By Our Reporter
SHILLONG, Sep 22: The Comptroller and Auditor General of India (CAG) has found that the inability of the State Nodal Agency (SNA) to protect the interest of the government in efficient implementation of MHIS-IV and PMJAY resulted in the extension of undue financial benefit of Rs 11.38 crore to the insurance company of the scheme.
Scrutiny of records of the CEO, SNA pertaining to the implementation of MHIS-IV and PMJAY showed that M/s Reliance General Insurance Company Limited was selected (December 2018) as insurer for the scheme at the agreed premium of Rs 1,630 per beneficiary household per annum and accordingly, contract agreement was executed on December 3, 2018.
According to Clause 8B(c), the administrative cost is 12, 15, and 20 per cent if the claim ratio is less than 60 per cent, between 60 and 70 per cent, and between 70 and 80 per cent respectively.
Further, clause 21A (a) to (c) of the contract agreement provides that the insurer shall be responsible for beneficiary identification, registration and to ensure availability of sufficient number of IT infrastructure/kits, at the designated location so as to complete the registration drive of 50 per cent of the targeted 7,88,256 households within four months (January 23, 2019 to May 31, 2019). The cost of registration was to be borne by the SNA.
In this regard, the audit observed undue financial benefit of Rs 3.86 crore to the insurer.
Scrutiny of records showed that the SNA intimated (January 15, 2019) the insurer to deploy 130 kits for registration drive and complete the registration process by May 31, 2019.
However, the CEO, SNA had in February 2019 expressed concerns over the slow pace of registration drive.
On March 18, 2019, the insurer requested the CEO, SNA for immediate deployment of additional 100 to 150 additional kits to speed up the registration process. The SNA in a meeting held on March 29, 2019 approved the deployment of 170 additional kits to speed up the registration process with the condition that the cost for deployment of the additional kits (Rs 3.69 crore) shall be adjusted out of the registration fee collected by the insurer from the beneficiaries on behalf of the SNA.
Despite deployment of additional 170 kits over and above the existing 130 kits, the insurer could achieve registration of only 28.28 per cent of the households as against the target of 50 per cent by May 2019.
In view of this, the SNA had extended the due date for completion of the registration drive up to August 31, 2019. The total registration fee collected from beneficiaries up to August 31, 2019 was Rs 4.52 crore which was transferred (January 29, 2020) in full to the SNA by the insurer in contravention of the decision taken by the SNA in the March 29, 2019 meeting.
It was further observed during audit that the insurer added the deployment cost of the additional 170 kits amounting to Rs 3.69 crore to its claim ratio leading to inflation of claim ratio to 60.48 per cent from the actual 57.59 per cent which consequently paved the way for enhancement of the administrative cost to 15 per cent instead of the admissible 12 per cent. This resulted in short refund of surplus premium to the tune of Rs 7.55 crore.
The inclusion of cost of deployment of additional kits enhanced the administrative cost to 15 per cent and the insurer refunded (July 2020) Rs 31.51 crore only in place of the admissible Rs 39.06 crore which was not challenged by the SNA.
Due to this, the SNA extended undue financial benefit of Rs 3.86 crore (short refund of surplus premium of Rs 7.55 crore reduced by Rs 3.69 crore deposited by the insurer as registration fee) to the insurer.
According to the report, the SNA’s acceptance of the refund amount of Rs 31.51 crore from the insurer as against the admissible refund of Rs 39.06 crore was tantamount to extending undue favour to the insurer and it resulted in the loss of Rs 3.86 crore to the state exchequer.
When this was pointed out, the department forwarded (January 2023) the reply furnished by the insurer (August 2022) which stated that inclusion of deployment cost of additional kits in the claim ratio calculation was as per agreement mutually arrived at in the March 29, 2019 meeting.
According to the report, the reply is a misrepresentation of facts as it was decided in the meeting that deployment cost of additional kits has to be met from the registration fee collected by the insurer on behalf of the SNA.
The audit also observed that the delay in refunds of surplus premium by the insurer within the prescribed time resulted in non-realization of interest amounting to Rs 7.52 crore which was tantamount to the extension of undue financial benefits to the insurer to that extent.
Clause 8 (B), (C), and (E) of the contract agreement envisages that after the adjustment of a defined per cent towards administrative cost and after settling all claims, the remaining amount should be refunded by the insurer to the SNA within 60 days of the date of expiry of the policy cover period, failing which, the insurer shall be liable to pay interest @ one per cent of the refund amount due and payable to SNA for every seven days of the delay beyond 60 days.
The scrutiny of records revealed that the insurer had refunded Rs 31.51 crore (July 6, 2020) and Rs 12.44 crore (September 17, 2021) being surplus premium for the policy years of February 2019 to January 2020 and February 2020 to January 2021 respectively.
“This indicates that the refunds were made after a delay of 14 and 25 weeks of the due dates,” the report said.
It further stated that due to delay in refund of the surplus premium, a total amount of Rs 7.52 crore was payable by the insurer being interest for the delay @ one per cent of the refunded amount which was not levied by the SNA.
“Non-realisation of interest amount to the tune of Rs 7.52 crore was tantamount to extension of undue financial benefit to the insurer. Thus, the SNA did not enforce the provisions of the contract agreement entered for efficient implementation of MHIS-IV and PMJAY and extended undue financial benefit of Rs 11.38 crore (Rs 3.86 crore plus Rs 7.52 crore) to the insurer,” the report added.