PRAHAR writes to FinMin over violation of advertisement norms by brokers

Civil society organisation PRAHAR has written a letter to finance ministry expressing concern over misleading advertisements by some insurance broking firms.

Public Response Against Helplessness and Action for Redressal (PRAHAR) in a letter written to finance minister Nirmala Sitharaman alleged that some of the new-age insurance broking firms selling policies online are alluring customers by indicating Rs 1 crore amount by investing a small amount for certain number of years.

Insurers and insurer intermediaries are bound by the guidelines outlined in the Master Circular on Insurance Advertisements (2019). Specifically, Clause 3.4.1.3 of the Master Circular strictly prohibits insurers from projecting future performance based on past financial results.

"Where attention is drawn to insurer's past financial performance, it should indicate that the past performance is not necessarily an indication of future performance," as per the Master Circular.

The organisation requested the finance ministry and sector regulator Insurance Regulatory and Development Authority of India (Irdai) to direct these entities to stop such misleading advertisements.

Such deceptive advertisements could lead to mis-selling of insurance products and also hurt interest of many policyholders.

The letter alleged that some brokerage firm including Policybazaar and InsuranceDekho are guilty of violating the master circular.

However, these entities have clarified that there are no violations of direction and in case the regulators point out any discrepancies, they would abide by their direction.

The company, being a regulated entity, complies with applicable regulations and guidance issued by the Irdai on all matters, including with respect to representations made pursuant to its advertisements, InsuranceDekho said in a statement.

The organisation in the letter also emphasised that there are other problems arising from the practices of insurance intermediaries.

"They make enticing promises to attract customers but leave them at the mercy of insurers when issues arise. Simple requests such as call records are not provided to customers, creating frustration and hindering the resolution of complaints," it said.

Additionally, if the 30-day window for addressing a case elapses during arguments, customers have no choice but to lose their money. Even in cases of mis-selling, full refunds are either not processed or delayed to an extreme level, causing further frustration for customers, it added.