Tata AIG penalised by IRDA

Insurance regulator IRDA on 25 November 2010 penalised Tata AIG Life Insurance Rs 5 lakh for failing to adhere to guidelines relating to management expenses. According to IRDA norms, management expenses of the life insurer for 2008-09 were 114.90% of the premium, which is beyond permissible limits under Section 40B of the Insurance Act, 1938. For the breach of set management IRDA had directed Tata AIG back in October 2009 to bring down its expenses on management below 110% by the year 2009-10 and below 100% by 2010-11. However the company expenses ratio actually increased to 117.28% for the year ended March 2010. IRDA therefore issued a notice asking why action should not be taken for violating norms. Tata AIG responded by saying that it was compliant with the limits in the initial years and had started relatively late expansion and heightened focus on expenses rationalisation.