Oriental Insurance Company limited has suspended two senior officials for gross negligence of duty and ordered a departmental enquiry into a suspected fraud that could run into crores.
The State-owned insurer suspended an Assistant General Manager and an Administrative Officer of its Marine Hull Insurance department at its head office in New Delhi for allegedly paying a whopping Rs47 lakh to an insurance broker as commission on a ship insurance premium.
Preliminary investigation showed that the two officers were involved in the fraudulent payment to the broker and they were suspended with immediate effect. A departmental enquiry has also been ordered. There is a probability of the involvement of other officers in this case and more heads are expected to roll.
“The officials approved the total payment of Rs47 lakh to a broker as his brokerage without verifying the facts and figures. When it was tallied by the audit and accounts department, the company found that the payment made was a fake one and the management took immediate action by suspending two senior officers in its Marine Hull Insurance department. A departmental probe is still on. The involvement of many more officers in the fraud is expected to come to the fore. Stringent action will be taken against them soon,” an Oriental Insurance official told The Pioneer on condition of anonymity.
As far as the commission on premium from any corporate is concerned, the brokers or commissioning agents, who are hired by Insurance Regulatory and Development Authority generally charge around 15 per cent brokerage on each premium collected from the third party.
In this case, the insurer booked the premium through one of the brokers under Marine Hull Insurance department and paid the commission (brokerage). The broker submitted 100 policies but the insurance company officials showed 101 policies and paid the commission for one policy extra to the broker, sources said.
“The broker charged a commission of Rs 47 lakh for that fake policy and collected three vouchers worth Rs 15 lakh each and one for Rs 2 lakh later. Either, he conned the management or the paying authority did not give heed. Hope, it will come to light after the investigation is over,” sources said.
According to sources, the bungling came to light on September 2 when the audit department saw a mismatch in accounts in its General ledgers (Gl) files. “The Gl files showed that three vouchers of Rs 15 lakh each worth a total of Rs 45 lakh were paid to a broker, while another Rs 2 lakh was paid through a separate voucher. When it was found to be a fraudulent payment by the audit department, the company immediately took the broker into confidence and asked him to return the money. As the management had sufficient proof, the broker returned the amount. The company began a departmental enquiry where they found some people involved in approving such fraudulent payments,” the sources said.
Sources said there might be a probability of senior officers’ involvement in this scam and the amount could run into crores of rupees.
According to sources, this scam has been going on since 2009. “After this case came to light, the broker returned all the money. But the company officials did not hand over the matter to the CBI because of the possibility that higher officials may also be involved in this scam,” the sources added.
In an e-mail response to a query, General Manager and Chief Vigilance Officer Rakesh Kumar of the Marine Hull Insurance department has confirmed the development and said, “The matter is under investigation, and at this stage information cannot be shared with anybody as it may hamper the investigation process.”
Several attempts to contact Oriental Insurance Chairman and Managing Director AK Saxena for his comments went in vain. An e-mail sent to him in this connection on September 24, remained unanswered till the time of going to press.
When contacted, one of the suspended officials claimed to be innocent and said he was framed to protect higher officials. “I was totally unaware of the case. I got to know on September 6 and the broker paid all the money on September 9. But, all of a sudden, I got the suspension order on September 11, stating that it was committed ‘intentionally.’ It was all framed to protect higher officials who ignored the case before giving final approval to the payment,” he said.
When asked about the further course of action, he said, “I am waiting for their charge sheet and I will go to court for my defence.”
Meanwhile, a five-member team from Kochi arrived at the company’s Mumbai divisional office on Monday for a special audit of the case as the division handles all marine insurance cases in the company. Also, a team from the office of the Comptroller and Auditor General visited Delhi to take stock of the situation.