The Securities and Exchange Commission of Pakistan (SECP) has imposed a fine of Rs 0.5 million each on two insurance companies and issued a stern warning to another insurer for their defaults of different sections of the Insurance Ordinance 2000.
In an order passed against M/s EFU General Insurance Limited, the SECP said after carefully examining the arguments and studying the facts and findings of the case, the default of Section 45 of the Insurance Ordinance 2000 has been established and the Company has also accepted its default. "Instead of imposing the maximum penalty, a fine of Rs 500,000 has been imposed due to the fact that the Company (EFU General Insurance Limited) had not complied with the provisions of Section 45 of the Ordinance, by not maintaining proper books and records of the Company relating to the claims", the SECP order said.
"The Company is also directed to thoroughly probe into the issue of missing files and genuineness of the claims paid, and to take immediate measures for the recovery of those missing files and any other files that may be missing from the Company's record and send us confirmation within 90 days from the date of this order that the company is fully compliant with the requirements of Section 45 of the Ordinance", it added.
"M/s EFU General Insurance Limited are hereby directed to deposit the aforesaid fine of Rs 500,000 in the designated bank account maintained in the name of Securities and Exchange Commission of Pakistan with MCB Bank Limited within thirty days from the receipt of this Order and furnish receipted vouchers issued in the name of Commission for information and record", the order said.
In another order against M/s EFU General Insurance Limited, the SECP said that the default of Section 12 read with Section 11(I)(f) of the Ordinance is established and to a great extent, the Company has also accepted its default. "Instead of imposing the maximum penalty, the SECP takes a lenient view, and thus, condones the Company due to the following reasons:
a. The company's management including its directors has taken cognizance of the fact that they did not have proper policies and procedures and they have initiated, and to some extent finalised, the formulation of policies and procedures.
b. The Company has, on the net, gained from the transactions in the shares of M/s EFU Life Assurance Limited, and the loss on the repurchasing of the shares has not affected the Company's solvency position.
c. The intention of sharing of the internal audit reports with the Chief Executive Officer and the relevant departments was to address the anomalies and shortcomings on immediate basis, and that the internal audit function reports to the audit committee.
d. The Company has in-built checks and controls in its IT systems, which may be revised on an ongoing basis and especially upon the finalisation of the policies and procedures.
"Also, the Company is hereby issued a stern warning that in case of similar non-compliance in future a stronger action against the Company will be taken", the order said. In another separate order, the SECP imposed a fine of Rs 500,000 on M/s East West Life Assurance Company Limited for non-compliance.
The SECP order said that a nominal fine of Rs 500,000 is imposed due to the fact that the Company had not complied with the provisions of Section 11(I)(f) read with Section 12 of the Ordinance, by not establishing and maintaining proper system of internal controls all across the Company.
Furthermore the Company was directed to take immediate measures for the establishment of the effective and efficient system of internal controls so as to comply with the requirements of Section 11(I)(f) read with Section 12 of the Ordinance; conduct a thorough inquiry into the matter and investigate the role of Chief Internal Auditor, Chief Financial Officer, Head of Underwriting and any other officer who is directly/indirectly responsible or involved in the fraud, and if found guilty, take appropriate action(s) under intimation to the Commission within 90 days from the date hereof; and compensate all the affected policyholders of the Company who have suffered losses due to the fraudulent activities at the Company's Hyderabad Regional Office.
M/s East West Life Assurance Company Limited are hereby directed to deposit the aforesaid fine of Rs 500,000 in the designated bank account maintained in the name of Securities and Exchange Commission of Pakistan with MCB Bank Limited within thirty days from the receipt of this Order and furnish receipted vouchers issued in the name of Commission for information and record, the order said.