Policybazaar Fined ₹5 Crore by IRDAI for Misleading Insurance Promotions

The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a hefty ₹5 crore penalty on Policybazaar Insurance Brokers for multiple violations of insurance regulations. The infractions range from misleading promotions of insurance products to delayed remittance of premiums and lack of transparency in outsourcing practices. This regulatory action serves as a stern reminder for insurance intermediaries to maintain consumer trust and compliance.

Why Policybazaar Was Penalised

1. Misleading Promotions of Insurance Plans

Policybazaar was found endorsing certain insurance products as “Best” or “Top” without offering objective evaluation criteria or transparent comparison tools. This practice risked misleading customers into believing these products were either IRDAI-approved or superior to other market options.

“By showing certain insurance products of some insurers as ‘Best’ or ‘Top plans’, it has led to the creation of preference and promotion of these insurers and their specific plans only.”

2. Delayed Transfer of Insurance Premiums

Regulations require web aggregators to promptly transfer collected premiums to insurers. However, Policybazaar was found delaying this process, sometimes over 30 days. Such delays can cause,  Policy issuance holdups Coverage gaps for customers Increased risk in case of claims during the delay period

3. Lack of Transparency in Outsourcing Agreements

Policybazaar’s outsourcing contracts reportedly included high payouts to third-party agencies without adequate compliance oversight. Additionally: Around 100,000 telemarketing-driven policies lacked proper verification mapping, Many call recordings were incomplete or missing.

4. Selective Display of Insurance Products

During inspections, Policybazaar’s website displayed, Only ULIP plans from 5 insurers despite having agreements with more, Health insurance ‘Top Plans’ from only 12 out of 23 partner insurers and This selective showcasing limits consumer access to the full range of available products.

Regulatory Action and Legal Basis

The penalty was imposed under Section 102 of the Insurance Act, 1938, which empowers IRDAI to levy fines for violations. Along with the fine, IRDAI issued,

• Directions for compliance improvements
• Advisory notes for better transparency
• A formal caution against future violations

Impact on the Insurance Sector

This case underscores several key lessons, Transparency is non-negotiable – Insurance aggregators must display unbiased, comprehensive options. Prompt premium remittance is crucial to safeguard policyholders. Compliance with outsourcing regulations helps maintain procedural integrity.

For consumers, this serves as a reminder to,

• Compare products using multiple platforms
• Verify policy details directly with insurers
• Be cautious of marketing terms like “Best” or “Top”