Prime Highlights
- Policybazaar penalized ₹5 crore by IRDAI for various governance and regulatory offenses, such as biased insurance advertising and governance loopholes.
- Offenses include ethics of marketing, delayed transfers of premiums to, non-compliance.
Key Facts
- IRDAI invoked disc 11 offenses under Insurance Act and disc Web Aggregator Regulations.
- Biased insurance scores and tardy premium transfers damage consumer confidence.
Key Background
In a major regulatory move, the Insurance Regulatory and Development Authority of India (IRDAI) has levied a ₹5 crore fine on insurance web aggregator Policybazaar. The fine is for 11 diverse offenses, which were discovered following a systemic compliance audit conducted. Offenses listed include unfair ranking of insurance policies, failure to pay customer premiums to the insurers, and corporate governance defaults.
The main issue was Policybazaar displaying some ULIP and health products as “top” products on their website without declaring the foundation of such. This gave an impression to consumers that such kinds of products were officially recommended or best. IRDAI reaffirmed that such behavior goes against transparency and puts consumer choice in a backward, violating fair market rules.
Also, Policybazaar was discovered to have retained premiums from insurers beyond time limits as per law. Retaining premiums could expose customers to an insurance cover shortage, and this is a serious issue in the case of operational integrity. The regulator also noted inconsistencies in the correlation of policies with sales agents and in call recordings being retained—critical elements in validating tele-sales transactions.
A grave misconduct involved the concurrent holding of numerous directorships by senior managers without prior approval of the regulator. This failure to seek approval of the regulator was considered to be a conflict of interest as well as a violation of good governance principles. How outsourcing arrangements were handled and commission structures revealed was also under question.
IRDAI’s penalty serves as a cautionary message to all digital insurance intermediaries to maintain strict adherence to compliance norms. While this may raise concerns among customers, IRDAI’s proactive stance reinforces trust in regulatory oversight and the importance of responsible digital insurance practices.
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