The ₹5 crore penalty imposed on Policybazaar by the Insurance Regulatory and Development Authority of India (IRDAI) is one of the most serious regulatory actions taken against an insurance aggregator in recent years.
IRDAI Fines PB Fintech for Misleading Insurance Ads
- Regulatory Body: IRDAI (Insurance Regulatory and Development Authority of India)
- Date of Action: August 5, 2025
- Entity Penalized: PB Fintech Ltd, the parent company of Policybazaar Insurance Brokers Pvt Ltd
Key Reasons Behind the Penalty
IRDAI found 11 regulatory violations after a detailed inspection of Policybazaar’s operations.
1. Biased Product Rankings on the Website
- Violation: Policybazaar allegedly ranked certain insurers’ products more prominently than others not based on merit or customer benefit, but on commercial arrangements.
- Impact: This misleads customers into thinking the top-ranked products are the best, when they might not be.
- IRDAI’s View: Such biased display compromises transparency and violates the guidelines meant to ensure fair comparison among insurance offerings.
2. Misleading Advertisements
- Violation: The company allegedly promoted insurance plans using claims or promises that were either exaggerated or unverified.
- Example: Some plans were advertised with misleading benefits or claim settlement guarantees.
- IRDAI’s View: This violates the Insurance Advertisement and Disclosure Regulations, which require full accuracy and clarity in promotional content.
3. Delay in Remitting Premiums to Insurers
- Violation: There were delays in transferring the collected premium amounts to the respective insurance companies.
- Impact: This could lead to issues in policy activation and compromises customer protection.
- IRDAI’s View: According to norms, insurance intermediaries must remit premiums within the stipulated timelines to maintain system integrity.
4. Failure to Maintain Proper Records
- Violation: Policybazaar did not maintain or submit certain mandatory documents and customer data records.
- Examples: Incomplete KYC records, transaction logs, or communication trails.
- IRDAI’s View: Such failures hinder regulatory oversight and can be exploited for fraud or policy disputes.
5. Improper Handling of Group Insurance Policies
- Violation: Issues were found in the manner Policybazaar sold and managed group health or life insurance products, especially in the B2B segment.
- IRDAI’s Concern: These practices did not fully comply with the regulatory guidelines regarding group products and could lead to risk dilution or benefit denial.
6. Unregistered Products Sold via Platform
- Violation: In a few cases, products were displayed or promoted on the website before receiving official approval from IRDAI.
- Impact: This raises questions about product legitimacy and legality of sales.
Legal Basis of Penalty
The fine was levied under Section 102 of the Insurance Act, 1938, which allows IRDAI to penalize companies up to ₹1 crore per violation in case of willful or repeated breach of norms.
Policybazaar’s Response (So Far)
- The company has acknowledged the IRDAI order and stated that it will review and respond appropriately.
- It has also mentioned that corrective steps are being taken to ensure full compliance in future.
- However, as of now, no formal appeal has been filed against the fine.
IRDAI Makes Ad Transparency Non-Negotiable
- This penalty sets a precedent for stricter monitoring of digital insurance aggregators.
- It could lead to tighter scrutiny across the sector, especially for platforms ranking and selling financial products.
- Customers may now question the neutrality of comparison platforms, potentially shifting toward insurer-direct channels.
Insurance Snapshot: Penetration, Growth & Trends
- Overall Insurance (3.7% of GDP): Below global average; penetration declining despite premium growth.
- Life Insurance (2.8%): Premiums and new business rising, but fewer individual policies sold.
- Non-Life Insurance (1.0%): Growth led by health and motor; standalone health insurers (SAHIs) performing well.
- Insurance Density: USD 70 (Life) / USD 25 (Non-Life) — both significantly below global averages (USD 391 / USD 379).
- Government Schemes: Not GDP-linked; expanding coverage rapidly—e.g., Ayushman Bharat now covers ~500 million people.
Despite more government-backed initiatives and growing premiums, India’s insurance sector remains markedly under-penetrated, particularly compared to global standards. There are critical opportunities for expansion, especially in rural markets and underserved demographics.
IRDAI’s action against Policybazaar not only safeguards consumer interest but also reinforces the authority’s independence and integrity. This decisive move sends a clear message across the insurance industry—transparency and accountability are non-negotiable. It stands as a vital lesson for all financial intermediaries operating in the digital space.