The insurance watchdog does not seem to have any regulation in its arsenal to crack down on multi-level marketing schemes which are being peddled by corporate agents
A life insurance policy is being openly peddled as a marketing tool under the eyes of the Insurance Regulatory and Development Authority (IRDA). Corporate agents of State-run behemoth Life Insurance Corporation of India (LIC) are running a pyramid scheme in one of its life insurance schemes.
Swarg (which is a corporate agent for LIC), is running a multi-level marketing scheme in LIC’s ‘Jeevan Saral Policy’.
Swarg states in its website that it has its headquarters at Dadar, central Mumbai. It claims that it has 45 showrooms selling jewellery and gems. According to its portal, Swarg is “planning another 1,000 showrooms as soon as possible.”
The company claims that it has “various concepts and insurance plans for you, which will give you tremendous attractive features like security, investments, tax benefits and above all an additional income source. With our membership, you can promote our insurance plans and earn a sizeable income which might be comparatively higher than the salary drawn by you.”
The plan works in the following way—in the company’s own words—“We have launched a scheme through which by taking a Jeevan Saral Policy from our company of yearly premium of Rs6,005 you can earn an extra income up to Rs4,46,976 approximately within 2 years period.” (These are the exact words of the company as they appear on the website; no grammatical changes have been done).
Three additional members have to be roped in at the first stage, after you cough up the initial premium of Rs6,005 for the Jeevan Saral Policy. Apparently, Swarg’s telemarketing team will then get into the act and then convince these three members to go in for the same policy. That’s when you will start to ‘benefit.’
As any typical pyramid scheme operates, these three new members will have to rope in three additional members each, thereby attracting a net total of nine members (we are at the second stage of the pyramid now).
And so it goes on and on, and at the eighth stage, if Lady Luck favours you and everything falls into place, you’ll have a total of 6,561 members—and your promised ‘net rewards’ work out to Rs4,00,937. There is a caveat, though. Each member has to rope in three more members within three months for the whole multi-level marketing scheme to remain operational.
When Moneylife contacted the company to ask whether it is mandatory to get more clients if one buys a policy, the sales executive said, “It’s not mandatory but it’s for your benefit. It’s good if you can get clients directly but if you are not able to do it then we would help you to convince your friends or relatives.”
“We don’t encourage multi-level marketing,” said a senior official from IRDA, preferring anonymity. The official also admitted that there are no rules to regulate such schemes and also said that he had no knowledge as to when such rules to curb multi-level marketing schemes will come about.
This seems odd, because a few weeks back, IRDA member S Kannan said that the insurance regulator is planning to introduce regulations to crack down on pyramid schemes.
“Multi-level marketing is not allowed for selling life insurance. If anyone is doing it, action will be initiated. It is not permissible,” said another LIC official.
Moneylife tried calling both LIC and Swarg, but no replies were forthcoming. Emails sent to both these entities remained unanswered at the time of writing this story.
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own sweet will. We can only try to educate them and try to prevent some from falling prey n of course there are regulators, law enforcement agencies
but they will come only when the perpators have vanished. Only Thing to do is to educate the people which we are doing. Borkar
In their partial reply, the IRDA has said that MLM is not a permitted form of selling insurance, but remained evasive on the action taken by them to stop this practice.
According to some estimates, the money collected through this channel of MLM is to the tune of Rs 5000 crores annually.
IRDA is fully aware of what is going on. But their unwillingness to initiate any tough action suggests either they are in the payoff of these entities or the entire operation is controlled by political bigwigs, or probably both. It is nothing but swindling the public.
While it wants an agent to go for training and passing the exam. these marketing companies do not care for training. they show only money that can be earned by intorducing people and enlarging the chaimn even by illitereates..
Zukanewala Chahiye.
Zukanewala Chahiye.
who is responsible? i hope irda chairman is not an undermatriculate.if irda chairman is a retired ias/ips,first govt. should transefer/stepped down the post.because he should learn knowledge
about what is MLM/PYRAMID/PROFESSIONAL FULL TIME INSURANCE ADVISOR.NOW INVESTORS' FEEL IRDA SHARING HIS ACTIVITIES WITH CORPORATE HOUSE FOR MILLIBHAGAT WORKS. IRDA U CAN FOOL SOME POLICY HOLDERS FOR SOME DAYS,NOT ALL POLICY HOLDERS FOR ALL DAYS.UR ACTION MAY BE RESPONSIBLE FOR UR NEXT GENERATIONS.
THANKING U, U MAY CONT, ME FOR UR SUVIVAL.
The guys who sit on top posts in these insurance companies know about these. But still they dont speak as they are remunerated for their targets not for the ethics. Poor people get cheated. People need to get present to reality and should stop thinking about doubling money or unimaginable returns which is used by such companies to lure them.
However it clearly shows the state of affairs at IRDA. As an financial advisor ,its better that zero commission comes fast in to Insurance. All these cheaters will leave the business. Hope someone is awake in IRDA, SEBI and Financial ministry to take control and stop this daylight robbery.
and still insurance regulatory authority and RBI not taking action against such co.
whether this is collective investment scheme which can be prosecuted by sebi.
there were so many multi mkting cos came and become dead after sometimes.the channel is not working as specified by anyone