Maruti insurance arms court trouble

Problems are adding up at Maruti Suzuki, which is fighting a labour turmoil at its Manesar plant. Storm clouds are now hovering over the car maker’s six subsidiaries that have been selling insurance policies as corporate agents of various general insurance companies. The Insurance Regulatory and Development Authority (IRDA) has fined six general insurance companies — National Insurance Company, New India Assurance Company, ICICI Lombard, IFFCO Tokio, Royal Sundaram Alliance and Bajaj Allianz General Insurance Company — a sum of Rs 5 lakh each for granting corporate agency licences to six Maruti Suzuki subsidiaries violating regulations. Following this, the insurers are likely to cancel their agency licence to Maruti subsidiaries. Maruti Suzuki India had formed six subsidiaries —Maruti Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti Agency Network Ltd, Maruti Insurance Agency Solutions Ltd, Maruti Insurance Agency Services Ltd and Maruti Insurance Agency Logistics Ltd. The car maker holds 99.99 per cent equity in each of the subsidiaries and has procured corporate agency licences between 2002 and 2007 for selling policies from various general insurance companies. IRDA noted that insurers granted licences to Maruti subsidiaries “grossly violating” the IRDA (licensing of corporate agents) Regulations, 2002. According to the regulation, only one licence (of the corporate agent) can be granted to one business group provided that the group doesn’t have any other insurance activity, including brokering, agency or product manufacturing. The regulation also defines that all companies in which a single promoter group holds 10 per cent equity or more will be considered belonging to the same business group. For granting corporate agency licences to group companies, insurers need prior approval from the insurance regulator. However, the six Maruti subsidiaries were granted licences by insurers without complying with these regulations. “This was clearly possible by circumventing the provisions and guidelines to their advantage and such blatant violations itself calls for stringent action,” the insurance regulator said.