IRDA finds ‘massive problems' in SKS Micro's insurance operations

Troubles continue to pile up for SKS Microfinance Ltd. The insurance regulator has found irregularities in the micro-finance institution's handling of insurance of its clients.

“We have found massive problems in insurance operations of SKS Microfinance,'' Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, told Business Line here on Tuesday.

IRDA teams conducted field enquires and inspections for a long time, he said.

The irregularities included receiving the cheques of death claims from its insurers on its name, which is illegal.

The only listed MFI in the country, based out of Hyderabad, had also “collected” higher commissions than permitted by the insurance regulator while selling the insurance policies.

SKS deals with about 10 insurance companies in both life and non-life for various purposes including distribution of products.

It earns a substantial part of its other income, which was at Rs 366 crore in 2011-12, from distribution of insurance policies.

When asked when enquiry was completed, the IRDA chief said: “We have asked for an explanation.''

Generally, IRDA gives a personal hearing to any company that violates norms before deciding on a penal action.

When contacted, a company spokesperson said: “SKS Microfinance believes that there are no irregularities and, if there are process lapses on account of difficulties in offering rural insurance solutions to millions who have no bank accounts, the processes will be strengthened.”

SKS had stopped enrolment of group endowment policies two years ago, he added.

SKS scrip declined 3.92 per cent to touch a new low of Rs 77.20 on the Bombay Stock Exchange on Tuesday.