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Irdai penalises brokers for cheating Tata AIG

George Mathew
Tata AIG, Tata AIG cheating case, Irdai, Unison lnsurance Broking Services, Indian express

In an order issued last week, Sujay Banarji, Member (Distribution), Irdai, barred Steven Chetty, MD, Confiance, from doing insurance/reinsurance business in lndia and lndian insurers and their offices overseas, as he had played an active and primary role in the fraudulent deal.

The Insurance Regulatory and Development Authority of India (Irdai) has slapped curbs and penalised brokers and agents for their involvement in the Rs 300-crore fraudulent crop reinsurance deal in which Tata AIG General Insurance was cheated by multiple intermediaries including Unison lnsurance Broking Services, an Indian composite insurance broker, Confiance, a Malaysia-based broker, and its Jaipur-based agents in India, Global Master Consultant (GMC).

In an order issued last week, Sujay Banarji, Member (Distribution), Irdai, barred Steven Chetty, MD, Confiance, from doing insurance/reinsurance business in lndia and lndian insurers and their offices overseas, as he had played an active and primary role in the fraudulent deal.

Mukesh Ranwan and Sachin Agarwal, directors of GMC who are representatives of Confiance in lndia, have also been barred from doing any insurance/reinsurance business in lndia, Indian insurers and their offices overseas. lndian reinsurers and their offices overseas, foreign reinsurance branches in lndia and insurance intermediaries were directed not to engage in any business activity with Ranwan and Agarwal.

The regulator has also fined Unison Brokers, which was the primary broker for Tata AIG General insurance in the deal, to the tune of Rs one crore.

Tata AIG, which was forced to exit the crop insurance business after losing money heavily in the reinsurance deal, made a complaint to Irdai against Unison lnsurance Broking Services alleging fraud in reinsurance placement pertaining to crop insurance, with a premium of around Rs 300 crore in Rajasthan cluster for Kharif 2018 season.

Irdai had received an email from Tata AIG on December 21, 2018, informing the fraud committed against its company with regard to the placement of reinsurance protection through Unison lnsurance Broking Services, a composite Baroda-based broker that had made facultative reinsurance arrangements to support the company’s crop reinsurance risk cover in 2018-19, through Confiance lnternational Reinsurance Broker LLC, a Malaysia-based broker involving their lndian representative GMC.

Chetty, the MD of Confiance in Malaysia, and Ranwan and Agarwal are the representatives of Confiance heading GMC in lndia. Confiance had provided the best terms for placement with two reinsurers, Tokio Marine Kiln Syndicate (TMK) and Best Meridian lnsurance (BMI).

The reinsurance placement was confirmed with copies of signed slips of the participating reinsurers. The broker remitted the reinsurance premium of Rs 1.13 crore and Rs 6.17 crore, respectively, to Confiance.

After deducting its brokerage in November 2018, it came to the knowledge of Tata AIG officials that TMK is not participating in the facultative placement of its crop business. Immediately, Tata AIG contacted the general counsel of TMK with a copy of the TMK signed reinsurance slip provided by Confiance. After checking internally, TMK confirmed it had not provided any support for the reinsurance and the slip purportedly signed by it was not issued by it.

Tata AIG contacted BMl and BMI confirmed that it is not on risk and BMI Global and its affiliates or subsidiaries have not quoted, underwritten, signed or executed any reinsurance involving Tata AlG. BMI also informed that it is opening an investigation regarding the original source of this document and confirmed that BMI does not accept or recognise being bound to this coverage.

Tata AIG took up the matter with the broker. After examining the matter, the broker came to the conclusion that the slips provided by GMC, the lndian representative of Confiance, are fraudulent slips.

Chetty, in his email to Unison Insurance, expressed distress on the situation/forged documents and informed the broker that Confiance is not aware or authorised such action.

He further informed the broker that the funds are sitting in the accounts of Confiance, for a risk which they did not officially place. Chetty arranged for transfer of funds to the broker and the broker in turn refunded the premium to Tata AIG General Insurance.

According to Irdai, considering the facts and the involvement of Confiance, foreign reinsurance broker in the chain of events and its implication in the reinsurance market in lndia, it is established that the cession of reinsurance premium, issuance of the forged reinsurance slip and subsequent refund of the reinsurance premium by Confiance constitutes a serious and grave offence.

Irdai said the actions of Confiance were deliberate and harmful. Such actions cannot under any circumstances be tolerated as it put the existence of general insurance companies in peril.

In the entire episode, Confiance made no efforts to clarify its stance and simply returned the premium, which, in turn, proves that it intentionally committed this act by not placing the risk with the foreign reinsurers and issued forged reinsurance slips to the lndian reinsurance broker.