India’s insurance sector thrives on trust, transparency, and strict regulatory compliance. When these principles are compromised, the regulator—the Insurance Regulatory and Development Authority of India (IRDAI)—steps in to protect policyholders’ interests. Recently, IRDAI imposed a ₹1 crore penalty on Policybazaar Insurance Web Aggregator Pvt. Ltd. for multiple regulatory violations committed during its operations as an Insurance Web Aggregator (IWA).
Background
Policybazaar, now a composite broker since February 2024, was operating as an IWA during the inspection period (June 1–5, 2020). The IRDAI’s order pointed to several breaches, ranging from unfair product promotion to delays in premium remittance.
1. Unfair Product Promotion and Misleading Rankings
The IRDAI observed that the Policybazaar website promoted certain insurance products as “Top Plans” or “Best”, without transparent criteria or factual, third-party verification.
- ULIP Section: Only 5 insurers’ ULIP plans were displayed as “Top Plans” despite Policybazaar having agreements with multiple other life insurers.
- Health Section: Health insurance plans from only 12 insurers were showcased as “Top Plans” out of 23 partner insurers.
Why this is problematic:
Such selective showcasing creates bias and limits customer choice. IRDAI regulations strictly prohibit IWAs from ranking or promoting one insurer over another unless it is based on transparent, factual data available to customers.
2. Delayed Remittance of Premiums
Another serious violation was the delay in transferring premiums collected from customers to the respective insurers.
- Legal Requirement: Section 64VB of the Insurance Act, 1938 mandates remittance within 24 hours of receiving the premium.
- Findings:
- In some cases, delays exceeded 30 days.
- For over 8,971 policies, delays ranged from 5 to 24 days.
- For around 77,033 policies, premiums were remitted after more than 3 working days.
Why this matters:
Delayed remittance can delay policy activation and potentially affect coverage during the waiting period—directly impacting customer protection.
3. Lack of Proper Record-Keeping
The IRDAI found that over 97,000 policies sold via telemarketing were not linked to an Authorised Verifier (AV).
- Rule: Every policy sold in telemarketing mode must be tagged to a specific AV.
- Impact: Without proper mapping, it becomes impossible to verify who sold the policy, undermining accountability and compliance.
Key Takeaways for the Industry
- Transparency First: Avoid biased product rankings unless backed by verifiable, third-party data.
- Timely Premium Transfer: Always remit collected premiums to insurers within the legal time limit.
- Robust Data Management: Maintain clear records linking each sale to an authorised individual.
- Regulatory Awareness: Regular compliance audits can prevent hefty penalties and reputational damage.
Final Word
The Policybazaar case is a strong reminder that trust is the foundation of insurance. With digital platforms becoming the primary channel for policy sales, regulatory compliance is not optional—it’s a responsibility to customers.
As IRDAI continues its vigilant oversight, all insurance intermediaries must ensure fairness, transparency, and accountability in every transaction.
Source : – Economic Times
