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.