Why Did IRDAI Impose a Rs 5 Crore Fine on Policybazaar?

New Delhi, Aug 4 (NationPress) The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a hefty fine of Rs 5 crore on the online insurance platform Policybazaar for breaching multiple regulations under the Insurance Act and the IRDAI (Insurance Web Aggregators) Regulations, 2017.

The penalty must be paid by the insurance web aggregator (IWA) within 45 days from the receipt of the order, as stipulated by the IRDAI.

The order highlights that key managerial personnel (KMPs) and employees of the aggregator allegedly held directorships in other firms without prior approval from the IRDAI.

“Moreover, it was noted that the President, Head of Operations, Director General of Insurance Business, and Business Unit Head were serving as directors in other organizations,” the order states.

In addition to these regulatory infractions, Policybazaar was found to be promoting certain products in a biased manner, ranking various insurance options as top-tier without providing adequate information for potential customers to make informed decisions.

“The IWA apologized for failing to secure prior approval from the Authority. Following a Personal Hearing, the IWA asserted that current Principal Officers and KMPs no longer hold directorships in any other companies,” it further stated.

The IWA regulations mandate that domain names for primary, secondary, or product category-specific websites must be owned and registered in the name of the IWA.

“However, it was observed that the website policybazaar.com is owned by its parent company. The IWA has paid a licensing fee of 5 percent of its revenue to the parent company for using the domain. In the fiscal years 2018-19 and 2019-20, amounts of Rs 15.51 crore and Rs 25.79 crore were paid to the parent company,” noted IRDAI.

Upon reviewing the documents submitted by the IWA, IRDAI concluded that the claims regarding ownership of the domain name policybazaar.com were inaccurate.

According to the order, the IWA website displayed the top five ULIP plans (Bajaj Allianz Goal Assure, Edelweiss Tokyo Wealth Gain+, HDFC Click2 Wealth, SBI Life e-wealth Insurance, and ICICI Signature) during the inspection.

“The IWA website showcased only the ULIP products of five insurers, although the IWA has agreements with other life insurance companies offering ULIPs. The term 'Top products' implies a ranking based on specific criteria. Only five products were labeled as ‘Top products’ despite agreements with multiple life insurers,” the order indicated.

Similarly, in the 'Health section,' there were references to “Top plans-health insurance” from twelve insurers in a specific sequence (ranking).

The order concluded that by showcasing select insurance products from certain insurers as “Best” or “Top plans,” it has fostered a preference and promotion of these insurers and their particular offerings.