Reliance Life’s murky business alliances and practices

Multi level marketing, business from unlicensed entities, dubious corporate agents, licensed advisor signatures forged, foreign tour packages, huge payments for contests, lead generation agreement violation, excessive payments for dissemination of information and much more in IRDA order 

Reliance Life Insurance Company (Reliance Life) is facing the heat from Insurance Regulatory and Development Authority (IRDA) for several violations leading to Rs1.77 crore penalty. IRDA order has 47 charges along with decision on each one, but there is no mention about the glaring corporate agent AB Capital fraud selling of policies with “interest free loan of 10 times premium”. IRDA did come up with charges which showcase Reliance Life’s murky business alliances, payouts and dubious business practices. IRDA order shows serious lapses in Reliance Life and hence the insurer cannot claim to be a victim of fraudulent selling.

Moneylife has consistently maintained that insurance policies are logged by valid entities and hence insurer needs to trace the relation between fraudulent sellers and the valid entity logging the sale.

 (Life insurance fraud continues with impunity)

 (Fraudulent selling of life insurance– What are IRDA and insurers doing?)

Here are highlights of IRDA order:

Multi level marketing and unlicensed entities: Business is sourced from unlicensed entities through Multi Level Marketing (MLM) and was logged into the code of licensed entities. Business was procured by forged signatures/without signatures at the space specified in the agents confidential report column. There are instances wherein signature of IRDA licensed advisor specified persons is either forged or not available. There are cases of business being sourced through unlicensed entities but booked under broker code of Net ambit Insurance Broking India Ltd.

Life Insurer is associated with V-Care Life involved in MLM and is getting business logged in the name of some of the agents. It was also observed that some of the Channel Development Associates (CDAs) are indulging in MLM through the agents mapped to them and no systems are in place to verify the details of agents that sourced the proposals. Mutyala Getwin Online Marketing Private Limited is doing insurance business in multilevel marketing model.

Leads obtained and payments are made to the various corporate agents based on agreements and in the process unlicensed entities solicited insurance business was logged into various code numbers of ‘Reliance Third Party Distribution Channel’ which is one of the new business verticals of the insurer.

Corporate agent Pinnacle Insurance Agency is engaged in MLM activities. They offer high value gifts to its distributors and the criteria for award winning are also published on their website. Corporate agent admitted to involvement of two of its employees in the multi level marketing activities. IRDA observed that the life insurer has failed to monitor the activities of the corporate agent. This is considered as a serious lapse and hence Reliance Life is told to investigate into the manner in which the corporate agent is soliciting the insurance business and submit actions initiated within 30 days from the date of the order.

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

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

Contests and foreign tour packages: Extra payouts were made towards contests, apart from commission, to some individual agents. Instances are noticed where payments other than eligible commission/ brokerage were made to corporate agents and brokers in the name of contests and other related activities. Further expenses towards foreign tour packages were also incurred, Rs71 lakh during 2010-11 and Rs1.03 crore during 2011-12, on some of the brokers and corporate agents. During 2010-11, huge payments of Rs12.82 crore were made towards “Referral Fees –Contests” against referral fee of Rs1.27 crore.

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Lead generation agreement violation: An amount of Rs168.70 crores during 2010-11 and Rs45.21 crores during 2011- 12 (up to Dec 2011) were paid to various entities towards marketing and publicity. Significant amounts were paid to various entities towards “Marketing Activities”, “Dissemination of information" and “Generation of Leads" during the years 2010-11 and 2011-12. Dissemination charges of Rs74.89 crores were paid to about 641 entities during 2010-11and Rs35.31 crores to about 131 entities during 2011-12 (up to December 2011). Service Agreements entered revealed that these entities were engaged for lead generation and dissemination of information. IRDA order states that entering into service level agreements and making payments for lead generation and dissemination of information is not permitted even before IRDA (Sharing of Database) Regulations, 2010. Only Banks were allowed to be entered into referral agreements. Payment of significant monies for an unskilled job of distribution of publicity material under the guise of ‘Dissemination of Information’ is questionable.

Advertisements violation: In respect of product Reliance Premier Life, instances (Unique Ad id No: Mktg/sales pitch/version 1.0/August 2009, Mktg/poster/version 1.0/August 2009 and Mktg/hoarding/version 1.0/August 2009) were found where Advertisements filed with IRDA are different from that were issued to the public.

The advertisements bearing numbers Mktg/RTSIAP - Brochure/ version1.0/ November 2009, Mktg/RTSIAP-Brochure/version 1.1/April 2010 were not filed with the authority and are also not appearing in the advertisement register.

Reliance Life refunds Rs60,000 in a suspicious transaction: Another Moneylife success

Is Reliance offering 10-year interest-free loan for buying insurance?

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    COMMENTS

    Dayananda Kamath k

    7 years ago

    when you have a regulator like irda who do not have any idea of their domain what you can expect. today every ombudsman, regulator tries to shift the complaint to other regultor or any dam reply irrelevent also will be taken as closing of the complaint without application of mind. just like rahul gandhi reading speaches without understanding the content.

    mahesh d m

    7 years ago

    Reliance Life is really a fraud company. This AB Capital called me and told that since my insurance policy did not gave much returns Reliance life will be giving 8 gram gold coin and Through this I bought 3 insurance policies. They fooled me too. when I complain about this Reliance life did not replied. I sent 3 letters but no reply.

    REPLY

    raj pradhan

    In Reply to mahesh d m 7 years ago

    Write to Moneylife Foundation Insurance Helpline

    Sanjay M Shah

    7 years ago

    IN COMPETITIVE BUSINESS ENVIRONMENT, EACH & EVERY CO WANTS TO HAVE UPPER HAND BY SELLING THEIR PRODUCT BY HOOK OR BY CROOK.
    ETHICS IS NOT FOLLOWED, TARGET GIVEN TO EMPLOYEE & BROKER ARE TO BE ACHIEVED OTHERWISE THEY ARE FIRED OR EXPELLED. THIS WORST SIDE OF COMPETITION. REGULATIONS ARE THERE BUT LOOPHOLES ARE FOUND OUT BY SUCH CO & MARKETING IS DONE.
    IN SPITE OF REGULATIONS SUCH THINGS ARE HAPPENING SHOWS SYSTEM ALSO NEEDS TO BE UPDATED. SAHARA IS GOOD EXAMPLE OF LOOPHOLE IN SYSTEM. BANKS ARE ALSO INDULGE IN WHITE COLLAR BLACKING BUSINESS, THEY ARE HIGHEST MIS SELLERS & ARE TO BE BANNED FROM SELLING INSURANCE & MUTUAL FUND PRODUCTS. SUCHITRA K.MURTY IS ANOTHER EXAMPLE.

    ANANTHA NARAYANAN

    7 years ago

    I learn Bajaj Allianz life also resorting to MLM even though not as blatantly as Reliance. It is better if IRDA keeps a close watch on the Private Life Insurance companies.

    sivaraman anant narayan

    7 years ago

    If the regulator strictly goes by the rule book, is this not a case for revocation of licence for doing Insurance business? From the figures quoted by way of commissions and rewards etc, the penalty is a pittance for Reliance! In any case the penalty goes to the coffers of the regulator and the deceived policy holders do not get compensated.Is this not legalised corruption for excusing wrong-doing?

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