Introduction
In a
significant regulatory move, the Insurance Regulatory and Development
Authority of India (IRDAI) has imposed a hefty penalty of ₹5 crore on
Policybazaar, citing multiple violations including biased insurance
product promotions, delayed premium remittances, and non-compliance
with policy mapping requirements.
The decision,
which has sent ripples across India’s insurtech and digital insurance
distribution space, underscores IRDAI’s renewed push for greater
transparency, fair competition, and consumer protection in
the insurance industry.
This news blog
breaks down what happened, why Policybazaar was fined, what the implications
are for the sector, and what it means for you as a policyholder or investor.
What Is Policybazaar and Why Is It Important?
Policybazaar is
one of India’s leading online insurance aggregators. Founded in 2008, it became
a household name by helping consumers compare and buy various insurance
products from health to term life to ULIPs all online. In February 2024,
the company also secured a composite broker license, expanding its scope
beyond just web aggregation.
As a key player
in India's digital insurance space, any regulatory action against it naturally
draws industry-wide attention. Let’s now understand the key findings in the IRDAI
order against Policybazaar.
Why Did IRDAI Fine Policybazaar ₹5 Crore?
1. Biased and Misleading Product Promotions
One of the most
serious accusations in the IRDAI order relates to the biased promotion of
insurance products on Policybazaar’s website when it was operating as an Insurance
Web Aggregator (IWA).
- On its website, Policybazaar ranked
certain insurance products as “Top” or “Best” without providing any objective,
verified basis for those rankings.
- For example, the Top 5 ULIP
plans shown were from Bajaj Allianz, Edelweiss Tokio, HDFC, SBI Life,
and ICICI. But these rankings excluded other insurers with whom
Policybazaar also had agreements.
- Similarly, under the “Health
Insurance” section, the platform showcased plans from only 12 insurers
as “Top Plans,” even though it had tie-ups with 23 insurers.
IRDAI’s Take:
IRDAI mandates
that an IWA must not promote one insurer over another, especially
without valid and transparent third-party data. Words like “top,” “best,”
“No. 1” are not allowed unless backed by independently verified
data.
The regulator
observed that this biased representation skewed customer choices and led
to non-transparent product comparison, effectively misleading users.
2. Delay in Remitting Premiums to Insurers
Policybazaar
was also pulled up for delaying the transfer of insurance premiums
collected from customers to the respective insurers.
- Under Section 64VB of the
Insurance Act, 1938, insurance intermediaries must remit premiums
within 24 hours of receipt.
- IRDAI’s inspection found that Policybazaar’s
own payment gateway and nodal account were used to collect
premiums. Yet, remittances were often delayed by:
- More than 30 days for some policies
- 5 to 24 days for 8971 sample policies
- More than 3 days for over 77,000 policies
This delay violates
the Insurance Act and could potentially risk policy activation delays or
cancellations for customers.
3. Failure to Map Policies to Authorised Verifiers (AVs)
Policybazaar
also sold over 97,000 insurance policies without tagging them to the
respective Authorised Verifier (AV) a serious lapse under the IRDAI’s
Insurance Web Aggregator Regulations, 2017.
Why does AV Mapping matter?
Every policy
sold via Telemarketing Mode must be traceable to the AV who
concluded the sale. This helps ensure:
- Accountability of sales
representatives
- Transparency in customer
interactions
- Prevention of mis-selling
Yet, of the 4.3
lakh policies sold via Telemarketing Mode, 97,780 were either marked as
“unassisted” or had no AV mapping making it impossible to verify who
closed the sale.
4. Other Regulatory Breaches
Beyond the
above, the IRDAI found Key Managerial Personnel (KMPs) at Policybazaar
holding directorships in other companies without obtaining the
regulator’s prior approval. This violates the governance norms laid down for
IWAs.
Breakdown of the ₹5 Crore Fine
| Violation | Penalty (₹) | Details |
|---|---|---|
| Biased product promotion | ₹2 crore | Showcased selected insurer plans as “Top” or “Best” without basis |
| Delay in premium remittance | ₹1 crore | Violated the 24-hour rule under Section 64VB |
| Failure in AV Mapping | ₹1 crore | Over 97,000 unmapped policies |
| Governance & compliance lapses | ₹1 crore | KMPs held directorships without IRDAI approval |
| Total | ₹5 crore | — |
What IRDAI’s Action Means for the Industry
This action by
IRDAI is a wake-up call for all digital insurance platforms and brokers.
As more Indians go online to buy insurance, the need for accurate, unbiased,
and transparent information becomes even more crucial.
Key Takeaways for InsurTechs:
- No unfair promotions: Rankings must be based on data,
not commercial interests.
- Follow remittance rules: Delays can cause regulatory heat
and customer dissatisfaction.
- Traceable sales process: Every telemarketing sale must be
linked to a responsible individual.
- Governance is not optional: Regulatory approval is a must
for key appointments and directorships.
What Should Customers Know?
As a customer,
it’s easy to trust the "Top Plan" banners on popular insurance sites.
But this case shows why due diligence is critical. IRDAI’s action
suggests:
- Not all rankings are unbiased
- Always read the policy brochure
carefully
- Prefer insurers that disclose all
terms openly
- Don’t fall for labels like “best”
or “No. 1” without checking data
Here’s what you should do before buying insurance:
- Compare multiple plans, not just the “top” ones
- Check the claim settlement ratio from IRDAI’s annual reports
- Speak to an authorised insurance
advisor if
confused
- Read customer reviews and expert
opinions from neutral platforms
How Has Policybazaar Responded?
As of now, Policybazaar
has not made a public statement addressing the ₹5 crore fine. However,
given the gravity of the allegations, industry experts expect:
- Policybazaar may appeal the order
or request a review
- The company could implement
corrective actions to avoid future penalties
- Investors and analysts will keep a
close eye on how it manages this reputational issue
Will This Affect Policybazaar’s Business?
It could, in
both the short and long term.
Possible Short-Term Impacts:
- Loss of consumer trust
- Regulatory scrutiny in upcoming
audits
- Higher compliance burden
Long-Term Implications:
- Might need to revamp product
comparison methods
- Could lose some insurer tie-ups or
partnerships
- May change internal tech and
governance frameworks
Conclusion
The ₹5 crore
penalty on Policybazaar by IRDAI is not just a monetary setback; it’s a
signal of changing times in India’s digital insurance space. Regulators are
watching more closely, and transparency is non-negotiable.
As the market
matures, consumer protection and fair practices will drive trust.
Whether you're a customer, insurance advisor, or digital platform compliance
is not a choice anymore, it's a necessity.
