LAHORE: A leading insurance company was left with no option but to pay a penalty of Rs500,000 imposed by Securities & Exchange Commission of Pakistan (SECP) for violating several sections of the Insurance Ordinance, 2000, during an onsite inspection.

The said insurance company has been operating in Pakistan over the last one decade and offers a range of life and health insurance products. The company has expanded its operations and increased its investments in recent years. Despite this, the dismissal of the appeal and upholding of the penalty serve as a reminder of the importance of regulatory compliance in the insurance industry.

As per the findings of the Commission, the company failed to maintain proper records, provide complete data and claims, and relocated records without obtaining approval from the Board of Directors. Accordingly, a proper notice was served to the company for violation of a number of legal requirements, followed by the imposition of penalty after due opportunity of hearing.

The insurance company challenged the penalty at the relevant appellate forum, maintaining that the penalty was unfair and that the Commission had not exercised due diligence in rendering the penalty order. They also cited extenuating circumstances, including the destruction of files and data due to unforeseen events and the impact of the COVID-19 pandemic.

It further maintained that files for claims were provided to the inspection team at the time of inspection in whatever form they were available. Also, the storage of files was maintained at the ground floor of the building and the inspection team had also witnessed floor filled with rainwater at the time of inspection. Furthermore, it was difficult to hold the Board meeting due to COVID-19 pandemic, therefore, the management decided to shift the record from one to another place.

However, the relevant appellate forum did not agree with the stance and ruled that the explanations did not adequately justify their violations and that the penalty was rightfully imposed. The forum also emphasized the importance of regulatory compliance and noted that the penalty would serve as a reminder to the insurance firm and others to adhere to the provisions of the Ordinance.

Copyright Business Recorder, 2024