit. Reasons for cheque bounces are verified by a dedicated team and system is updated for all such cases and policies are cancelled and premium register and commission statement is updated. Necessary action is taken in all such matters. Dishonoured cheques of Risk Care are only around 12-14 per cent of the total other intermediaries.” Sompo also denied that vendors named above were parties related to Singh.