Policybazaar: IRDAI Penalizes ₹5 Crore for Misleading Promotions and Policy Violations

The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a hefty penalty of ₹5 crore on Policybazaar, a major online insurance platform. The penalty was issued for 11 separate violations of insurance regulations, including biased promotions, delayed premium transfers, and poor record-keeping.

Why Did IRDAI Penalize Policybazaar?

IRDAI found multiple issues during an inspection of Policybazaar's operations when it was functioning as an Insurance Web Aggregator (IWA). Some of the major problems included:

• Promoting certain insurance plans as “top” or “best” without real proof

Delaying the transfer of customer premiums to insurance companies

Not linking policies with Authorized Verifiers (AVs)

Violations of the Insurance Act, 1938 and IRDAI Web Aggregator Rules, 2017

Biased Product Promotion: A Serious Concern

IRDAI’s report mentioned that Policybazaar unfairly showcased certain insurance products as “Top Plans” on its website. For example:
ULIP Plans Listed as “Top 5” Other Insurers with ULIPs Not Shown

Bajaj Allianz Goal Assure	Yes
Edelweiss Tokyo Wealth Gain+	Yes
HDFC Click2 Wealth	Yes
SBI Life e-Wealth Insurance	Yes
ICICI Signature	Yes

Even though Policybazaar had tie-ups with more insurance providers, only a few were highlighted. This created an unfair advantage and limited the choice for customers.

What Are the Rules for Product Promotion?

According to IRDAI regulations:

• Insurance Web Aggregators cannot promote one insurer over another.

Words like “Top,” “Best,” or “No.1” are only allowed if supported by transparent, factual, third-party data.

Promoting select plans misleads users and violates consumer rights.

Delays in Premium Transfers: Another Major Violation

Policybazaar also failed to transfer collected premiums to insurance companies within the time allowed by law. Under Section 64VB of the Insurance Act, 1938, intermediaries must send premiums to the insurer within 24 hours of receiving them.

But IRDAI found:

• For 67 selected policies, delays exceeded 30 days

For 8971 policies, delays ranged from 5 to 24 days

For another 77,033 policies, premiums were transferred after 3 working days

This kind of delay puts policyholders at risk, as their policies may not become active on time.

Policy Mapping Failures : Over 97,000 Policies Unaccounted For

Policybazaar also failed to properly map over 97,000 policies sold via telemarketing to any Authorized Verifier (AV). This means:

• There’s no record of who assisted the customer.

Customers and regulators can’t track who processed each sale.

This violates data and transparency requirements.

Out of 4,32,366 policies sold through telemarketing, 97,780 were “unassisted” or “unmapped.” IRDAI requires each policy sold to be linked to an AV for proper accountability.

Violation by Key Management Personnel (KMPs)

Another breach mentioned in the IRDAI order involves key managerial personnel (KMPs) at Policybazaar. Some of them held director positions in other companies without getting prior approval from IRDAI—another violation of the rules.

Company Status Changed in 2024

During the period under investigation, Policybazaar operated as an Insurance Web Aggregator. But in February 2024, it obtained a composite broker license, which gives it broader permissions in the insurance market.

However, the violations were committed before the change in license, and IRDAI’s action is based on that period.

What This Means for Insurance Buyers

• Be cautious of insurance plans labeled “best” or “top” without clear data.
  
  
• Always verify policy details before buying online.
  
  
• Prefer platforms that are transparent and follow all regulations.
  
  
• Regular checks by IRDAI help protect consumers from unfair practices.