Irdai Slaps Rs 5 Crore Fine On Policybazaar For Biased Promotions, Premium Delays And Rule Breaches

The Insurance Regulatory and Development Authority of India (Irdai) has imposed a penalty of Rs 5 crore on online insurance marketplace Policybazaar, for biased promotion of insurance products, delays in remitting premiums to insurers and for violations regarding many other operational guidelines.

The regulator's action follows a detailed investigation that found Policybazaar, then functioning as an Insurance Web Aggregator (IWA), guilty of breaching 11 regulatory provisions under the Insurance Act and the Irdai (Insurance Web Aggregators) Regulations, 2017.

When contacted by Outlook Money, Policybazaar declined to comment on this development.

Here are the key violations that led to this penalty on Policybazaar:

Promotions That Favoured Few

One of the key findings by Irdai was that Policybazaar displayed certain insurance products on its website as "Top" or "Best" plans without disclosing any objective criteria or third-party data to support these claims. The regulator has noted that this biased presentation gave undue preference to a handful of insurers, even though the platform had agreements with many others.

"It is not clear on what grounds the IWA displayed the said products as best / top in their category. There was no material that was available to the prospects to make an informed choice," the official order noted.

For instance, during a June 2020 inspection, the site showcased five ULIP plans and selected health insurance policies as top-rated options, despite having arrangements with 23 life and health insurers at the time. Such practices go against Irdai rules, which prohibit ranking or comparison that promotes one insurer over another without a factual, verifiable, and clearly disclosed basis.

Delay in Premium Remittance

This was another serious violation by the aggregator wherein it delayed in transferring premiums paid by customers to the insurers. As per the Insurance Act, intermediaries are required to remit premiums within 24 hours of its receipt. However, Irdai found that Policybazaar delayed remitting these premiums from five to over 30 days across thousands of policies; it noted 77,000 instances of late transfers.

Moreover, the regulator also noted that Policybazaar was using its own payment gateway and nodal account to collect premiums, adding another layer of delay in the whole process.

Outlook Money earlier did a story on how insurance companies and aggregator/broker websites are violating health insurance sales guidelines vis-a-vis collecting premiums upfront before the policy proposal is fully accepted by the insurer.

Irdai's Master Circular on Protection of Policyholders' Interests, 2025 states that "Premium is to be paid only after the insurer communicates acceptance of the proposal". However, many aggregators still collect premiums before underwriting. Some platforms move users from proposal to payment in less than 5 minutes.

Telemarketing and documentation gaps

Irdai's inspection also revealed lapses in the tracking of telemarketing sales. It found that out of over 4.3 lakh policies sold through this mode, around 98,000 were not mapped to any Authorised Verifier (AV), making it unclear who facilitated the sale to begin with.

The Irdai norms stipulate that policies must be linked to AV which ensures accountability and traceability of such sales. Moreover, Policybazaar was further pulled up for failing to furnish call recordings when requested citing 'system retrieval issues'. The regulator did not levy any fine on this account but has directed the company to undergo an external audit by a chartered accountant.

Other regulatory breaches were:

• Some key managerial personnel were found holding directorships in other companies without prior Irdai approval, violating exclusivity requirements.

• Some agreements with insurers for outsourced services were reportedly vague and lacked objective pricing criteria.

• In some cases, commissions exceeded the prescribed limits by Irdai, leading to reconciliation delays.

• Several Authorised Verifiers also held insurance agent licenses, which is another red flag under current norms.

Each of the five most serious lapses attracted a Rs 1 crore fine, adding up to Rs 5 crore in total penalties.

From Aggregator To Broker

It is important to note that these violations date back to when Policybazaar operated as an Insurance Web Aggregator. The company in February 2024 had received the composite insurance broker licence which allows for broader insurance distribution services.

This enforcement action by Irdai, however, serves as a strong reminder that compliance standards are and should be non-negotiable in India's growing insurance market.