Consumer Affairs Booklet...consumer awareness and consumer protection help in provides the backbone...

POLICYHOLDER PROTECTION

& WELFARE

POLICYHOLDER PROTECTION

& WELFARE

INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITY OF INDIA

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Consumer Affairs Booklet

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CONTENTS

Topic Page No.

Foreword

1. Data Relating to Number of Complaints 5vis-à-vis Number of Policies and Claims Intimated

2. Policyholder Protection and Welfare – An update 11

3. Spurious calls – Problem, Impact and Efforts 19taken by IRDAI to caution public

4. Mis-Selling in Life Insurance Sector 47Data pertaining to Complaints in Life Insurance Sector.- Information from Life Insurers

5. Claim Handling by Insurance Companies 161- Information from Life and Non-life insurers onHandling of Claims and Court cases

6. Data on Policyholder Grievances 373a) Life Insurersb) Non-Life Insurersc) Insurance Ombudsmand) Summary of complaints, disposal & Resolution

i) Industry wiseii) Life - Insurer wiseiii) Non Life - Insurer wise

7. Important Regulations / Instructions 473a) IRDA (Health Insurance) Regulations 2013b) Guidelines on Standardization in Health Insurance 2013c) IRDA (Linked Insurance Product) Regulations 2013d) IRDA (Non-Linked Insurance Product) Regulations 2013e) Premium rates for Motor Third Party Liability Insurance Covers for 2015-16

8. Regulatory Framework for Grievance Redressal in the Insurance Sector 555Annexures :a) IRDA (Protection of Policyholders Interests) Regulations 2002b) Redressal of Public Grievances Rules, 1998 – Insurance Ombudsmanc) Guidelines for Grievance Redressal by Insurance Companiesd) Corporate Governance Guidelines

– Mandatory Policyholder Protection Committeee) Guidelines on Periodic disclosures to the public – Grievance Disposal

9. Hand book on Insurance Sector’s Grievance Redressal System 573

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FOREWORD

(T.S. VIJAYAN)Chairman

Indian insurance industry is currently going through a historic transitional phase. With the legislativechanges taking effect and a more enlightened policyholder demanding better benefits, better serviceand better products, the pressure is both on the industry and the Regulator to live up to the expectationsof one and all.

On the regulatory front, the Insurance Regulatory and Development Authority of India has always beenleading the path – towards protection of interests of policyholders as also the orderly growth of insuranceindustry. In this endeavour, IRDAI has been taking several pro-active steps – on regulatory front on oneside and creating awareness on insurance related issues on the other.

This booklet is an initiative by IRDAI aimed at dissemination of information not only to policyholders andinsurers but also to other financial sector institutions, both within the country and abroad who are interestedin knowing about Indian insurance industry. As is well known, in insurance, validated data plays a criticalpart in knowing the strength of the industry, its robustness, maturity as well as the areas that needattention. This booklet brought out by the Consumer Affairs Department of IRDAI has data relating tonumber of policyholder complaints and analysis of such policyholder grievances so as to highlight theareas where more efforts are required to be made towards policyholder welfare. The booklet also dwellsupon various consumer education initiatives of IRDAI, the Regulations issued by IRDAI in the recentpast and the Grievance Redressal System presently in force.

I am sure, the booklet, being launched as part of the consumer education initiative of IRDAI, would helpdisseminate valuable information and would be useful to all concerned.

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Data Relating to Number of Complaints

vis-à-vis Number of Policies

and

Claims Intimated

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ANALYSIS OF LIFE COMPLAINTSVIS-A-VIS NO. OF POLICIES

Policies on which complaints were not received

Policies on which complaints were received

No. of Policiesfor 2012-13 : 44154624

No. of policies Complaintsfor 2013-14 : 374620

ANALYSIS OF LIFE COMPLAINTSVIS-A-VIS NO. OF DEATH CLAIMS

Claims on which complaints were not received

Claims on which complaints were received

No. of Death claimsfor 2012-13 : 1243919

No. of Death claim Complaintsfor 2013-14 : 5261

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ANALYSIS OF NON-LIFE COMPLAINTSVIS-A-VIS NO. OF POLICIES





ANALYSIS OF NON LIFE COMPLAINTSVIS-A-VIS NO. OF CLAIMS



No. of claimsfor 2012-13 : 27400000

No. of claim Complaintsfor 2013-14 : 27409

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ANALYSIS OF LIFE COMPLAINTSVIS-A-VIS NO. OF POLICIES





ANALYSIS OF LIFE COMPLAINTSVIS-A-VIS NO. OF DEATH CLAIMS



No. of Death claimsfor 2013-14 : 1311339

No. of Death claim Complaintsfor 2014-15 : 3953

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ANALYSIS OF NON-LIFE COMPLAINTSVIS-A-VIS NO. OF POLICIES





ANALYSIS OF NON LIFE COMPLAINTSVIS-A-VIS NO. OF CLAIMS



No. of claimsfor 2013-14 : 30300000

No. of claim Complaintsfor 2014-15 : 26467

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Policyholder Protection and Welfare– An update

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IRDAI has been set up with the principal objectiveof protection of policyholders’ interests. IRDAI has,over the years, put in place an elaborate regulatoryand supervisory framework for the insurers andintermediaries involved in insurance business sothat they operate not only on sound financial linesbut also to increase the reach of the insuranceservices to general public so as to have greaterinsurance inclusion. Greater insurance inclusioncan be achieved not only through improved access,greater diversity of insurance products so as to suitthe needs of different sections of the society anddifferent classes of people but also throughimpressing upon the members of public the needfor insurance and the benefits that accrue onaccount of taking insurance. Thus, promotinginsurance awareness through a multi-prongedstrategy is an integral part for creating an enablingenvironment for greater insurance inclusion. Agrievance redressal system which is easilyaccessible and effective in redressing customergrievances provides the necessary assurance andstrengthens the confidence of general public thatproblems if any faced by them will be resolved. Thus,consumer awareness and consumer protection helpin provides the backbone for greater insuranceinclusion.

The Consumer Affairs Department of IRDAIhandles work relating to the policyholder protectionframework, grievance redressal system andconsumer awareness. IRDAI has taken variousinitiatives during the period 2013-14 and 2014-15,a brief gist of which is indicated below:

I. DRAFT PROTECTION OF POLICY-HOLDERS INTERESTS REGULATIONS

The basic framework for protection ofpolicyholders’ interests is contained in theIRDA (Protection of Policyholders’ Interests)Regulations 2002 (PPHI Regulations inshort). There have been several changes thathave come about after 2002 which includeintroduction of new categories of insuranceintermediaries like brokers, web-aggregatorsand new products like micro insuranceproducts, ULIP products etc. The channels

POLICYHOLDER PROTECTION AND WELFARE – AN UPDATE

of grievance redressal have also increasedwith the introduction of IGMS, IRDAIGrievance Call Centre etc. The increasingcomplaints of alleged mis-selling of lifeinsurance policies, delay in settlement ofclaims of general insurance introduction oftechnology in the process of sourcing, saleand servicing of products necessitate acommensurate change in the regulatoryframework for better policyholder protection.The grievance redressal guidelines have notbeen issued as regulations but as guidelines.In order to make the guidelines enforceable,they have to be made a part of the regulations.The consumer protection framework andprovisions for securing fair treatment ofcustomers contained in other regulations/guidelines like group guidelines, distancemarketing guidelines, micro-insuranceregulations etc. need to be examined,strengthened and incorporated in the PPHIRegulations. The TATs for various serviceshave been provided in the regulations.However, there is a need to review the TATsand direct the insurers to come out with aCitizen’s charter. A Model citizen’s Charterneeds to be introduced for adoption by theinsurance industry. The FSLRCrecommendations relating to consumerprotection also call for an enabling regulationto provide for greater consumer protection atall stages of financial transactions.

In this context, there was a need to have arelook at the PPHI Regulations and amend itsuitably to strengthen policyholder protectionas well as to keep it in tune with changingtimes. IRDAI constituted a Standing AdvisoryCommittee under the Chairmanship of ShriDD Singh, Member (Distribution) consistingof officials from Insurance Division ofDepartment of Financial Services, retiredsenior executives of life and non-life industry,Secretary Generals of Insurance Institute ofIndia and Governing Body of InsuranceCouncil, academicians from NationalInsurance Academy, Pune and officials ofConsumer Affairs Department, IRDAI. The

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Committee which is primarily constituted forreviewing the functioning of Ombudsmen wasentrusted with a one-time task of reexaminingthe customer protection framework ininsurance industry and suggesting changesto the PPHI Regulations.

Based on the recommendations of thisCommittee, Draft IRDA (Protection ofPolicyholders’ Interests) Regulations 2014were drawn up. The Regulations were placedin the public domain for comments. Thecomments have since been received and areunder consideration. Revised IRDA(Protection of Policyholders’ Interests)Regulations would be issued in due coursewhich would serve as a new policyholderprotection framework.

II. ANNUAL SEMINAR ON POLICYHOLDERPROTECTION AND WELFARE

The Fourth Annual Seminar on Policyholderprotection and welfare organized by IRDAIwas held at Mumbai on November 27, 2013.The occasion was marked by the release ofIRDA’s ‘Consumer Affairs booklet for 2012-13’; General Insurance Council’s ‘Indian Non-Life Insurance Industry Yearbook 2012-13’and Insurance Information Bureau’s ‘Reporton spread of Life Insurance Agents in India’.The mobile version of IRDA’s consumereducation website and a Documentary filmon IRDAI initiatives, Animation films ofeducational comic books and a ‘Handbookon surveyors and loss assessors’ were alsolaunched.

The Seminar had in depth discussions onissues concerning the Policyholdersprotection and Welfare and covered fourspecific topics viz. Insurance Literacy underNational Strategy, Can you hear consumervoice?, Use of innovative channels forconsumer Education and Delving into HealthInsurance where eminent speakers ofrelevant fields presented their views andresponded to the questions raised by theparticipants.

The seminar was attended by about 300participants who included Chief executivesof insurance companies, InsuranceOmbudsmen, academicians, representativesof financial regulators, and consumerorganizations; insurance intermediaries andIRDAI officials. The seminar provided valuableinputs to the stakeholders which would helpthem to steer their efforts towards consumerempowerment.

III. MEETING WITH INSURANCEOMBUSDMEN AND GBIC

A meeting of all the Insurance Ombudsmenin India with Chairman and Members IRDA,Chairman and Secretary, Governing Body ofInsurance Council and senior officials of theIRDAI was held on December 20, 2013 atNational Insurance Academy (NIA), Pune.Chairman GBIC and Secretary GBIC werealso invited for the meeting. The issues facedin the implementation of the Redressal ofPublic Grievances Rules, 1998 and thesuggestions on the Draft Bima Lokpal Ruleswere discussed with the Ombudsmen. TheInsurance Ombudsmen made presentationson the staffing, complaints handled,constraints faced in resolving grievanceswithin 3 months and suggestions relating toRPG Rules and regulations applicable toinsurers. The suggestions on the Bima LokpalRules were forwarded to the Department ofFinancial Services, Ministry of Finance,Government of India along with IRDAI’s viewson the suggestions.

An Annual Conference of InsuranceOmbudsmen was organized by GoverningBody of Insurance Council on October 14 and15, 2014 at Hyderabad. During the seminar,the newly appointed Ombudsmen werebriefed about the RPG rules and variousimportant IRDAI regulations. Fur ther,considering that there are variations inapproach to handling of complaints at theOmbudsman centres, a Brainstormingsession among the Ombudsmen was alsoheld to enable bringing about uniformity inhandling complaints across all the offices of

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Insurance Ombudsmen. Chairman IRDAI andMember (Distribution) addressed theOmbudsmen and apprised them of theexpectations from Insurance Ombudsmen.Officials from Consumer Affairs Departmentand Health Department attended theConference and clarified doubts of theInsurance Ombudsmen on policyholderprotection regulations and health regulationsrespectively.

IV. WORKSHOP OF GRIEVANCEREDRESSAL OFFICERS (GROs) OFINSURERS

A Workshop of GROs of insurers wasconducted on December 19, 2013 at NIAPune. The workshop was presided by theMember (Distribution) and Senior Officials ofIRDAI. The issues in redressal of grievancesby insurers and observations on the majorareas of grievances of life, non-life and healthinsurance and measures to reduce theirincidence were discussed. The observationsregarding maintenance and updating statusof resolution on Integrated GrievanceManagement System were also discussedwith the insurers. All the insurers made apresentation on the Organizational Structureof Grievance Redressal in their company,Board Committee and other Committees forPolicyholder Protection and GrievanceRedressal, Status of pending claims, Statusof Legal cases, Policy and Systems in placefor speedy settlement of claims by thecompany, Issues in IGMS, Problems facedin timely resolution of grievances andsuggestions for better policyholder protectionand speedy grievance redressal. While lifeinsurers were asked to present on the extentof the problem of Mis-selling / Unfair businesspractices based on complaints and thesystems put in place to address mis-selling,non-life insurers were asked to present aboutthe systems in place to superviseperformance of surveyors and TPAs handlingclaims.

V. TRIPURA STATE ACTION PLAN

The Insurance Awareness Campaign in theState of Tripura was launched on 8.1.2015 atAgartala by the Hon’ble Chief Minister ofTripura Shri Manik Sarkar. The Campaign isa collaborative effor t of the InsuranceRegulatory and Development Authority ofIndia (IRDAI) and the Government of Tripura.The Campaign aims to make the citizens ofthe State aware about the benefits ofinsurance so that they can derive maximumadvantages for themselves by taking the rightdecisions. The objective is proposed to beachieved within an outer time limit of twoyears through a wide range of activities, byadopting a multi-institutional approach withthe involvement of Insurers, Life and Generalinsurance councils, Banks, Financial LiteracyCentres, Common Service Centres etc. anda multi-pronged strategy which, inter-alia,includes Seminars at District levels, villageadoption, educating students, use of media– print and electronic, distribution of educationmaterial etc. The Chief Minister launched thebooklet outlining the Action Plan of theConsumer Awareness Campaign in Tripura.Shri TS Vijayan, Chairman, Shri M.Ramprasad, Member (Non-Life), Shri SriramTaranikanti (ED), Shri Lalit Kumar (FA) andrepresentatives of Consumer AffairsDepartment represented IRDAI in the launch.Shri Bhanulal Saha, Hon’ble Minister ofFinance, Government of Tripura, Shri A.Jindal, Secretary, Finance, Government ofTripura, Shri G.K. Rao, Chief Secretary,Government of Tripura were also present inthe function and addressed the participants.Nearly 200 participants representing districtadministration, insurance sector, consumerbodies, insurance councils, members of pressetc. attended the launching ceremony. Theoccasion was also marked by the release ofthree IRDAI handbooks titled “Introduction toInsurance”, “Employment Opportunities in theinsurance sector” and “Handbook onInsurance”. The Action plan is beingimplemented by Government of Tripura andIRDAI collaboratively.

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VI. INSURANCE AWARENESS POLICY OFINSURERS

IRDAI advised all insurers to have Boardapproved Insurance Awareness Policy forincreasing insurance awareness across thecountry.

VII. RESEARCH GRANT SCHEME

To promote academic research in the areasof insurance, IRDAI launched a ResearchGrant Scheme promoting applied researchin insurance with focus on policyholders’protection and insurance inclusion. Thescheme has been further modified andproposals have been invited for researchunder the Scheme.

VIII. PARTICIPATION IN NATIONAL STRATEGYFOR FINANCIAL EDUCATION

Realiziing the need to spread financial literacyacross all citizens of the country equippingthem with knowledge, skills and confidencerequired to make an informed choice whilechoosing any financial product, theGovernment of India, Ministry of Finance,through Financial Stability and DevelopmentCouncil (FSDC), has formulated NationalStrategy for Financial Education (NSFE) andadvised all financial sector regulators for itsimplementation within a time frame of fiveyears. NSFE aims to promote a smoother andmore sustainable co-operation betweenregulators and stakeholders, avoid duplicationof resources and allow development ofarticulated and tailored roadmaps withmeasurable and realistic objectives based ondedicated national assessments. IRDAI alongwith other financial sector stakeholders hasbeen playing an active role in theimplementation of National Strategy forFinancial Education; and a special institutecalled National Centre for Financial Education(NCFE) is established under NISM toimplement NSFE.

NCFE has conducted National FinancialLiteracy Assessment Test (NFLAT) for SchoolChildren during FY 2013-14 and FY 2014-15

and all stakeholders including IRDAI areinvolved in this endeavour. While in its launchyear, NCFE-NFLAT attracted over one lakhstudents from around 1400 schools acrossthe country, in the year 2014-15 it attractedover one lakh students from 1800 schoolsfrom across the country indicating theoverwhelming response for the initiative.

A National Survey on Financial Literacy andInclusion in India was carried out by NCFEthrough Mott Mac Donald. The Draft reporthas been submitted before the TechnicalGroup on Financial Inclusion and FinancialLiteracy of FSDC.

In order to spread financial literacy to theyoung, NCFE is also working with CBSE andNCERT for inclusion of basic financialeducation information in the schoolcurriculum.

IX. PAN INDIA INSURANCE AWARENESSCAMPAIGN

IRDAI sponsored a pan-India insuranceawareness campaign through GeneralInsurance Council, disseminating insuranceeducation on common general insurancetopics viz. motor, health, rural and propertyInsurance.

X. INSURANCE AWARENESS DAYCELEBRATION BY IRDAI

In an attempt to enhance insuranceawareness across the nation, IRDAI decidedto celebrate its formation day as ‘InsuranceAwareness Day’ on 19th April every year.IRDAI celebrated ‘Insurance Awareness Day’for the very first time on 19th April, 2014 atHyderabad. Shri Kalyan Jyoti Sengupta,Hon’ble Chief Justice, High Court of AndhraPradesh, was the chief guest of the occasionand delivered the key note address. Thefollowing Consumer Education material waslaunched to mark the occasion.

1) IRDAI Brochure

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2) Voice-over of virtual Tours of IGMS, IGCC andConsumer Education Website in 12 regionallanguages including Hindi.

3) Voice-over of 12 Animation Films in 12regional languages including Hindi.

4) Youtube Page of IRDAI – IRDAI Connects

IRDAI organized ‘Pan India InsuranceAwareness Quiz’ for all intermediariesincluding agents, corporate agents, TPAs,Surveyors and brokers who play a vital rolein the value chain of insurance business.IRDAI also organised in-house PhotographyCompetition with the theme: Mission IRDA.The Chief Guest distributed the prizes to thewinners of these competitions and theSouthern Zone winners of the NCFE-Financial Literacy Assessment Test. This wasfollowed by cultural programme withperformances by members of staff and theirfamily members which included Tableau ofchildren highlighting the importance ofinsurance and the various categories ofinsurance. The function was attended by Ex-Chairmen and Ex-Members of IRDAI, Seniorexecutives of the insurance sector and themembers and IRDAI with their family

XI. INSURANCE AWARENESS DAYCELEBRATION BY INSURERS

Stepping up its efforts to make insuranceawareness a focused activity by the entireinsurance fraternity, IRDAI Foundation Day(i.e April 19) was celebrated as InsuranceAwareness Day by all the insurers also. Theinsurers organized a host of activities topromote insurance awareness.

XII. OTHER INSURANCE AWARENESSINITIATIVES

Insurance education helps a consumer tounderstand their needs and risks, availabilityof insurance for managing risks, value ofpossessing an insurance product and knowabout the dos & don’ts before and afterpurchase of an insurance policy. IRDA, asinsurance sector regulator, has been playing

a pro-active role in promoting insuranceeducation since its inception and has adoptedmulti-pronged approach to enhanceconsumer awareness on various tenets ofinsurance. IRDA’s strategy of publicity andconsumer education has been encompassingboth in-house programmes and supporting/sponsoring external programmesencouraging all stakeholders to promoteinsurance awareness among the publicstepping up its efforts for insurance education.

A. Seminars

During 2013-14, IRDAI sponsored eightseminars conducted by consumer bodies andNGOs in rural, semi-urban areas viz. Nigohan(District Lucknow, UP), Chittoor (AndhraPradesh), Bhubaneswar (Orissa), Raiganj(Dist. Uttar Dinajpur, W.B), Nagaon (Assam),Mysore (Karnataka), Semaria (District Rewa,M.P) and Itanagar (Arunachal Pradesh).

During 2014-15, as a part of Tripura Actionplan, four seminars have been conducted byGovernment of Tripura in collaboration withIRDAI.

B. Bima Bemisaal Campaign

In addition to the IRDAI launched Hindiversion of its consumer education websiteand introduced a games section ‘YoungCorner’ targeting children to learn insurancein a playful manner.

Comic Book Series and animation films havebeen translated into 12 vernacular languagesand a documentary film on various initiativesof IRDAI towards protecting the interests ofthe policyholders.

The visual education material has also beenplaced on Youtube site as IRDAI Connects.

A mobile website of IRDAI has been launchedto provide for ease of access of IRDAI websiteto consumers using mobile.

IRDAI published four handbooks viz. Role ofInsurance Surveyors, Life Insurance Riders,

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Householders & Shopkeepers Insurance andGrievance Redressal Mechanism ininsurance sector for the benefit ofpolicyholders.

IRDAI also published a brochure giving a gistof IRDAI, its history, organizational structureand functions.

The insurance education material developedby IRDAI is not only made available onconsumer education website in easilydownloadable form but the printed copies arealso distributed through various channelssuch as financial literacy centres, consumerbodies etc.

In order to curb the menace of spuriouscallers, a massive multipronged campaign in

print, electronic and internet media is beingcarried out by IRDAI for cautioning generalpublic against spurious callers and fictitiousoffers.

C. IRDAI Calendar

For the first time in 2014, IRDAI publishedwall calendars and desk calendars withinsurance messages and carrying relevantpictures to depict these messages.Considering the response to this effort, IRDAipublished similar calendars in 2015 also withinsurance related messages.

IRDAI would continue with the initiatives forprotecting policyholders’ interests and forpromoting insurance awareness.

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Spurious calls –Problem, Impact and Efforts taken

by IRDAI to caution public

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I. INTRODUCTION

Spurious calls in the name of regulatoryorganizations and government or quasigovernment authorities has been a problemwhich has been in prevalence for quitesometime now. The calls contain offers ofbenefits of huge amounts to be released byauthorities. As a pre-requisite for suchpayment, the callers insist upon fulfillment offormalities which include furnishingdocuments of identity proof and addressproof, details of bank account, bankingusername, password, PIN etc. and finallyinsisting upon payment of money for fulfillingcertain regulatory requirements. Thepayments are made mostly in cash orsometimes through cheque or net banking.The gullible persons who respond to suchcalls and who are lured by such offers losetheir money and trust in the financial system.

II. INSURANCE RELATED SPURIOUS CALLS

In 2010-11, it was observed that members ofgeneral public were receiving calls fromindividuals who claim to be representativesof IRDAI and offering insurance policies ofdifferent insurance companies with variousbenefits. However, the problem was not veryserious in nature. However, to cautionmembers of public IRDAI first issued a publicnotice on November 1, 2010 (Annexure I)informing the general public that InsuranceRegulatory and Development Authority is aregulatory body which does not involvedirectly or through any representative in saleof any kind of insurance or financial products.Any person making any kind of transactionwith such individuals/agents will be doing thesame at one’s own risk. It was also advisedthat if any member of the public notices suchinstances he/she may lodge a policecomplaint in the local police station. This wasfollowed by issuing public caution innewspapers for greater reach. With the

SPURIOUS CALLS – PROBLEM, IMPACT AND

EFFORTS OF IRDAI TO CAUTION PUBLICintroduction of Do Not Call Registry and thecoming into force of the “The TelecomCommercial Communication CustomerPreference Regulations, 2010” with effectfrom 27th September, 2011 providedprotection to telecom customers fromunsolicited commercial calls.

III. RISE IN SPURIOUS CALLS AND MODUSOPERANDI

However, the problem of spurious calls hasbeen on the rise in recent times. Moreimportantly, the calls in the name of IRDAI orits officials rose significantly in 2013-14. Inaddition to such calls, there have beencomplaints of spurious calls made in thename of other insurance related agencies likeGoverning Body of Insurance Council, LifeInsurance Council, insurance companies,grievance management department ofCentral Government etc. The spurious callersare approaching customers either withfictitious offers of bonus on policies, returns,transfer of commission payable to agents etc.or on the threat that their money is transferredto someone else. In either case, the callersinsist upon fulfilling certain formalities whichinclude submitting KYC documents, givingtheir details of bank account, cheques, cardetc. and seeking payment of money forreasons like taking a dummy policy, paymentof income tax, service tax etc. or forsubscribing to some non-financial offers. Theconsequence of such calls are that membersof public fall for such offers or threats andmake payment to the spurious callers throughvarious modes like transfer of funds, sharingcard and pin, issuing cheque etc. While incertain cases fresh policies are issued tothese customers, in certain other casesmoney is being collected for non-financialpurposes without any issue of policy.Sometimes, there is no proof of payment,more so in cases where payments arereportedly made in cash.

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IV. OFFERS MADE BY SPURIOUS CALLERS

The general nature of fictitious offers madethrough such spurious calls, as discernedfrom the complaints received by IRDAI, areas follows:

• Claiming to be representatives of IRDAI andoffering insurance policies of differentinsurance companies with various benefits.

• Claiming that IRDAI is distributing bonus toinsurance policy holders out of the fundsinvested by insurance companies with IRDAI.

• Claiming that the policyholder would receivebonuses being distributed by IRDAI if theypurchase an insurance policy and wait for afew months after which the bonus would bereleased by IRDAI.

• Advising existing policyholders that money inrespect of their policy has been fraudulentlytransferred to someone else and for receivingthat money back from IRDAI, they have tofulfil certain formalities including payment ofmoney

• Claiming that they are from the GrievanceCell or IGMS Department of IRDAI making acall in continuation with a complaint madeagainst an insurer and for resolving thegrievance and release of benefit, they haveto fulfill certain formalities including paymentof money.

• Advising customers to subscribe to a freshpolicy after surrender of the existing policyand wait for a few months after which thefresh policy would be entitled for additionalenhanced returns / benefits.

• Informing that ‘Survival Benefit or MaturityProceeds or Bonus’ is due under their existingpolicy and investing in a new insurance policyis mandatory to receive the amounts whichare due.

• Advising public to invest in insurance policiesto avail gifts, promotional offers, interest freeloans, or setting up of Telecom towers or othersuch offers.

V. IMPACT OF SPURIOUS CALLS

Spurious calls of the nature indicated abovecause loss of reputation to IRDAI and otheragencies and also financial loss to the gulliblepublic who pay money based on such callsin lure of the offers made. Considering thefact that the mission of Government as wellas IRDAI is in promoting financial inclusionby improving access to insurance relatedservices in both life and non-life segments,such spurious calls would adversely affect thegeneral sentiment of general public in relationto insurance. Given the fact that insurance isa complex financial product and is a subjectmatter of solicitation, the trust deficit causeddue to such spurious calls can dissuade thosewho are apprehensive but interested inbuying insurance because of the benefits ofinsurance. Since insurance is a product ofrisk protection, this can impact the generalrisk coverage of members of public renderingthem more vulnerable to risks to their life andproperty. The premiums received frominsured public forms the corpus for insurancecompanies to make long term investmentsin instruments such as Government securitiesand other securities. The money so investedserves as the investment for nation building.As a result, spurious calls are also indirectlyhindering not only growth in the insurancesector but also development of the countrythrough the premium funds available fordevelopment.

VI. IRDA’S CAUTION TO PUBLIC

Considering the extent of the problem andthe impact of such calls on IRDAI’s efforts atprotection of interests of policy holders andensuring the orderly growth of the insurancesector, IRDAI has taken up a campaign tocaution members of public. The emphasis ismore on dissuading people from believingsuch spurious calls and acting upon them sothat the problem does not manifest into afinancial loss to members of public who makepayment believing in the veracity of the callsand offers.

Through the caution, IRDAI has beeninforming the members of public that:

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• IRDAI does not involve directly or through anyrepresentative in sale of any kind of insuranceor financial products.

• IRDAI does not invest the premium receivedby insurance companies.

• IRDAI does not announce any bonus forpolicyholders or insurers.

• IRDAI has put in place Grievance RedressalCell in Consumer Affairs Department,Integrated Grievance Management Systemand IRDAI Grievance Call Centre to providean alternate platform for registeringgrievances against insurers therebyfacilitating resolution of customer grievancesby insurers.

• IRDAI or its officials dealing with GrievanceManagement do not make calls in relation tocomplaints lodged with IRDAI as IRDAI playsa facilitative role and does not adjudicateupon or investigate into such complaints

• Any person making any kind of transactionwith such individuals/agents will be doing thesame at their own risk.

VII. EFFORTS TAKEN BY IRDAI TO CAUTIONPUBLIC

IRDAI has taken concerted efforts at buildingawareness among the members through amulti-pronged strategy. The modes ofcampaign used by IRDAI directly forcautioning public about such offers are publicnotices, press releases, advertisements innews papers, radio spots, televisionadvertisements, caution on the Internetwebsites of IRDAI and its consumereducation website etc. IRDAI has also issueddirections to insurers to incorporate cautionagainst such spurious calls in their publicitymaterial – print, internet and electronic – aswell as through SMS to their policy holders.Insurers themselves have also beenindependently taking up steps for cautioningpublic through print, electronic and internetmedia.

The following are the various efforts taken inthe direction of cautioning public fromspurious calls and fictitious offers:

PRINT MEDIA

i. IRDAI issued public notice on January 29,2014 informing public about the various kindsof spurious calls and cautioning them fromfalling prey to such spurious calls and fictitiousoffers. (Annexure II).

ii. IRDAI issued several rounds ofadvertisements carrying the same messageas public notice in newspapers both in Englishand Hindi in major newspapers across thecountry. (Annexure III)

iii. On August 15, 2014, IRDAI issued a detailedadvertisement on Right Buying which alsoincluded caution against spurious callsamongst other aspects of insurance frombuying to servicing and making claims(Annexure IV).

iv. The advertisement in 13 languages, includingEnglish, Hindi and major regional languages,is being issued periodically in majornewspapers across the country. (AnnexureV)

v. IRDAI issued a public caution again onAugust 26, 2014 including a write up onModus operandi adopted by spurious callersalong with audio clips (Annexure VI). A pressrelease was also issued on September 4,2014 (Annexure VII).

RADIO JINGLE

Considering the growing popularity of FM channelson radio, IRDAI has started using radio jingles alsoas a mode of conveying the caution in a brief yeteffective manner for a larger audience. During thecourse of the FM radio programme on Questionand Answers after the telecast of SatyamevaJayate, a popular programme on televisionhighlighting socially relevant issues, IRDAIbroadcast radio clips cautioning against spuriouscalls. The text of the clip is enclosed as AnnexureVIII. IRDAI is also planning a full fledged campaignof spreading awareness about the caution throughradio jingles.

TV COMMERCIALS

Electronic media are the most effective form ofpassing message in the most effective manner to

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a wide audience. In order to use this medium forcautioning public, IRDAI has recently startedtelecasting a television commercial on spuriouscalls in the name of IRDAI. Two advertisementshave been prepared conveying the message fortelecast at periodic intervals, especially towards theend of the financial year, which is also the timewhen members of general public purchaseinsurance for largely for tax purposes. IRDAI ishaving an integrated campaign using all the abovemedia for creating and promoting public awarenessto be cautious against spurious calls and fictitiousoffers in the name of IRDAI.

INTERNET

The caution against spurious calls has been placedon the home page of the IRDAI website and theconsumer education website of IRDAI. The TVcommercial prepared by IRDAI has also beenplaced on the Youtube Site of IRDAI – IRDAConnects.

DELHI METRO CAMPAIGN

IRDAI has been carrying out a consumer educationcampaign in association with Delhi Metro to buildawareness about insurance. In the presentcampaign, the emphasis is on spreading cautionagainst spurious calls. In addition to posters insidethe Metro rails, this campaign also includes posters,banners etc. within the Metro stations as well ason the property of Delhi Metro outside the stationssuch as walls, foot-over bridges, pillars etc.

INSURANCE AWARENESS CAMPAIGNS

The caution against spurious callers is beingincorporated in all the insurance awarenesscampaigns conducted by IRDAI or in which IRDAIis associated.

DIRECTIONS TO INSURERS

i. On 27 January 2014 IRDAI issued a circularto all life insurers mandating them to cautionmembers of public about spurious calls andfictitious offers in their advertisements /commercials in print and electronic mediafrom February 1, 2014 (Annexure IX). Thetext of the caution to be included in televisioncommercials was specified and insurers wereadvised to include voice over of the text witheach advertisement.

ii. In a circular dated February 13, 2014, the datefrom which the caution with voice over wasrequired to be included in TV commercialswas extended to March 1, 2014. Further, allLife Insurers also were advised to cautionmembers of public about fictitious /spuriousoffers by sending an email / SMS to all theirexisting policyholders and advise them to notrespond to such offers (Annexure X).

iii. The modified instructions were issued to alllife insurers vide circular dated June 24, 2014considering the representations of insurersand the Life Council (Annexure XI). Therequirement of voice over was relaxed andthe text of the caution was also simplified.Life insurers were advised to include a slidecontaining the caution to be included in everyTV commercial or cinema advertisement

VIII. RECOURSE FOR MEMBERS WHO PAIDMONEY BASED ON SPURIOUS CALLS

In spite of the best efforts in cautioning publicthere are several persons who complainabout making payment to spurious callers.The various categories in cases wherepayment is made based on spurious calls andthe recourse available are briefly indicatedbelow:

i. The amount is paid to an individual

Being a fraud by an individual, the onlyrecourse available is to take up the matterwith police for necessary action.

ii. The amount is paid to a non-insurancerelated service provider or agency

In such cases, depending on whether theservices promised by the agency have beenprovided or not, the individual has to take upthe matter with such agency or the police fornecessary action. IRDAI would not be in aposition to intervene as the institution doesnot fall within its regulatory purview.

iii. The amount is paid for an insurance relatedservice to an unregulated entity

In such cases, the complaint can be filed withpolice being a case of fraud. Complaint can

25

also be filed with IRDAI since the money ispaid for insurance related service. IRDAI willtake necessary action in the matter asprovided for under the Insurance Act, 1938including issuing of a public notice to cautionmembers of public from dealing with suchentities.

iv. The amount is paid to an insurancecompany and a policy is issued

Being a case of fraud, a complaint can befiled with police for necessary action againstthe telecallers as well as the insurancecompany whom they represent. However, asan insurance policy is issued by an insurancecompany, the person may make a complaintof mis-selling with the insurance companybringing to the notice unfair business practiceadopted by the telecaller/agent/intermediaryin selling the policy and seek changes in thepolicy or cancellation of the policy. The otherchannels of making a complaint offered byIRDAI can also be used for registering acomplaint against the insurer such as writingto Consumer Affairs Department of IRDAI,sending an email to [email protected],making a call to toll free numbers (155255 or1800 425 4732) of the IRDAI Grievance callcentre or online on the Integrated GrievanceManagement System (IGMS)(www.igms.irda.gov.in).

IX. COMPLAINTS ON SPURIOUS CALLS

The complaints relating to spurious calls areincluded under the broader complaintcategory of unfair business practices in theIntegrated Grievance Management Systemof IRDAI which is the industry-wide repositoryof insurance grievance related information.The number of complaints of this nature asper IGMS are as follows:

Sl. Year Number of % increase overNo. complaints previous year1 2012-13 63512 2013-14 7356 15.823 2014-15 9940 35.13

It can be seen that there has been a 35 %increase in the number of complaints relating

to spurious calls from 2013-14 to 2014-15warranting a dedicated and extensivecampaign for building awareness amongstpublic and cautioning them from falling preyto spurious calls.

X. ACTION BY IRDAI ON COMPLAINTS

On receipt of complaints, IRDAI has beensending an advice to the complainantinforming them of the caution issued by IRDAIwith an advise that the complainant can file apolice complaint. The format of advice sentis different depending on the nature ofcomplaint. Where the complainants havebeen issued an insurance policy as aconsequence of the spurious call, thecomplaint is also registered against theinsurer(s) whose policy(ies) have beenissued. In cases where the details of policiesare reportedly indicated by the spurious caller,the insurer is advised to explain how theinformation was compromised.

IRDAI takes up the complaint with the insurerfor resolution, which is updated by the insureron the IGMS. In case the complainant is notsatisfied with the resolution provided by theinsurer, he may take up the matter withinsurance ombudsmen (for details visitwww.gbic.co.in) for amicable resolution oradjudication under the Redressal of PublicGrievance Rules, 1998 (Ombudsmen areentertaining complaints of mis-selling thoughit is not expressly included as a ground ofcomplaint under the Rules). Alternately, thecomplainant can file a complaint withConsumer Forum for deficiency of service;or take up before a criminal court for cheatingor fraud; or file a suit in a civil court for breachof trust. IRDAI plays a facilitative role inresolution of customer complaints but doesnot adjudicate upon complaints.

However, through the volume of complaints,IRDAI monitors the market conduct ofinsurers, agents and intermediaries. Further,during the course of on-site inspection andoff-site monitoring of regulated entities likeinsurance companies, insurance agents,corporate agents and insuranceintermediaries (brokers) for examining the

26

compliance of these entities with the extantregulatory framework, IRDAI focuses on theprocess of soliciting, offering and sellinginsurance. Based on the findings, IRDAIinitiates regulatory action against the insurersor intermediaries as per the provisions of theInsurance Act and Regulations.

XI. FILING POLICE COMPLAINTS

Considering that the spurious callers operatefrom various parts of the country, it isimpracticable for IRDAI to file policecomplaints or investigate into case of eachsuch complaint of spurious calls made in thename of IRDAI or its officials given the issuesrelating to jurisdiction for filing a policecomplaint. As such, IRDAI has sparingly filedpolice complaints. However, IRDAI hassymbolically filed police complaints in twocases to highlight the problem of spuriouscalls to the police authorities and to signal tothe insurers that they should file complaintsagainst persons who are selling insurancepolicies or using the insurers’ names forsoliciting and selling insurance policies by

making fictitious offers through spurious calls.Several insurance companies have taken thecue and have filed FIRs against spuriouscallers and taken up the matter with policeauthorities given the loss of reputation causedby such spurious calls.

XII. CONCLUSION

As the popular usage in financial circles goes,there can be regulation for need but therecannot be any regulation for greed. Therealization of the fact that insurance is for riskprotection and not for windfall gains can bringabout caution in the members of public. So,there is a need for greater insuranceawareness apart from the specific effortstaken by IRDAI in cautioning public againstspurious calls. IRDAI on its part has beenproactive in devising and implementing amulti-pronged strategy for spreading cautionso that people do not fall prey to offers madeby spurious callers.

27

PUBLIC NOTICERef: IRDA/CAGTS/PNTC/LCE/172/11/2010

1st November, 201 0

Insurance Regulatory and Development Authority(IRDA) is a regulatory body established by an Actof Parliament to protect the interests of thepolicyholders, to regulate, promote and ensureorderly growth of the insurance industry and formatters connected therewith or incidental thereto.

Some instances have been observed by theAuthority that general public are receiving calls fromindividuals who claim to be representatives of IRDAand offering insurance policies of different insurance

PUBLIC NOTICERef: IRDA/CAD/PNTC/MISC/046/01/2014

Date : 29-01-2014

IRDA CAUTIONS PUBLIC AGAINST SPURIOUSCALLS AND FICTITIOUS OFFERS

Insurance Regulatory and Development Authority(IRDA) has been receiving complaints , throughemail/letters and in its Integrated GrievanceManagement System, from members of publicinforming the Authority that they are receivingspurious calls from unidentified persons:

• Claiming to be representatives of IRDA andoffering insurance policies of different insurancecompanies with various benefits.

• Claiming that IRDA is distributing bonus toinsurance policy holders out of the fundsinvested by insurance companies with IRDA.

• Claiming that the policyholder would receivebonuses being distributed by IRDA if theypurchase an insurance policy and wait for a fewmonths after which the bonus would be releasedby IRDA.

• Advising customers to subscribe to fresh policyafter surrender of the existing policy and waitfor a few months after which the fresh policywould be entitled for additional enhancedreturns / benefits.

• Informing that 'Survival Benefit or MaturityProceeds or Bonus' is due under their existingpolicy and investing in a new insurance policyis mandatory to receive the amounts which aredue.

• Advising public to invest in insurance policiesto avail gifts , promotional offers, interest freeloans , or setting up of Telecom towers or othersuch offers.

The general public is hereby informed that IRDA isa regulatory body established by an Act ofParliament, i.e. the Insurance Regulatory andDevelopment Authority Act 1999, to protect theinterests of the policyholders , to regulate , promoteand ensure orderly growth of the insurance industryand for matters connected therewith or incidentalthereto. Further, IRDA informs the members ofpublic that:

• IRDA does not involve directly or through anyrepresentative in sale of any kind of insuranceor financial products.

• IRDA does not invest the premium received byinsurance companies.

• IRDA does not announce any bonus forpolicyholders or insurers.

• Any person making any kind of transaction withsuch individuals/ agents will be doing the sameat their own risk.

companies with various benefits (such as offeringof scholarship along with policy etc.).

The general public is hereby informed thatInsurance Regulatory and Development Authorityis a regulatory body which does not involve directlyor through any representative in sale of any kind ofinsurance or financial products. Any person makingany kind of 'transaction with such individuals/agentswill be doing the same at their own risk. If anymember of the public notices such instances he/she may lodge a police complaint in the local policestation.

KUNNEL PREMConsultant and Special Officer (Life)

Annexure-I

Annexure-II

28

PUBLIC NOTICE

IRDA CAUTIONS PUBLIC AGAINSTSPURIOUS CALLS AND FICTITIOUS OFFERS

Insurance Regulatory and Development Authority(IRDA) has been receiving complaints, throughemail/letters and in its Integrated GrievanceManagement System, from members of publicinforming the Authority that they are receivingspurious calls from unidentified persons:

• Claiming to be representatives of I RDA andoffering insurance policies of different insurancecompanies with various benefits.

• Claiming that IRDA is distributing bonus toinsurance policyholders out of the fundsinvested by insurance companies with IRDA.

• Claiming that the policyholder would receivebonuses being distributed by IRDA if theypurchase an insurance policy and wait for a fewmonths after which the bonus would be releasedby I RDA.

• Advising customers to subscribe to fresh policyafter surrender of the existing policy and waitfor a few months after which the fresh policywould be entitled for additional enhancedreturns I benefits.

• Informing that 'Survival Benefit or MaturityProceeds or Bonus' is due under their existingpolicy and investing in a new insurance policyis mandatory to receive the amounts which aredue.


The general public is hereby informed that IRDA isa regulatory body established by an Act ofParliament, i.e. the Insurance Regulatory andDevelopment Authority Act 1999, to protect theinterests of the policyholders, to regulate, promoteand ensure orderly growth of the insurance industryand for matters connected therewith or incidentalthereto. Further, IRDA informs the members ofpublic that:


• IRDA does not investthe premium received byinsurance companies.


• Any person making any kind of transaction withsuch individuals/agents will be doing the sameat his own risk.

IRDA hereby urges the public to remain alert andnot to fall prey to frauds or scams perpetrated bymiscreants who impersonate to be employees Iofficers of I RDA or other insurance companies.

If any member of the public notices such instances,he or she may lodge a police complaint, along withthe details of the caller and telephone number fromwhich the call was received, in the local policestation

IRDA hereby urges the public to remain alert andnot to fall prey to frauds or scams perpetrated bymiscreants who impersonate to be employees /officers of IRDA or other insurance companies.

If any member of the public notices such instances,he ur she may lodge a police complaint, along with

the details of the caller and telephone number fromwhich the call was received, in the local policestation.

Consumer Affairs DepartmentIRDA

Annexure-III

29

Annexure-IV

30

Annexure-V

31

Annexure-V

32

Annexure-V

33

Annexure-V

34

Annexure-V

35

Annexure-V

36

Annexure-V

37

Annexure-V

38

Annexure-V

39

Annexure-V

40

Annexure-V

41

PUBLIC NOTICERef: IRDA/CAD/PNTC/MISC/197/08/2014

August 26, 2014

IRDA CAUTIONS PUBLIC AGAINST SPURIOUSCALLS AND FICTITIOUS OFFERS

Members of public have been receiving a lot ofspurious calls in the name of officials of InsuranceRegulatory and Development Authority makingfraudulent claims and fictitious offers.

2. IRDA issued a public notice on January 29,2014 cautioning members of public from fallingprey to such offers and issued advertisementsin newspapers.

3. In spite of these efforts, it is observed thatmembers of public are still receiving spuriouscalls in the name of officials of IRDA. Thenature of calls are as indicated below:

• Claiming that IRDA is distributing bonus toinsurance policy holders out of the fundsinvested by insurance companies with IRDA.

• Claiming that the policyholder would receivebonuses being distributed by IRDA if theypurchase an insurance policy and wait for afew months after which the bonus would bereleased by IRDA.

• Advising existing policyholders that money inrespect of their policy has been fraudulentlytransferred to someone else and for receivingthat money back from IRDA, they have to fulfilcertain formalities including payment of money

• Claiming that they are from the Grievance Cellor IGMS Department of IRDA making a call incontinuation with a complaint made against aninsurer and for resolving the grievance andrelease of benefit, they have to fulfil certainformalities including payment of money.

4. The other kinds of spurious calls are:

• Advising customers to subscribe to a freshpolicy after surrender of the existing policy andwait for a few months after which the freshpolicy would be entitled for additional enhancedreturns / benefits.

• Informing that ‘Survival Benefit or MaturityProceeds or Bonus’ is due under their existingpolicy and investing in a new insurance policyis mandatory to receive the amounts which aredue.


5. The general public is hereby informed thatIRDA is a regulatory body established by anAct of Parliament, i.e. the Insurance Regulatoryand Development Authority Act 1999, toprotect the interests of the policyholders, toregulate, promote and ensure orderly growthof the insurance industry and for mattersconnected therewith or incidental thereto.Further, IRDA informs the members of publicthat:


• IRDA does not invest the premium receivedby insurance companies.


• IRDA has put in place Grievance RedressalCell in Consumer Affairs Depar tment,Integrated Grievance Management Systemand IRDA Grievance Call Centre to providean alternate platform for registering grievancesagainst insurers thereby facilitating resolutionof customer grievances by insurers.

• IRDA or its officials dealing with GrievanceManagement do not make calls in relation tocomplaints lodged with IRDA as IRDA plays afacilitative role and does not adjudicate uponor investigate into such complaints

• Any person making any kind of transaction withsuch individuals/agents will be doing the sameat their own risk.

6. IRDA hereby urges the public to remain alertand not to fall prey to frauds or scamsperpetrated by miscreants who impersonate

Annexure-VI

42

to be employees / officers of IRDA or otherinsurance companies. These miscreantsfrequently use the names of Shri Rakesh Bajaj,Smt. Manju Arora, Shri R. Srinivasan, ShriMukesh Sharma, Sri Mukesh Kumar etc. asIRDA officials to give confidence to thecustomer that they indeed are receiving callsfrom the IRDA.

7. In order to make the members of public awareof the kind of calls that are being received,one such spurious call indicating the modusoperandi adopted to force the gullible customerto fall their prey, is indicated below:

Modus Operandi

• The spurious callers call the victims repeatedlyand introduce themselves as employees ofIRDA.

• They would inform that proceeds of one’sinsurance policy are being transferred to someother person.

• They would suggest the policyholder to visitIRDA at Hyderabad / Delhi and meet oneparticular officer who is responsible fortransferring this money. They would give mobilenumbers of this officer.

• On being called on the given number theperson on the other side would introducehimself/herself as IRDA officer.

• They would inform that IRDA is maintainingmoney from such accounts where agents hadcommitted frauds and this money is beingreturned to policy holders.

• The officer would tell that on policyholder’smandate the due from existing policy is beingtransferred to some other person.

• When informed that no such mandate wasgiven, they would indicate that somebody hascommitted fraud and that they will file an FIRwith police in Hyderabad / Delhi. They wouldalso give details of the FIR filed.

• For further assistance they would give anothernumber. The person on this number wouldsuggest that to get back the money, thepolicyholder has to engage the services of a

particular company. The policyholder has todeposit the following documents:

i) An account payee cheque in the name of thecompany;

ii) PAN;

iii) First page of the policy document; and

iv) Address proof.

• They would fur ther suggest that thesedocuments be couriered and the details of thedespatch including docket number etc befurnished to them.

• They would keep on calling for details of thedespatch of cheque and documents and wouldassure the policyholder that the transfer ofdues from the policy to other persons accountwould be stopped once they receive thesedocuments.

The following are the links to the Audio fileswhich contain the voice recordings of theconversation as made available by one of thecomplainants

Spurious Call – Audio 1Spurious Call – Audio 2

8. If any member of the public notices suchinstances, he or she may lodge a policecomplaint giving full details, along with thedetails of the caller and telephone number fromwhich the call was received, in the local policestation.

9. As a customer education initiative, on August15, 2014, IRDA issued an advertisement inEnglish in leading newspapers with the title“Real Value of Insurance through Right Buying– A Few Tips”. This advertisement alsocontained caution to public from falling prey tospurious calls made in the name of IRDA andmaking payments to unlicensedintermediaries. IRDA would continue its effortsto caution members of public from falling preyto spurious calls and fictitious offers in thename of IRDA or insurance companies orintermediaries.

Consumer Affairs DepartmentIRDA

43

PRESS RELEASENo. IRDA/CAD/MISC/PRE/206/08/2014

September 4, 2014

Re: Spurious Phone Calls and Fictitious /Fraudulent Offers – with sample audio of aspurious call

Members of public have been receiving a lot ofspurious calls in the name of officials of InsuranceRegulatory and Development Authority makingfictitious and fraudulent offers. IRDA had issued apublic notice on January 29, 2014 cautioningmembers of public to not fall prey to such offers.

2. Some new patterns of spurious calls are beingreported by complainants. Incorporating thenew kinds of calls in the name of officials ofIRDA received by members of public, IRDAhas issued a public notice on August 25, 2014reiterating its caution to members of public tonot fall prey to such spurious calls and fictitiousoffers.

3. IRDA has also shared the modus operandiused by one such spurious caller based on acomplaint and provided links to the audiorecords of the spurious call to make membersof public aware of the practices followed tocheat them (Spurious Call Audio 1, SpuriousCall Audio 2)

4. IRDA is a regulatory body established by anAct of Parliament, i.e. the Insurance Regulatoryand Development Authority Act 1999, toprotect the interests of the policyholders, toregulate, promote and ensure orderly growthof the insurance industry and for mattersconnected therewith or incidental thereto.Further, IRDA has informed public that:


• IRDA does not invest the premium receivedby insurance companies.


• IRDA has put in place Grievance RedressalCell in Consumer Affairs Depar tment,Integrated Grievance Management Systemand IRDA Grievance Call Centre to providean alternate platform for registering grievancesagainst insurers thereby facilitating resolutionof customer grievances by insurers.

• IRDA or its officials dealing with GrievanceManagement do not make calls in relation tocomplaints lodged with IRDA as IRDA plays afacilitative role and does not adjudicate uponor investigate into such complaints

• Any person making any kind of transaction withsuch individuals/agents will be doing the sameat their own risk.

5. IRDA has once again urged the public toremain alert and not to fall prey to frauds orscams perpetrated by miscreants whoimpersonate to be employees / officers of IRDAor other insurance companies.

6. IRDA advised that if any member of the publicnotices such instances, he or she may lodgea police complaint giving full details, along withthe details of the caller and telephone numberfrom which the call was received, in the localpolice station.

7. The public notice along with the audio clipshas been placed on the web-site of IRDA(www.irda.gov.in) as well as on the consumereducation website of IRDA(www.policyholder.gov.in)

Consumer Affairs Department

IRDA

Annexure-VII

44

RADIO JINGLES

First Script

Second Script

Annexure-VIII

45

PUBLIC NOTICECir. No. IRDA/CAD/CIR/MISC/038/01/2014

27th January 2014To All the CEOs of Life Insurance Companies

Re: Spurious Phone Calls and Fictitious /Fraudulent Offers

This is with reference to the discussion in theExecutive Committee of the Life Insurance Councilheld at Kolkata on 23 December 2013, which waschaired by Member (Life), IRDA. It was unanimouslydecided during the meeting that IRDA will create aslide on "Fraudulent Selling of Life InsuranceProducts" and send it to all life insurers to enablethem to insert it at the end of all their productadver tisements with a view to educate thecustomers on the role of regulator and also cautionthe public on spurious calls. In this regard, pleasefind attached herewith a slide cautioning membersof public about IRDA not being involved in sale offinancial products or in investing premium.

2. You are advised to include this slide along withvoice over of this content in clear terms alongwith every advertisement/commercial issuedin electronic media (TV /cinema halls etc.).

3. Every advertisement / commercial issued fromFebruary 1, 2014 should contain this message.

4. Further, you are also advised to incorporatethe content in box item prominently in everyadver tisement in print media includingpamphlets, publicity material etc.

5. Please acknowledge receipt and confirmaction.

LALIT KUMARFinancial Advisor

PUBLIC NOTICECir. No. IRDA/CAD/CIR/MISC/059/02/2014

February 13, 2014

To All the CEOs of Life Insurance Companies

Re: Spurious Phone Calls and Fictitious /Fraudulent Offers

Please refer to the circular IRDA/CAD/CIR/MISC/038/01/2014 dated January 27, 2014 on thecaptioned subject.

2. Considering a representation from LifeInsurance Council and in order to providesufficient time to insurers to prepare the voiceover and reorient their campaign, it has beendecided to extend the date of implementationof the contents of circular, insofar as it relatesto TV ads I commercials, from February 1,2014 to March 1, 2014. Please note that nofurther request for extension of time would beentertained by the Authority. However, otherrequirements of the circular like incorporating

the content in box item prominently in everyadver tisement in print media includingpamphlets, publicity material etc. shall beimplemented forthwith.

3. All life insurers shall also flash on their homepage of their websites, the public notice No.IRDA/CAD/PNTC/MISC/046/01/2014 datedJanuary 29, 2014 issued by IRDA cautioninggeneral public about spurious calls andfictitious offers. Further, all life insurers shallalso send an email I SMS to all their existingcustomers advising them to not respond tospurious calls in the name of IRDA I otherinsurance companies asking for changing overto other insurers in the lure of bonus or higherreturns.

4. Please acknowledge receipt and confirmaction.

LALIT KUMARFinancial Advisor

Annexure-IX

Annexure-X

46

PUBLIC NOTICECir No. IRDA/Life/Cir/ADV/146/ 06/2014

24th June 2014

To The CEOs of all Life Insurance Companies

Re: IRDA Notice on Spurious Phone calls to beincluded in all Insurance Advertisements

This has reference to the point 2 of the Cir No. IRDA/CAD/CIR MISC /038/01/2014 dated 27th Jan 2014and the subsequent discussions in ExecutiveCommittee of Life Insurance Council on 28th May2014 at Hyderabad.

The mandatory inclusion of voice over of thecontents of the slide containing IRDA Notice onSpurious Phone Calls along with everyadvertisement/commercial issued in electronicmedia (TV/Cinema halls etc.) stands relaxed.

Instead it is now prescribed to include the separateslide as per the enclosed content in Annexure-I atthe end of the TV Advertisements / Cinema HallAdvertisements of Insurance with the slide gettingdisplayed continuously for a minimum period of 5seconds. (Hindi version in Annexure-II is alsoenclosed).

True Translations in other Indian Languages mayalso be used as per need with due certification)

All other provisions of the above referred Circularand that of Circular No. IRDA/CAD/CIR/MISC/059/01/2014 dated February 13, 2014 are to bescrupulously complied with from July 2014.

This has the approval of the Competent Authority

Member (Distribution & Life)

DON’T BELIEVE FRAUDPHONE CALLS!!!

IRDA IS NOT INVOLVED IN !

1) ANNOUNCING BONUS IN INSURANCEPOLICIES

2) INVESTING PREMIUMS

3) SELLING INSURANCE POLICIES

Issued in Public Interest byINSURANCE COMPANY, IRDAI

Annexure-XI

47

Mis-Selling inLife Insurance Sector

49

I. INTRODUCTION

Mis-selling is the most important issue in the lifeinsurance sector. However, there is no definition ofmis-selling in the any legislation regulatinginsurance business in the country (Insurance Act,1938 or Insurance Regulatory and DevelopmentAuthority Act, 1999) or any regulation or guidelinesissued by the insurance regulator, InsuranceRegulatory and Development Authority of India(IRDAI).

Mis-selling in common parlance refers to unfair orfraudulent practices adopted at the time of solicitingand selling insurance and generally includes sellingpolicies which have not been sought by thecustomer or which are different from what thecustomer wanted or was promised or where theproduct offered for sale is not suitable to the needsof the customer.

Some of the common examples of mis-selling areselling of insurance policies

• with regular premium as single premium policyand the premium is disproportionate to knownsources of income

• which are unsuitable based on the profile /requirements of the customer like selling apolicy of 15 to 20 years premium paying termto senior citizens

• by agent or intermediary without explaining theproduct features

• indulging in forgery, tampering of proposal orrelated papers

• when the customer wanted to invest money indeposits or mutual funds (most common inbancassurance)

• making fictitious offers like huge bonus onpoorly performing policies or giving interest freeloan, opening ATM, putting up a telecom toweretc.

• after making spurious calls in the guise of IRDAIofficials, insurance officials etc.

The list is illustrative and not exhaustive.

MIS-SELLING IN LIFE INSURANCE SECTORMis-selling is mostly in life insurance sector wherethere is saving and/or investment along with riskcover. It is also prevalent to an extent in healthinsurance where misrepresentations about benefitsor coverage or both are made to solicit and sellhealth cover. In pure risk policies like other non-lifepolicies, there is not much of mis-selling as there isno incentive to mis-sell. The focus therefore is onmis-selling by life insurance companies.

II. IMPACT OF MIS-SELLING

Complaints on unfair business practices affect thesentiment about the insurance sector in generaland life insurance sector in particular. This wouldsignificantly impact the initiatives aimed atenhancing the level of insurance inclusion asmeasured by indicators such as insurancepenetration (measured as ratio of premium to GDP)and insurance density (measured as ratio ofpremium in USD to population). In the year 2014-15, there has been a sharp decrease in the newbusiness figures of life insurance. Increasedincidence of mis-selling can adversely impactgrowth in the insurance industry which in turn wouldimpact the availability of long term funds foreconomic development from the insurance sector.Hence, while there is need to assess and reducethe extent of mis-selling, there is also a need toreassure general public that the regulatoryframework of life insurance business is soundenough to protect policyholders’ interests andgrievances, if any, are capable of being resolvedby insurers or settled / adjudicated by insuranceombudsmen or consumer fora.

III. COMPLAINTS OF MIS-SELLING

Integrated Grievance Management System (IGMS)introduced by IRDAI in 2011 is a computerizedindustry-wide grievance repository for the insurancesector. In IGMS, has complaints relating to mis-selling are classified under the broad category of“Unfair Business Practices”.

The complaints relating to broad head of ‘unfairbusiness practices’ consist of complaints fallingwithin the following complaint descriptions:

50

1. Product differs from what was requested ordisclosed.

2. Term(Period) of the policy is different/alteredwithout consent

3. Mode of premium payment differs fromrequested or disclosed

4. Annuity/Commutation/Cash Option /Rider/other Options not included as requested

5. Proposed Insurance not in the interest ofproposer

6. Intermediary did not provide materialinformation concerning proposed cover

7. Single premium Policy issued as Annualpremium policy

8. Tampering, Corrections, forgery of proposalor related papers

9. Credit/Debit card debited without consent ofConsumer

10. Premium paying period projected is differentfrom actual

11. False promises made regarding surrendervalue by intermediaries

12. Free-look refund not paid

13. Cancellation of policy other than Free LookPeriod not responded.

14. Advice concerning Exclusions/limitations ofcover not communicated

15. Illegitimate inducements offered

16. Misappropriation of premiums

17. Malpractices or unfair business practices

The number of complaints relating to unfairbusiness practices has been increasing as can beseen from the table below:

The number of complaints on unfair businesspractices increased by 63 % in 2012-13 and by 26% in 2013-14 over previous year’s number. Howeverin the current year, there has been a 31 % drop inthe number of mis-selling complaints which can beattributed largely to the multi-pronged insuranceawareness campaign by IRDAI and also to thesharp drop in the new business mobilized by thelife insurance sector. While the number of new lifepolicies issued during the years 2011-12, 2012-13and 2013-14 was almost stagnant at 4.42 crorepolicies, the number of policies dropped sharply inthe year 2014-15.

The proportion of complaints relating to unfairbusiness practices to total life complaints hasincreased from 32.55 % in 2011-12 to 56.49 % in2013-14 with the number of complaints gettingdoubled. This proportion has reduced marginallyto 52.02 % during the current year.

The proportion of complaints of mis-selling to newpolicies issued rose from 0.23 % in 2011-12 to 0.47

Year No. of % increase Total life % of mis- No. of new % ofcomplaints / decrease complaints selling policies complaints

compared to complaints n newlast year policies

2011-12 100770 - 309613 32.55 441,60,341 0.232012-13 168482 + 63. 22 341012 49.41 441,55,298 0.382013-14 211622 + 25.60 374620 56.49 441,85,973 0.472014-15(upto 31.3.2015) 145129 - 31.22 278992 52.02 NA NA2014-15(upto 31.12.2014) 112006 208585 53.70 160,35,617 0.69

Source: Integrated Grievance Management System and Business Figures-Life of IRDAI

51

% in 2013-14 and to 0.69 % in the current year ( upto December 31, 2014).

IV. REGULATORY FRAMEWORK

The regulatory framework for preventing mis-sellingand ensure right selling is discussed in brief. Thebasic framework for regulation of insurancebusiness is contained in the Insurance Act, 1938.IRDA Act, 1999 established Insurance Regulatoryand Development Authority of India as theregulatory authority to enforce the provisions ofInsurance Act so as to ensure which are broadly inthe nature of providing a framework for , thefollowing regulations are aimed at ensuring that mis-selling does not take place.

a. IRDA (Protection of Policyholders' Interests)Regulations, 2002

The basic framework for policyholder protection iscontained in these regulations.

Procedure to be followed at the 'point of sale',requirements to be complied with at the proposalstage and disclosures to be made in the lifeinsurance policy are clearly stated in theseRegulations.

The Regulations contain a provision for free-lookcancellation within 15 days of receipt of policy. Everyinsurer, while forwarding the policy to the insured,should inform by the letter forwarding the policy thathe has a period of 15 days from the date of receiptof the policy document to review the terms andconditions of the policy and where the insureddisagrees to any of those terms or conditions, hehas the option to return the policy stating thereasons for his objection. On availing of the free-look cancellation, the insured would be entitled toa refund of the premium paid, subject only to adeduction of a proportionate risk premium for theperiod of cover and the expenses incurred by theinsurer on medical examination of the proposer andstamp duty charges. In case of ULIPs, the insuredwould also be entitled to repurchase the units atthe price of the units on the date of cancellation

The Regulations clearly indicate that therequirements of disclosure of “material information”regarding a proposal or policy apply both to theinsurer and the insured. Further, every insurer is

required to have in place proper procedures andeffective mechanism to address complaints andgrievances of policyholders efficiently and withspeed.

Therefore, the regulations ensure that theprospective policyholder is given a thoroughunderstanding of the specific requirements anddetails required for taking an insurance policy. Theinsurer, agent or intermediary should enable theprospect to take the best cover that would be in hisor her interest.

b. The IRDA (Insurance Advertisements andDisclosure) Regulations, 2000

These regulations require the insurers, agents orintermediaries do not issue "unfair or misleadingadvertisements" and follow the procedures laiddown therein with respect to advertisements(including those on the internet) so that anycommunication directly or indirectly related to apolicy and intended to result in the eventual sale orsolicitation of a policy is not misleading or unfair.

Guidelines issued in 2007 on advertisement,promotion and publicity of insurance companies andinsurance intermediaries clearly stipulates thedetails to be made available in the advertisement,which are categorized as "invitation to contract",and also indicates the do's and don’ts amongstother requirements. In 2010, IRDAI issued a circularto life insurers to give fair information to thecustomers about the product on offer.

c. IRDA (Licensing of Insurance Agents)Regulations, 2000

d. IRDA (Licensing of Corporate Agents)Regulations, 2002

e. IRDA (Insurance Brokers) Regulations, 2002

f. IRDA (Web Aggregators) Regulations, 2013

These regulations mandate compliance of theagents, corporate agents, brokers and web-aggregators with the code of conduct prescribedtherein to ensure that the persons solicitinginsurance business should be eligible persons andthey disseminate the requisite information in respectof insurance products offered for sale, understandthe policy being sold and should be capable of

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making suitable advice based on the customerneeds so that the policy offered / sold meets therequirements of the prospect. Responsibilities arecast upon the agents and other intermediaries interms of code of conduct, which are mainly aimedat curbing the mis-selling and to promote bestpractices during solicitation of the business. Thetraining curriculum of these intermediaries is alsoupdated to ensure that the sales force is up to datewith all the changes and is capable of providingnecessary advice at the time of sale to theprospects.

g. Guidelines on Distance Marketing ofInsurance Products, 2011

With the increasing recourse taken by insurers,corporate agents and brokers to solicit policiesincluding lead generation through telecalling, SMS,email, internet, DTH, postal mail and other modeswhich do not involve communication in person aswell as requests from clients seeking informationand sale of insurance products in distance mode,IRDAI issued Distance Marketing Guidelines. Theseguidelines cover not only measures for policyholderprotection at the time of offer, negotiation andconclusion of sale but also about preparation ofstandardized script, training of telecallers,monitoring of calls, preservation of call recordingsetc.

h. IRDA (Non-Linked Insurance Products)Regulations, 2013

i. IRDA (Linked Insurance Products)Regulations, 2013

IRDAI had a detailed review of the existing featuresof the insurance and pension products offered bythe life insurers. Based on this review and alsotaking into account the persistency levels observedin the dynamic changing environment, IRDAIbrought out these regulations for protecting theinterests of the policyholders, improving thepersistency levels and also bringing in valueaddition to both the insurer and the policyholder.

These regulations ensure that the commission ratesare consistent across the industry and have beensmoothened with the payments depending on thepremium payment term. The benefit illustrationrequirements have been made applicable not only

to linked products but also to all the non-linkedproducts also. The Regulations prohibit certain typeof products like highest NAV guarantee, splitting ofpolicies, accepting advance premium for longperiods in case of linked products, prohibit mis-leading names so that there is clarity on savingsand protection products in case of non-linkedproducts. The regulations also bring in transparencyin terms of benefit payouts and enable thecustomers to choose the right policy.

In case of linked products which are more prone toallegations of mis-sell on account of high chargesand risk of investment resting on the policyholder,the regulations for linked products make itmandatory for separate training to all the insuranceagents/intermediaries before they are authorizedto sell linked insurance products, recommending asuitable product and collecting sufficient informationabout the potential policyholder as a proof thereof,inform the upfront charges and indicate howpremium paid is appropriated towards variouscharges from the unit fund and the balance of thefund at the end of the first year and subsequentyears. An agent/intermediary should obtain astatement of consent (to be furnished along withthe documents under File& Use Procedure) signedby the policyholder and countersigned by theperson (agent, intermediary etc) himself/herself,along with the proposal form, that he hasunderstood the inbuilt features of the policy andthe applicable charges and that he is fully aware ofinvestment risks under the policy to be issued.

j. Grievance Redressal Guidelines forInsurance Sector 2010

In addition to the above regulations, IRDAI has alsoissued Grievance Redressal Guidelines forinsurance sector specifying the timelines foracknowledging, resolving and closing prospect andpolicyholder grievances. IRDAI has also providedchannels for customers to raise grievances withinsurers in the form of Integrated GrievanceManagement System, IRDA Grievance Call Centreand postal, fax and email channels, wherein IRDAIfacilitates resolution of grievances by insurers.

Insurance Ombudsman also examine andadjudicate upon complaints relating to mis-sellingthough the Redressal of Public Grievance Rules,

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1998 does not expressly provide mis-selling as aground of complaint.

Complainants who are not satisfied with theresolution provided by the insurer or decision ofthe Insurance Ombudsman are free to approachConsumer Fora or Courts.

k. Corporate Governance Guidelines –Policyholder Protection Committee

With a view to addressing the various complianceissues relating to protection of the interests ofpolicyholders, as also relating to keeping thepolicyholders well informed of and educated aboutinsurance products and complaint-handlingprocedures, each insurer has been directed set upa Policyholder Protection Committee which shalldirectly report to the Board. The responsibilities ofthe Policyholder Protection Committee includeputting in place proper procedures and effectivemechanism to address complaints and grievancesof policyholders including mis-selling byintermediaries and reviewing the mechanism aswell as status of complaints at periodic intervals.The Committee is also responsible for ensuringcompliance with the statutory requirements as laiddown in the regulatory framework and adequacyof disclosure of “material information” to thepolicyholders.

From the foregoing it is clear that the elaborateregulatory framework is in itself sufficient to ensurethat insurers, agents or intermediaries do not resortto mis-selling.

V. MONITORING COMPLIANCE ANDREGULATORY ACTION

The compliance with the regulatory framework canbe ascertained by way of On-site inspection or off-site monitoring through tools such as complaints,press repor ts, etc. IRDAI conducts on-siteinspection of insurance companies, agents andintermediaries periodically to inspect the books ofaccount, examine the systems and procedures,compliance the regulatory framework, etc. IRDAIalso monitors the market conduct of the insurers,agents and intermediaries through complaints, theirfrequency and severity, press reports etc. Whereverit is found that the entities have not complied withthe regulatory framework, IRDAI takes upregulatory action.

VI. CONSUMER EDUCATION

The definitive way of reducing mis-selling is to makethe members of public aware of the concept ofinsurance, kinds of insurance policies, riskscovered, benefits offered, exclusions, andconditions etc. This is sought to be achieved throughvarious efforts of financial education to improvefinancial literacy

• Bima Bemisal campaign through print andelectronic media,

• Cautioning public against fictitious offers andspurious calls

• Launching consumer education websitewww.policyholder.gov.in and its mobile version

• Devising various films, comics, games,handbooks and FAQs relating to insurance andinitiatives of IRDAI and publicizing them

• Conducting regular seminars involvingcustomer groups addressing policyholderconcerns and policyholder education.

• Introducing mobile application which enablesthe prospective policyholders to compareinsurance products and premium rates in caseof unit linked products.

Considering the fact that several complaints werereceived from members of public relating tospurious calls and fictitious offers involvinginsurance products, IRDAI launched a multi-pronged campaign to caution members of publicthrough print, electronic and mass media includingInternet and by way of specific directions to insurersto incorporate the caution in their publicity materialin policy related advertisements as well asadvertisements in print, electronic media and TV.

VII. ACTION BY INSURERS

Insurers have also been taking the issue of mis-selling seriously by doing a root cause analysis ofmis-selling complaints to identify the major causesand have taken steps to prevent or reduce mis-selling through steps to ascertain suitability ofproduct, place controls on the various channelstuning it based on the vulnerability of the channeland have a strategy on dealing with complaints ofmis-selling.

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In addition to the action taken by IRDAI based onthe examination of complaints by the insurers, theyalso take up action against the agents orintermediaries in the form of issuing warning letters,terminating employees, filing police complaints andmost commonly resort to claw-back of commissionwherever the policies have been cancelled as aconsequence of proven mis-selling.

Further, every insurer has a Board approvedinsurance awareness policy containing the strategyand efforts to build awareness among customers.

VIII. INSURANCE LAWS (AMENDMENT) ACT,2005

The amendments to the Insurance Act, 1938 havebeen made through the enactment of InsuranceLaws (Amendment) Act, 2015. These changes willenable the interests of consumers to be betterserved through provisions like those enablingpenalties on intermediaries / insurance companiesfor misconduct and disallowing multilevel marketingof insurance products in order to curtail the practiceof mis-selling. The amended Law has severalprovisions for levying higher penalties ranging fromup to Rs.1 Crore to Rs. 25 Crore for variousviolations including mis-selling andmisrepresentation by agents / insurancecompanies.

IX. CONCLUSION

To summarize, the problem of mis-selling of lifeinsurance is a major cause of concern in expansion

of life insurance business. The regulatory frameworkis adequate to prevent mis-selling. However, greatercompliance with the relevant regulations, increasedinsurance awareness, simpler policy terms andconditions, greater adherence to code of conductby agents and intermediaries, and self-disciplineamong insurance intermediaries and insurancecompanies can significantly reduce the mis-sellingcomplaints without affecting the volume of newbusiness. Since mis-selling impacts the trust andconfidence on insurance companies, it is time theinsurance companies wake up to the challenge andnot only take initiatives in educating andempowering consumers leaving them the freedomto exercise an informed choice but also to rein inunscrupulous agents and intermediaries who arebringing business by resorting to cheating throughfalse promises. Putting in place systems to examinecomplaints from the underwriting perspective andexpeditiously redressing them where the policyappears inappropriate can help build trust in thepublic. The e

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