Tuesday, April 22, 2014

Reliance Life terminates AB Capital, lodges criminal complaints after Moneylife expose

Moneylife: Pune: Tuesday, April 22, 2014.
One of the biggest examples of systematic, fraudulent mis-selling of insurance policies, that has only led to a regulatory rap on the knuckles is that of AB Capital, a corporate agent of Reliance Life insurance, which has sold insurance policies to thousands of persons across the country on the fake assurance that they will get an interest free (or very low interest) loan that is equal to 10 times the premium paid.
Moneylife began to take up these cases in the early part of 2013 and wrote to the Insurance Regulatory Development Authority (IRDA) for the first time in July 2013. We have received complaints from all over India from people who did an internet search to figure out how to redress grievances.  Some of these had even borrowed money to pay the premium in order to obtain the interest free loan. While some of those, who were duped, are not financial savvy, many included software engineers from leading companies. Clearly the fraudsters had a sophisticated technique of convincing people.
Thanks to the regulator’s pressure, 95% of the complaints forwarded by Moneylife Foundation to Reliance Life have received refunds. However, the flood of complaints shows no sign of stopping. We were convinced that complaints which came to us are just a drop in the ocean. Queries to IRDA, about this rampant cheating in July 2013 and January 2014 elicited no response, forcing us to file a Right to Information (RTI) application at the end of January.
Following a first appeal, we received a detailed response with some stunning revelations.
First, while IRDA did not respond to us, it had been pushing Reliance Life to redress grievances. Secondly, Reliance Life told IRDA that until 22 August 2013 it had received 2,141 complaints against its corporate agent AB Capital. These are a vast multiple of those who approached Moneylife Foundation and had their complaints redressed. It is not clear whether all 2,141 cases have been redressed by Reliance Life.
Thirdly, Reliance Life told IRDA, “AB Capital has already terminated those employees, who indulged in mis-selling and has also lodged criminal complaints (NC) against such employees. Five salesmen have been arrested so far. Considering, the large number of complaints received against the corporate agent, the company terminated the agreement with AB Capital on 8th July.” Moneylife Foundation started taking AB Capital complaints to Reliance Life in June 2013.
Fourthly, Reliance Life has told IRDA that there are no more complaints pending about AB Capital. However, this is clearly incorrect, since Moneylife Foundation continues to receive fresh complaints even today. So far, Reliance Life has paid over Rs22 lakh to 31 people duped by AB Capital based on complaints sent by Moneylife Foundation. The amounts range from Rs30,000 to Rs2 lakh each.
In fact, while IRDA has not obtained all the details of the total extent of mis-selling by Reliance Life’s agent, or the correct data on redress, it has also not initiated any action against the company. On the contrary, Reliance Life seems to be comfortable enough to demand greater proof from victims of mis-selling. In a few recent cases, it only redressed complaints from those who had taken the precaution of making voice recordings of the telecallers and were able to provide proof.
This is clearly an issue on which the insurance regulator also needs to be held accountable for dragging its feet over the massive fraudulent actions by insurance agents.  So far IRDA has done nothing beyond sending letters and asking for data and information. Were the regulator been more pro-active or the Finance ministry and the Ministry of Consumer Affairs more diligent in their supervision, we would have seen some attempt to make companies more accountable for fraud and mis-selling by their agents.
But this is clearly another long battle along with better financial literacy among those who buy insurance.