Finally, insurer admits link to mis-selling

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: According to the company’s statement, “appropriate action” is being taken against the concerned person.

We have reported on numerous occasions
(see: 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.

1 decade ago
Dear Sir
Check one More
How are they Able to advertise openly
Looks Like outright insurance MLM
PS: Check the Pictures with every level.They are selling dreams
1 decade ago
the MLM companies and INSURERS are hand-in-glove in these schemes. The laws related to governing of agents are not fool proof. The Insurance company escapes on the ground that AGENT exceeded his limits & hence beyond the scope of Agent-Principal relation!
d k seth
1 decade ago
well done, desered an applaued, eithic is very imp in an business, and the watchdogs are suppose to play the role. The conern person should be debared from his agency with immedate effect which shall deterent to others,
1 decade ago
This only happens in Insurance domain , which is rather shocking and strange.Banking industry hardly face this kind of mis selling.Even NBFCs have improved.Enforcement in insurance sector can labelled as soft.Frauds are plenty and punishment is lax.
Laura Shapiro
1 decade ago
Hi, I just wanted to point out that MLM, network marketing and multi-level marketing are all legitimate businesses that sell legitimate products and services.

The "schemes" you are describing in your article would be best described as pyramid schemes or Ponzi schemes. Network marketing is a legal business model, unfortunately often mistakenly confused with the illegal pyramid/Ponzi schemes or scams.
Free Helpline
Legal Credit