Max Life Insurance has been fined Rs 3 crore by the insurance regulatory body IRDAI for violating norms. Generally, Axis Bank is the corporate agent of Max Life Insurance Company.
According to IRDAI, norms were violated in some of the transactions carried out by these two companies. So, IRDAI has announced that Axis Bank will have to pay a penalty of Rs 2 crore within the next 21 days. Meanwhile, Max Life Insurance Company will have to pay a penalty of Rs 1 crore.
Axis Bank acquired a 13% stake in Max Life Insurance Company from Max Group. And, this was first announced by Axis Bank in 2020.
Axis Bank then decided to buy a 29% stake in Max Life Insurance. IRDAI said the transaction violated the Payment of Commission, Remuneration and Remuneration to Insurance Agents and Insurance Intermediaries Rules, 2016 and the Registration of Corporate Agents Rules, 2015.
Axis Bank sold 0.998% of its equity shares at a price of Rs 166 per share—equivalent to the fair market value decided by a chartered accountant.
Subsequently, Axis Bank and its group of companies acquired 12% of shares within 22 days at a price range of Rs 31.51—32.12 per share as envisaged under Rule 11 UAs Income Tax Rules 1962 valuation.
“Because of this, the IRDAI said that there is no uniform way to determine transfer prices.”
But, the business has said that it believes its actions in regard to this share transaction were not unlawful.
The life insurance was fined Rs 3 crore, and the bank was fined an equivalent amount, for a share sale transaction in which the bank acquired a 12.99% ownership in its competitor and became a co-promoter.
“In order to strengthen its long-term strategic collaboration with Axis Bank and prevent additional legal challenges, Max Life has agreed to pay the penalty issued by IRDAI while maintaining that no misconduct was done.”
However, after careful study of the future regulations and in order to protect the company’s and its stakeholders’ best interests, they have chosen to remit money toward the penalty.
“The transactions were conducted in good faith.” However, after careful study of the future law, and in order to protect our company’s and its stakeholders’ best interests, we have chosen to remit money toward the penalty. Analjit Singh, Chairman of Max Life Insurance, stated.
The regulator stated in its ruling last week that the arrangement between Max Life and Axis Bank breached commission limit restrictions.
Misrepresentations to the regulator, higher-than-permitted remuneration for its corporate agent, and failure to follow fair-market value in the sale of shares were among the complaints levelled against the company. The insurance business was found guilty of all allegations and was fined one crore rupees for each one.
Axis Bank did not react to a reporter’s email. IRDAI ordered a Rs 2 crore penalty on Axis Bank, stating that the business breached several norms in connection with the transaction of Max Life Insurance Company Limited shares between Max Financial Services Limited and its subsidiaries.
Given this, it is crucial to stress that the penalty would have no meaningful impact on its operations or corporate agency.
Following its acquisition in April 2021, Axis Bank, together with its subsidiaries Axis Capital Limited and Axis Securities, will be the co-promoter of Max Life Insurance. And, Axis Bank’s stake in the firm is expected to increase in the coming quarters.