The insurance regulator on Sunday said it will carry out a special audit afresh of the life insurance companies to check whether their management expenses remain within allowable limit or not, officials said.
There is a limit for allowable expense for the insurers, and most of them are reportedly abusing their policyholders' money by exceeding the limit.
The Insurance Development and Regulatory Authority (IDRA) will conduct the special audit in line with a provision of the Insurance Act 2010 to check their position in this case.
IDRA will conduct the audit under new management expense rules, issued in September.
In 2015, the regulator conducted a special audit on 17 life insurers, and found 16 firms had higher management expense.
Such an additional spending eroded the life fund significantly and also weakened the insurance firms financially.
In the meantime, the Anti-Corruption Commission (ACC) asked IDRA to take actions against the 16 firms.
After releasing the audit reports in 2016, a vested quarter filed complaint against the insurance companies with ACC, arguing that the companies had 'abused' the policyholders' money.
But, ACC at one stage opined that IDRA would take actions against the companies as the primary regulator.
The life and non-life insurers usually spend a huge amount of fund for procurement of insurance policies. They employ a large number of marketing personnel and provide other logistics to maintain their businesses.
The Ministry of Finance (MoF) intervened in the scenario in 2016, asking IDRA to refrain from taking any action until new rules pertaining to the management expenses were prepared.
The stakeholders concerned, mostly insurers, then objected the audit reports, saying the investigations were made under old rules prepared in 1950s.
The stakeholders also argued that the present management expenses were higher than those of 1950s, mainly due to high rate of inflation and increased tariff of utilities and others.
While contacted, IDRA member and spokesperson Gokul Chand Das told the FE on Sunday that the regulator will start the special audit under the new rules just after the national election on December 30.
"We'll conduct the audit of the life firms just after the national polls."
He also said if they find that the companies' expenditures are in an acceptable level, they will not need to take any action. "If we find that the insurers' expenses are not within the allowable limit, we will definitely take actions against them," Mr Das added.
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