PRAHAR Raises Concern to Ministry of Finance: IRDAI overlooking blatant violation of its advertisement guidelines since 5 years

PRAHAR Raises Concern to Ministry of Finance: IRDAI overlooking blatant violation of its advertisement guidelines since 5 years

• Violations affecting lakhs of Insurance customers involving several thousands of crores of citizen investments.
• Oversight helping insurance websites like Policy Bazaar mop up massive funds from unsuspecting customers.
• Demands CBI enquiry into violations and workings of IRDAI; seeks a class-action involving full refunds to affected customers along with penalties and interest.

PRAHAR (Public Response Against Helplessness and Action for Redressal), a Delhi based NGO, which focuses on issues in the public domain that if not addressed can cause helplessness among Indian citizens, today complained to the finance ministry that IRDAI is overlooking blatant violation of its advertisement guidelines for the last 5 years, which is benefiting private insurance players at the cost of thousands of crores of money belonging to unsuspecting customers.

The NGO demanded a high-level review of the functioning of IRDAI, so that they do not only remain a policy making body, but have digitally ready, modern surveillance mechanisms to detect fraudulent practices on digital insurance platforms. The other demands of the NGO include that the misleading advertisements in question be immediately declared illegal and stopped; full refunds along with interest and penalties should be made to all the customers who have been sold policies under a systemic and organized mis-sell for several years by websites like Policy Bazaar, and a CBI inquiry be initiated to expose the violations.

In their letter to the Finance Minister, Smt. Nirmala Sitharaman, the NGO has pointed out that “Since December 2022, PRAHAR has been continuously writing to IRDAI raising concerns about a marketing programme being run by the highly popular insurance website www.policybazaar.com selling gullible customers a dream to ‘Become a Crorepati by Investing Right’. Various advertisements and a website promoting this has been running for the past 5 years and several lakhs of customers have purchased policies from Policy Bazaar as this misleading promise of becoming a crorepati is highly attractive.

Customers landing on to the ‘Investment Plans’ tab on the home page of www.policybazaar.com see a Life Insurance policy promising a maturity value of more than Rs. 1 Crore at the end of 20 years if one was to make a SIP of Rs. 10,000 per month for 10 years, which is a total investment of Rs. 12 lakhs. The Rs. 1 Crore figure is a highly attractive amount for any individual investor, especially for one who can only save Rs. 10,000 per month. It creates a huge shock value! So, for the investor, the misleading offer becomes very difficult to resist and can easily lead him or her to jump at the offer and commit to the investment plan.

The reality on the contrary is that this is a highly uncertain return as it is being promised on the basis of past returns. This means that all variable factors should remain unchanged over the course of the next 20 years for customers to get such attractive return, which is not certain at all! Therefore, this is nothing but a clear case of misinformation and deception on part of Policy Bazaar to lure unsuspecting and gullible investors. Such misinformation has the potential to upstage the long-term financial planning for many Indian citizens if left unchecked.

In India, insurers and insurer intermediaries are bound by the guidelines outlined in the Master Circular on Insurance Advertisements (2019). Specifically, Clause 3.4.1.3 of the Master Circular strictly prohibits insurers from projecting future performance based on past financial results.

The above mentioned heavily promoted investment plan of ‘Become a Crorepati/ Invest 10K & Get Rs. 1 Crore Return’ on the Policy Bazaar website is a gross and a blatant violation of the Clause 3.4.1.3. Customers who invest for 10 or 20 years will face deep disappointment and a sense of betrayal if the specific target of Rs. 1 Crore is not achieved, but by then, it would be too late to rectify the situation.”

PRAHAR’s letter further elaborates that they “have brought this issue to the notice of IRDAI multiple times and have been writing letters to various officials of IRDAI, since December 2022, including to Shri Debasish Panda, Chairperson IRDAI and Smt Meena Kumari, Executive Director, Life Department.”

The NGO has shared evidence and specific instance of customers who have complained to IRDAI and them, along with details of the case, call recordings and screen shots establishing mis-sell.

Expressing grave concern on the issue, Abhay Mishra, National Convenor & President of PRAHAR, said, “Insurance companies play an important role in our society by providing crucial financial security and protection to families against potential loss. Insurance policy intermediaries like the policybazaar.com website have also become quite popular as they enable easy comparison of different insurance plans, putting them in an opportune position to exploit investors with any misinformation. An ongoing violation of insurance advertisement rules by Policy Bazaar for over 5 years and an abject inaction by IRDAI for months despite being sent complaints on this matter, point to systemic gaps in the insurance sector, particularly in the enforcement of well documented rules”.

“We have a robust policy framework in India to regulate the insurance sector. However, these laws are of no use if not enforced adequately. IRDAI should not only remain a policy making body but must have digitally ready, modern surveillance mechanisms to detect fraudulent practices on digital platforms and stop them, as a topmost priority”, he added.

PRAHAR also found that there are other problems arising from the practices of insurance intermediaries. They make enticing promises to attract customers but leave them at the mercy of insurers when issues arise. Simple requests, such as call records, are not provided to customers, creating frustration and hindering the resolution of complaints. Additionally, if the 30-day window for addressing a case elapses during arguments, customers have no choice but to lose their money. Even in cases of mis-selling, full refunds are either not processed or delayed to an extreme level, causing further frustration for customers.

The NGO has sought immediate measures to curb deceptive practices and misleading advertising, to retain and restore confidence in the insurance industry and ensuring consumer protection.

About PRAHAR: PRAHAR is a not-for-profit organization focused on issues in the public domain that if not addressed can cause helplessness among Indian citizens. PRAHAR believes that citizen helplessness can be triggered by various situations ranging from a rapidly changing environment like a pandemic or can be caused by cheating or exploitation at the hands of those in a monopolistic or opportune position or regulatory oversight.