The insurance regulatory body IRDAI has imposed a significant penalty on Policybazaar, the country's largest insurance web aggregator. The organization has levied a total fine of ₹5 crore on the company for 11 serious violations under the Insurance Act, 1938, and the Insurance Web Aggregators Regulations, 2017.
This penalty includes an additional fine of ₹1 crore related to delays in premium payments. This action by IRDAI, addressing the neglect of insurance customers' interests and lack of transparency, is considered significant in the industry.
Questions Regarding Transparency in Top ULIP Rankings
IRDAI's investigation revealed that Policybazaar gave top rankings to some Unit Linked Insurance Plans (ULIPs) on its website, without presenting any authentic or independent data to support these rankings.
During the investigation in June 2020, ULIP plans from Bajaj Allianz, Edelweiss Tokio, HDFC, SBI Life, and ICICI were displayed in the top 5 on the website.
According to IRDAI, Policybazaar also had products from other insurance companies, but only the products of a select few companies were prominently featured on the website. This presented customers with limited options and lacked transparency in decision-making.
Bias in Health Plan Ratings as Well
Health insurance plans on the website were also displayed with words like "Top" and "Best". IRDAI's investigation found that Policybazaar had agreements with 23 health insurance companies, but only the plans of 12 companies were displayed with ratings on the website.
Such presentation does not provide customers with complete information, and they are forced to make decisions from limited options. This directly affects the freedom of insurance customers.
Significant Delays in Premium Transfer
Another serious allegation is that Policybazaar delayed transferring the premium amount collected from policyholders to the insurance companies. According to Section 64VB of the Insurance Act, this amount must be transferred to the insurers within 24 hours of receipt.
IRDAI's report found delays of more than 30 days in 67 policies, delays of 5 to 24 days in 8,971 policies, and premium transfers after 3 working days in 77,033 policies.
Due to this negligence, the coverage of policyholders could have been affected, and there could have been risks to insurance protection.
Ignoring Telemarketing Rules
Negligence on the part of the company has also come to light in the telemarketing process. According to the rules, confirmation from an authorized verifier (AV) is required for every sale made over the telephone.
IRDAI found that the company sold policies through more than 4 lakh telemarketing calls, out of which 97,780 policies were processed without any AV. This made it impossible to know which representative made the sale and what information was given to the customer.
Deficiencies in Maintaining Data Records
According to web aggregator rules, a complete record of the sale must be kept with every policy, so that the regulator can be informed of it when needed.
However, Policybazaar did not record this data in many cases. This not only affected customer service, but also hindered the regulator's monitoring process.
Director Positions in Other Companies Without Approval
The investigation also revealed that some key management personnel (KMPs) of the company held director positions in other companies without prior permission from IRDAI. This was also considered a direct violation. A web aggregator company operating in the insurance sector should not have a direct association with other corporate or insurance companies without obtaining approval from IRDAI.
After this action, the share of Policybazaar's parent company, PB Fintech, may also be affected in the market. Investors and analysts have now become more cautious about the company's operations and transparency.
However, this decision clearly reflects the seriousness of regulation and the priority of protecting customer interests in the insurance sector.
