Policybazaar hit with Rs 5 crore fine for misleading insurance promotions

The Insurance Regulatory and Development Authority of India (IRDAI) has levied a fine of ₹5 crore on Policybazaar Insurance Brokers for multiple breaches of regulatory norms. These infractions include biased product promotions, delayed premium transfers, and improper outsourcing agreements. The penalty was imposed under Section 102 of the Insurance Act, 1938, which allows the regulator to impose financial penalties on entities violating insurance regulations. This marks a significant regulatory action aimed at ensuring compliance within the insurance sector.

Policybazaar, a prominent online insurance aggregator, was found guilty of endorsing certain insurance products as ‘top’ or ‘best’ without providing objective criteria or comparison tools. This practice potentially misled customers into believing that these products were either approved by IRDAI or superior to others available in the market. The regulator stated, “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.”

Insurance premiums

A critical aspect of Policybazaar’s violations involved delaying the transfer of collected insurance premiums to the respective insurance companies. This delay, sometimes extending beyond 30 days, can result in policy issuance delays and coverage gaps, exposing insured individuals to heightened risks during the interim period. Regulatory requirements stipulate that web aggregators must remit such premiums promptly to avoid these issues.

Another cited violation was the lack of transparency in Policybazaar’s outsourcing agreements and commission structures. Contracts allegedly included high payouts to third-party agencies without consistent compliance oversight. Furthermore, nearly 100,000 telemarketing-driven policies remained unmapped to Authorised Verifiers, with incomplete or missing call recordings, raising concerns about procedural transparency.

ULIPs

Policybazaar’s website was also scrutinised for its selective display of insurance products. During an inspection, the site showed only ULIP (Unit Linked Insurance Plans) from five insurers, despite agreements with additional companies. Similarly, the health insurance section featured ‘Top plans’ from only 12 out of 23 partner insurers, which was criticised for lacking transparency.

IRDAI’s press release specified the penalty, quoting: “Irdai, in exercise of the powers under Section 102 of the Insurance Act, 1938, has imposed a penalty of Rs 5 crore on M/s Policybazaar Web Aggregator Pvt. Ltd. (now known as 'M/s Policybazaar Insurance Brokers Pvt. Ltd.') along with Direction, Advisory, and Caution for various violations established under the Insurance Act, 1938 and Rules and Regulations made thereunder.”

The regulatory framework aims to ensure consumers can make informed choices. However, as noted by the regulator, Policybazaar failed in “making available any material to the prospects to make an informed choice.” This incident serves as a reminder for web aggregators to maintain transparency and adhere to regulatory standards.

Policybazaar's penalty underscores the importance of compliance within the insurance industry. It highlights the need for aggregators to ensure transparency, timely premium remittance, and unbiased product promotions, aligning with consumer protection mandates. IRDAI’s decisive action reflects its commitment to safeguarding consumer interests and maintaining integrity in the insurance marketplace.