Life insurance is being sold fraudulently with a corporate approach to defraud gullible people. Intermediaries have neither been penalised nor have they lost their license. There is a need for stern action from IRDA and insurers to curb the menace. Will the regulator act?

Mis-selling of life insurance is ubiquitous. It can be about giving wrong information about product features or exaggerated returns. The new trend is fraudulent selling of policies with offers that may just lure the greedy and the gullible by offers of “interest-free” loan, mobile tower rent, helping to get company bonus, surrender of a policy without loss, etc. If you happen to lower your guard, you may a royal run around after getting stuck with a policy of trivial value. We have written several stories detailing this fraud
 

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Moneylife spoke with senior officials from an insurance company to piece together this disturbing trend. The fingers point to a few brokers and corporate agents. They work with multiple distance marketing agencies who in-turn log the sales. The arrangement is convenient as the brokers and corporate agents can feign ignorance of the fraudulent selling due to business agreements with multiple agencies. Even if their own employee is involved, they can terminate the employment after passing the blame solely to them. It is unfortunate that insurance brokers who are supposed to represent clients by offering the best products for their needs are taking consumers to cleaners and that too without even meeting them in many cases. The insurance company we spoke distanced itself from few brokers to avoid suspicious policies being sold.
 

Is Reliance Life’s corporate agent AB Capital involved in fraudulent “interest-free loan” offers? Will Reliance or the regulators initiate action?
 

It is also perplexing that an estimated that "95% of the fraudulent" cold calls originate from NCR. According to one official, “It could be due to ease of infrastructure to setup calling centre or it may be to do with culture of the place.” Most of the phone numbers reported by Moneylife readers to us have New Delhi area code (011). Moneylife has spoken with these shady characters few times on the phone (011-65981239/011-65695595). The fraudsters, who were based in New Delhi gave their address as 13th floor, Lalit Towers, Connaught Place. They were peddling Reliance Life Money Multiplier policy with the carrot of “interest-free loan”.
 

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Moneylife has taken up the issue with IRDA Chairman during 16^th CII Insurance Summit on 14^th August. IRDA is aware of the peril and have initiated steps, but a strict action involving penalties and license revocation is necessary to show a will to crack down. While IRDA has penalised a few life and non-life insurance companies with hefty fines in recent times, it has levied penalty only on two corporate agents and that too for violation with respect to non-life insurance company. Life insurance intermediaries are involved in dubious activities with impunity. It has been a scot-free run for them till now.
 

According to insurance company official, “IRDA has setup working committee of life insurers through life insurance council. There has been data collected on agencies involved in dubious calls, phone numbers from which calls are made and so on to help create database of fraud.” Media reports suggest that IRDA has already registered a case with the cyber police.
 

Reliance Life, ICICI Prudential Life Insurance, HDFC Life Insurance, Birla Sun Life Insurance, SBI Life Insurance and Aegon Religare Life Insurance have formally filed a complaint with the economic offences wing (EOW) of the government in this regard. The insurance company we spoke has hired retired police officials to help them investigate cases of fraud selling.
 

According to a press release issued by Reliance Life Insurance on 20^th August, the insurer has got seven such callers arrested and 12 others have been detained. It has filed around 200 cases with the police so far.
 

Reliance Life’s drive against fraud callers – Will it take action against its corporate agent AB Capital?
 

Moneylife Foundation Insurance Helpline has been in the forefront to help victims of fraud selling to get back their investment. We have helped 15 victims recover Rs14.70 lakh from Reliance Life Insurance with amounts ranging from Rs10,000 to Rs2 lakh. All of them were fraudulently sold policy by Reliance Life corporate agent AB Capital with lure of “interest-free” loan. The customers even get a fake loan reference number to make it look authentic. The waiting period for the fake loan is ‘forever’. The ploy is to ensure that the “free-look” period of the policy is over during the interim period of waiting for the “interest-free” loan.
 

Ironically, while Reliance Life feels it is a victim of such fraud, the same is the stance taken by AB Capital who wrote to Moneylife stating that “Based on our internal vigilance, we plan to lodge FIRs against the perpetrators and terminate their employment.”
 

Reliance Life’s corporate agent AB Capital offers to help victims of fraudulent “interest-free loan”
 

Should we give a clean chit to all the insurance companies? A policy is sold by an entity authorised to sell insurance. A trail of insurance policy will help to nab the culprits. If only insurance companies and IRDA follow the footprints of the policy for which grievance of fraudulent selling has been raised.