Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of Rs15 lakh on HDFC Life for violation of various regulations, including payment to brokers under the head of skill-building.
The regulator’s scrutiny found that the brokers’ employees were sponsored for foreign trips in the name of training. IRDAI, rightly, concluded that “Foreign trips to the employees of the brokers influence the brokers to sell the products of a particular insurance company by acting as a de facto agent, thereby defeating the objective of insurance broking model.” It means an insurance broker, who is supposed to suggest a product in the best interests of the consumer, will end up like an agent, pushing for a product from an insurance company which gives incentives like foreign trips.
Unlike insurance agents, who represent the insurer, an insurance broking firm is supposed to represent the customer; hence, they are allowed to sell products from any insurance company. But, instead of suggesting the product best suited for the customer, the broking firm’s decision may be influenced by an insurance company giving perks to the broker. Hence, buying an insurance product from an intermediary is not easy, since you don’t know which one is ethical.
There are real-life examples of intermediaries mis-selling by telling the customer to suppress their health condition. The goal of the intermediary may be to ensure that the insurer underwrites the policy, earning him a commission. But, an inaccurate proposal form will come back to haunt the customer at the time of a claim. If you do not trust an intermediary, it is better to buy an insurance product online from an insurance company’s website and not from web aggregators like Policybazaar. It will ensure that the proposal form you fill online will be what is received by the insurance company. Ask the insurer for a copy of the proposal form received along with the policy document.