Insurance fraud: Rs.8m and
Insurance Board discovers leasing
companies with hands unlawfully in insurance business
by Devan Daniel
Certain leasing companies have been found to have been
holding on to vehicle insurance premiums paid in by their
customers instead of sending them to the relevant insurance
company, an official of the Insurance Board of Sri Lanka (IBSL)
told the Island Financial Review.
When vehicles are leased, a third party motor vehicle
insurance cover is obtained as is mandatory by law.
"We recently discovered that certain leasing companies had
been canvassing comprehensive motor insurance policies directly
to their clients and collecting the premiums too," the official
"This is in direct contravention to the regulations set out
by IBSL where insurance policies can only be sold by insurance
agents of registered insurance companies or brokers registered
"The fact that the leasing companies are holding onto to the
premiums is a serious issue because it puts the policy holder at
According to IBSL laid down regulations, premiums must be
paid into the insurance companies within the premium due date
which falls 60 days after the inception of the insurance cover
and according to the ‘premium payment warranty’ if the premiums
are not received by then the policies are terminated.
It has been brought to the attention of IBSL that a certain
leasing company had been holding onto premiums amounting to
Rs.8ml perhaps utilising the 60 day credit period to make short
term investment gains.
The leasing company in question promoted policies and
collected premiums on behalf of an insurance company belonging
to the same group of companies.
"But even where the insurance companies are not of the same
group they do not complain because at the end of the day they
want the business. The insurance companies should be concerned
with collecting these premiums as early as possible," the
The IBSL has time and again advised policy holders to pay
their premiums only to insurance companies or insurance broking
companies registered with IBSL or to registered agents of these
The Regulation of Insurance Industry Act does not recognise
institutional insurance agents, only individuals. So leasing
companies should not be selling insurance in the first place let
alone collect premiums.
IBSL will shortly notify the Central Bank of these
developments as the bank is the regulator of leasing companies.