Citizens' Issues
Murky covers: Unscrupulous schemes to sell insurance products continue unabated

More and more dodgy schemes to sell insurance policies keep crawling out from the woodwork. But a number of insurance companies have preferred to maintain a deafening silence on these devious activities

Selling insurance translates into big money for agents. But a number of agents (and a few who are not authorised representatives of insurance companies) have been coming out with devious plans to sell policies to gullible investors. From operating multi-level marketing (MLM) schemes, blatant mis-selling of Unit-linked Insurance Plans (ULIPs), plastering of fake job applications all over the place and sending misleading text messages—every trick in the book is being tried to peddle insurance products.   
Moneylife has repeatedly highlighted these instances—but insurance companies have preferred to look the other way. Here are just a few of the cases that we have written on.

On 25 March 2010, agents from the Life Insurance Corporation of India (LIC) were trying new ways to trick people into buying insurance. A client was sold a policy under which she had to make a one-time premium payment of Rs1 lakh for 10 years—she was assured a monthly pension of Rs5,000 for the rest of her life. Debt-oriented instruments can offer returns of no more than 6%-7%, while equity-linked products can manage maximum returns of 15%. So what was the basis on which the client was offered these impossible returns on an insurance product? LIC has not replied to any of the detailed emails sent to them, till date.

Here’s another scheme that came to light on 6 April 2010, again involving LIC. Swarg, a corporate agent for the State-run insurer, was running an MLM scheme in LIC’s ‘Jeevan Saral Policy’. According to this ‘scheme’, after buying a Jeevan Saral Policy for a yearly premium of Rs6,005, one could earn an extra income of up to Rs4,46,976 within two years by getting in three more members into buying the policy. These members would have had to rope in three more members, and so the chain would go on.

This time, LIC responded by saying that “MLM is not allowed for selling life insurance. If anyone is doing it, action will be initiated. It is not permissible.” Yet, we have not heard of any action taken by the insurer so far.

On 16th April we wrote on how there is a company called Team Life Care Co running a website in which it lists down all the Bajaj Allianz products that it sells. However, Team Life Care Co was running a mirror website through a company called TLC Insurance Pvt Ltd where it was peddling a bizarre MLM scheme.

Moneylife contacted both Team Life Care Co and TLC Insurance (India) Pvt Ltd and members from both companies confirmed that these entities were part of the same organisation and shared a common managing director, one Mr Jagannath. When we contacted Bajaj Allianz, their response was: “We wish to inform you that Team Life Care Co (India) Ltd is a Corporate Agent of Bajaj Allianz Life Insurance and they solicit business through approved specified persons only.” So how was TLC Insurance running the MLM scheme?

On 19 April 2010, we reported on how Jeevanseva, a direct marketing firm, was selling personal accident schemes from Reliance General Insurance in an MLM format.

Again, there was no response from the insurer.

Another company is so brazen in its approach towards peddling MLM schemes involving LIC products, that it calls itself ‘Rose Valley Chain Marketing System’. It has an elaborate chain marketing scheme, as the name indicates, and has no qualms in handing out brochures that detail its MLM product.

On 18 May 2010, an official from Rose Valley told Moneylife, “Once you reach a certain level, you don’t have to work anymore; you can earn commission bought by your chain.” As usual, there was no response from LIC when we told them about Rose Valley’s MLM scheme.

On 27 May 2010, we reported on how local trains in Mumbai were being plastered with advertisements of an ‘incredible’ deal being offered for selling life insurance products of Birla Sun Life Insurance. As per the ad, anyone who goes in for this scheme would work only for two hours a day, sell five policies a month. For doing all this, the agent would get a commission of Rs6,000 per policy sold, amounting to Rs 3.6 lakh a year.

Birla Sun Life responded by saying that these schemes were not according to the company’s rules and regulations. “Our legal and compliance officer is already in action. We will be taking appropriate action against the person involved.” We have spoken to them over the past few days; we still await the results of their investigation.

On 11 May 2010, we had sent a mail to the Insurance Regulatory and Development Authority (IRDA) regarding these issues. A Giridhar, IRDA’s executive director told Moneylife: “Selling insurance through unlicensed persons is illegal. We will act on the information.”

When such schemes are expressly prohibited by the regulator, why do they continue to proliferate? That’s the question that both IRDA and the insurance companies need to answer.



Ramesh Karel

6 years ago

Good work!! A part of problem also is that though SEBI discloses, IRDA does not disclose the orders it has passes on its website. So if at all any action taken, is never known.

MF industry assets breach Rs8 lakh crore-mark in May

The industry's total assets under management grew by Rs34,393.67 crore, or 4.47%, in May

The assets under management (AUM) of the mutual fund industry grew by over 4% in May to cross the Rs8 lakh-crore mark and attain a six-month high, reports PTI.

The industry's AUM grew by Rs34,393.67 crore, or 4.47%, in May. The combined AUM of the 37 fund houses stood at Rs8,03,559.06 crore.

The last time the industry saw this record level of AUM was in November, when the assets hit an all-time high of Rs8.07 lakh crore, data by the Association of Mutual Funds in India (AMFI) showed.

Over May, Reliance MF, the largest fund house, saw an addition of Rs7,154 crore to its assets at Rs1.19 lakh crore.

After a gap of six months, the assets of HDFC MF breached the Rs1 lakh crore-mark in May. By the end of May, AUM of HDFC had increased by Rs7,160.53 crore to Rs1,01,863.31 crore, becoming the second fund house to manage assets of over Rs1 trillion.

Third-largest fund house ICICI Prudential MF saw its assets rising by Rs4,674.30 crore to Rs87,709.81 crore.

"The funds, which were pulled out in March, were re-infused in May. Also, short-term and ultra short-term funds saw hefty inflows, which propelled MF industry assets," Kotak Mutual Fund (fixed income and products) head Lakshmi Iyer said.

However, UTI MF bucked the trend and saw a decline of Rs840 crore from its assets to Rs78,617.15 crore during May.

During May, the Sensex dropped 3.5% as world equities wobbled on concerns over a debt crisis in the Eurozone. Analysts said that although inflow was not there in equity schemes, debt funds continued to witness investment interest.

Over the month, L&T MF added Rs1,045 crore to its assets, with May being the second consecutive month of rise. At the end of May, the AUM of L&T MF breached the Rs5,000-crore-mark to Rs5,170.69 crore.

During May, the assets of Kotak MF rose by Rs6,914 crore while Birla Sun Life MF saw its AUM increasing by Rs4,319 crore.

The other fund houses that saw their AUM rise in May included IDFC MF, Edelweiss MF, Franklin Templeton MF and Tata MF.

Of the 37 fund houses in the country, about 15 saw an erosion in AUM. This included LIC MF, whose assets fell by Rs1,544 crore to Rs 38,963 crore, and JP Morgan MF, which saw a decline of Rs330 crore to Rs3,785 crore.

Others that saw a decline in their assets included HSBC MF, Deutsche MF, Mirae Asset MF and SBI MF.


Sikozy Realtors buys 24,000 sq ft plot at Karjat in Maharashtra

Mumbai-based Sikozy Realtors Ltd, formerly Griffin Chemicals Ltd, said it bought 24,000 sq ft of vacant plot at Karjat, in Maharashtra. No financial details were provided.

The construction work for the residential flats on the acquired land will start by the August, 2010, it said in a filing.

On Wednesday, Sikozy Realtors ended 4.3% down at Rs41 on the Bombay Stock Exchange, while the benchmark Sensex closed 1% up at 16,741 points.


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