After repeated articles by Moneylife highlighting multi-level marketing and other illegal schemes being run by insurance agents, we have finally received information on some action taken by an insurer
Birla Sun Life Insurance has come out with an official statement on posters being plastered on local trains, advertising a dubious scheme being offered to potential agents to sell life insurance products
(see: http://www.moneylife.in/article/81/5641.html). According to the company’s statement, “appropriate action” is being taken against the concerned person.
We have reported on numerous occasions
(see: http://www.moneylife.in/article/78/5761.html) about such illegal schemes, including multi-level marketing (MLM), and this is the first time an insurer has responded. What’s more, officials from the company have admitted that the concerned person was associated with the company.
Selling insurance translates into big money for agents. A number of agents have been coming out with devious plans to sell policies to gullible investors. From operating MLM schemes, blatant mis-selling of unit-linked insurance products (ULIPs), plastering of fake job applications and sending misleading text messages—every trick in the book is being tried to peddle insurance products. The common factor in all of these dubious schemes has been the inaction of companies.
In its statement to Moneylife today, Birla Sun Life Insurance said, “We thank you for bringing this matter to our notice. We have investigated the case and have taken necessary action against the concerned person.”
An official from Birla Sun Life Insurance, who did not want to be named, admitted that the person advertising the scheme was associated with the company. The official said, “He was associated with the company and his act was one of negligence and not knowing the rules prescribed by the company.”
However, it is not clear what kind of action was taken. An executive from the corporate communications department of the company said that disclosing the nature of the action “would be against company policy.”
This issue throws up three matters. First, these schemes are being run by employees from various companies or at least by individuals associated with various insurers. Second, more often than not, firms have hardly ever responded to such issues—Birla Sun Life is an exception—and if they do respond, the response is tepid (“We will be looking into the matter”). Third, both insurance companies and the Insurance Regulatory and Development Authority (IRDA) have still failed to take action against such persons.
On 11th May, Moneylife had sent a mail to IRDA about various MLM schemes in operation. We were told that such schemes were not allowed by the regulator and action would be taken against such companies.
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