In a significant development shaking the insurance industry, the IRDAI imposed a ₹5 crore penalty on Policybazaar for breaching several compliance norms laid out under the Insurance Act and the IRDAI (Insurance Web Aggregators) Regulations, 2017. This move comes as part of the regulator’s intensified efforts to ensure fair practices and data transparency in India’s rapidly growing insurance landscape.
Why Did IRDAI Fine Policybazaar?
The ₹5 crore penalty on Policybazaar Insurance Brokers stems from 11 violations, including unfair product rankings, delayed premium remittance, and improper policy tracking. Here's a breakdown of the violations:
1. Biased Promotion of Insurance Products
The inspection revealed that the company showcased select insurance policies as “Top ULIPs” or “Top Health Plans” on its website. These included:
- Bajaj Allianz Goal Assure
- Edelweiss Tokio Wealth Gain
- HDFC Click2Wealth
- SBI Life eWealth
- ICICI Signature
However, there was no transparent ranking system or factual third-party data to justify these listings.
By labeling specific insurers' products as the “best” without disclosing a basis, Policybazaar’s promotion created a biased narrative and misled customers, directly violating IRDAI norms that prohibit endorsing one insurer over another.
2. Delayed Remittance of Premiums
Another serious violation was the delayed remittance of insurance premiums. According to Section 64VB of the Insurance Act, intermediaries must transfer premiums to insurers within 24 hours. Yet, in a sample of over 77,000 policies:
- Some delays extended beyond 30 days
- Average remittance lag ranged from 5 to 24 days
Policybazaar used its own payment gateway and nodal account, causing this violation and potentially putting policyholders at financial risk.
3. Failure to Map Policies to Authorised Verifiers (AVs)
Under IRDAI guidelines, policies sold via telemarketing mode must be linked to an Authorised Verifier (AV). However, Policybazaar failed to map over 97,780 policies, marking them as "unassisted" or "unmapped." This breach severely hampers audit trails and accountability, making it difficult to trace sales or hold representatives accountable.
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IRDAI's Stance on the Violation
The IRDAI fined Policybazaar Rs 5 crore not only for individual violations but for creating a broader atmosphere of non-transparency and regulatory indifference. It stressed that any use of “top,” “best,” or “No. 1” claims without verifiable, disclosed evidence misleads customers and reduces fair competition in the industry.
The order further warned that:
“Unverified endorsements create preference bias, limit customer choices, and result in a non-transparent marketplace.”
Implications for the Insurance Ecosystem
This case sets a precedent for digital platforms. As insurance distribution increasingly shifts online, regulatory compliance becomes more critical. Policybazaar’s ₹5 crore penalty is a wake-up call for all digital aggregators to:
- Ensure transparency
- Remit premiums on time
- Maintain proper policy records
- Avoid false advertising and biased product placements
What Can Customers Learn?
As a consumer, you must:
- Never rely solely on labels like “Top Plan” without checking IRDAI approvals
- Cross-verify the insurer and policy details from official websites
- Demand transparent comparison data when buying insurance online
