The Insurance Regulatory and Development Authority of India
(IRDAI) has imposed a ₹1 crore penalty on Canara HSBC Life Insurance Company Ltd for mis-selling a deferred annuity policy to an 88-year-old senior citizen through its corporate agent, Canara Bank. IRDAI also directed the insurer to conduct a comprehensive audit of all policies sold to seniors aged over 75 through Canara Bank over the past three financial years ending on 31 March 2026.
In an order passed last week, the bench of Swaminathan S Iyer (member-life) and Deepak Sood (member non-life) said, "The facts of the case clearly demonstrate that the policyholder was not adequately informed of material product features. Furthermore, the fact that the policyholder himself, when informed by the Insurer's representative, opted for cancellation and a full refund speaks eloquently to the reality that the product had been mis-sold to him. The Authority also notes that the Insurer's response to the show-cause notice (SCN) characterised the relative's social media post as 'unverified' and 'inaccurate', and described the refund as having been given 'notwithstanding' the Insurer's position that the sale was compliant. This characterisation is not only incorrect but also reflects an attitude of regulatory defiance that the Authority finds unacceptable in a regulated entity."
Further, IRDAI directed Canara HSBC Life Insurance to undertake an immediate and comprehensive audit of all policies sold to proposers or policyholders above the age of 75 years through its corporate agent Canara Bank over the past three financial years ending on 31 March 2026, and file a detailed report with the Authority within 90 days from the date of its order, identifying any instances of non-compliance with product eligibility criteria, suitability norms, and disclosure obligations.
The action follows IRDAI's suo-motu cognisance of a social media post dated 8 February 2026 alleging that Venkatachalam V Iyer, an 88-year-old customer of Canara Bank's Sadar Bazar branch in Nagpur, had been sold a deferred annuity policy with an annual premium of ₹2 lakh. After examining the matter, the regulator found several deficiencies in the solicitation, underwriting and issuance of the policy and issued an SCN to the insurer on 12 March 2026.
The policy was a non-linked, non-participating individual deferred annuity plan with an annual premium of ₹2 lakh, a four-year premium-paying term and a four-year deferment period. Mr Iyer, who was 88 when the proposal was made, was the proposer or policyholder, while his 57-year-old daughter, Geeta Subramanian, was shown as the life assured or annuitant. The annuity was stated to commence from February 2030.
A key issue was the proposer's age. IRDAI noted that the approved product brochure specified an entry age of 30 to 80 years. The insurer argued that this criterion applied only to the annuitant because the insurance risk was attached to the annuitant and not the proposer. IRDAI rejected this argument, saying the approved brochure did not state that the age limit applied exclusively to the annuitant and did not contemplate the proposer and annuitant being different persons.
The regulator said an insurer cannot interpret approved product parameters after the event to justify an individual sale. By permitting Canara Bank to sell the product to an 88-year-old proposer, the insurer had deviated from the approved product features and violated the applicable provisions of the Master Circular on Protection of Policyholders' Interests, 2024.
IRDAI also found that adequate suitability and financial underwriting had not been undertaken despite the customer's advanced age. The annual premium of ₹2 lakh represented around 20% of his self-declared annual income of ₹10 lakh, while the total premium commitment over four years was ₹8 lakh. There was also no documentary verification of his financial capacity. The regulator said the failure to undertake enhanced scrutiny reflected a failure of the insurer's duty of care towards a vulnerable customer.
The pre-issuance verification call was another major concern. IRDAI found that the representative told the policyholder that the annual annuity of ₹50,791 ‘will be given to you’, giving the impression that Mr Iyer himself would receive the annuity. In reality, his daughter was the annuitant and was entitled to receive it.
The regulator rejected the insurer's explanation that the use of ‘you’ was merely intended to personalise the conversation, stressing that the verification call was an important safeguard for informed consent.
The proposal form contained several inconsistencies. The annuitant's city was recorded as Bangalore, while the state was shown as Maharashtra. More significantly, the bank details under the section for the annuitant were those of Mr Iyer himself rather than his daughter.
“This is not a trivial administrative error; it is indicative of lack of due diligence where underwriting parameters are given a go by the sales team. It is also indicative of the fact that the agent filled the proposal form without any meaningful application of mind or oversight. Such errors, if they were to be identified by the Insurer at the underwriting stage, would have been a red flag warranting further verification,” IRDAI said.
IRDAI said these inconsistencies indicated inadequate due diligence and weak oversight during proposal processing. The insurer also admitted that one of the two mobile numbers recorded in the proposal form did not belong to either the policyholder or the annuitant.
The regulator further found that the benefit illustration on record did not carry a one-time passcode (OTP)-verification stamp. Although the insurer claimed that it had been electronically shared and OTP-verified, it attributed the missing stamp to a technical error. IRDAI rejected this defence, saying “The Authority is unable to accept a 'system error' as a defence for the failure to obtain the policyholder’s affirmative acknowledgement on the benefit illustration.”
The customer information sheet and a copy of the proposal form were also not provided to the policyholder at the point of sale. In addition, the insurer collected a premium deposit on 12 February 2025, while the policy was issued only on 28 February 2025. IRDAI said the master circular, already in force at the time, prohibited the collection of premium deposits along with the proposal form and rejected operational difficulties as a justification for non-compliance.
Another concern was that the policy document did not clearly explain what would happen if the proposer died before completing the four-year premium-paying term. IRDAI considered this a critical feature that should have been disclosed, particularly given the proposer's age.
The insurer said the policy had been purchased to secure a guaranteed lifelong pension for Mr Iyer’s daughter. It also said that, after the social media post went viral, it met the policyholder and, at his request, refunded ₹4.09 lakh, including the second-year premium, and reversed the commission. It subsequently revised its product brochure and policy document, strengthened its suitability framework and introduced pre-issuance video-based validation calls.
These remedial steps did not satisfy IRDAI. The regulator observed that the policyholder himself opted for cancellation and a full refund after being informed about the policy, which it said supported the conclusion that the product had been mis-sold.
“The multiple failures in this case, the deviation from product eligibility, the inadequate verification call, the hasty completion of the proposal form, the absence of suitability assessment, no clarity on recipient of annuity, no clarity on policy in-case of death of the proposer, collectively constitute a systemic failure of internal controls and oversight mechanisms on the part of the Insurer, in violation of Regulation 5(2) of the IRDAI (Corporate Governance for Insurers) Regulations, 2024,” the order said.
In its order, IRDAI imposed the ₹1 crore penalty under Section 102 of the Insurance Act, 1938, citing violations of Regulations 6(b), 7(2)(i) and 21(7) of the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024, along with several provisions of the Master Circular on Protection of Policyholders' Interests, 2024 and Regulation 5(2) of the IRDAI (Corporate Governance for Insurers) Regulations, 2024.
IRDAI has also directed Canara HSBC Life to audit all policies sold through Canara Bank to proposers or policyholders aged above 75 during the three financial years ended 31 March 2026, and to submit a detailed report within 90 days. The insurer must strengthen oversight of its corporate agents and ensure full implementation of the Bima-ASBA facility across its distribution channels.
The penalty is to be paid from the insurer's shareholders' account within 45 days of receiving the order.
