Policybazaar missteps trigger ₹5 cr penalty-Should consumers be worried?

Irdai has imposed a ₹5 crore penalty on Policybazaar Insurance Brokers for certain lapses and also cautioned against violating insurance norms

The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of ₹5 crore on Policybazaar Insurance Brokers Pvt Ltd (formerly a web aggregator) for multiple violations spanning corporate governance, product promotion, premium remittances, and compliance lapses.

 

IRDAI’s order, issued on August 4, 2025, identifies 11 charges under the Insurance Act, 1938, and IRDAI (Insurance Web Aggregators) Regulations, 2017, revealing widespread operational and ethical shortcomings. These infractions include:

 

These infractions include:

 

Biased product promotions: Policybazaar ranked select ULIP and health insurance plans as “top” without transparent criteria, leading to preferential treatment and curtailing consumer choice. This misled customers into thinking those were IRDAI-approved or superior products, without offering objective data or comparison tools.

 

 

 Example: If a term insurance plan from Insurer X was ranked “Best Term Plan of 2023” on Policybazaar, it often lacked a clear explanation of why—whether based on premium, claim settlement ratio, or features. This could influence a customer’s decision based on marketing, not facts.

 

Governance conflicts: Some senior Policybazaar officials were found holding directorships in other companies without IRDAI’s prior approval, violating the Web Aggregator Guidelines, 2017. The concern here is a conflict of interest—key decision-makers influencing multiple insurance-related entities, compromising neutrality and compliance.

 

Delayed premium remittance: 

Another major violation was Policybazaar’s delay in transferring customer premiums to insurers. Under law, web aggregators must pass collected premiums to the respective insurance companies within a stipulated time frame. Any delay, even for a few days, can cause:

• Policy issuance delays
• Coverage gaps
• Legal risk if something happens to the insured in the interim

 

 What this means for you: You may think your policy is active once you pay on the website—but if the aggregator hasn’t transferred the premium in time, your coverage might not have started.

 

Improper outsourcing and commission structures: Contracts lacked transparency, with high payouts to third-party agencies, and possibly inconsistent compliance. 

 

Flawed policy mapping and call-recording: Nearly 100,000 telemarketing-led policies weren’t mapped to Authorized Verifiers (AVs), and call recordings were incomplete or unavailable.

 

IRDAI also flagged unauthorized commission levels and failure to maintain formal outsourcing agreements—both drawing fines and strong advisories. 

 

 Penalty Breakdown

IRDAI imposed ₹1 crore fines for each of the following:

 

Governance and undisclosed KMP directorships

 

Misleading product promotions

 

Outsourcing and commission irregularities

 

Non-compliant policy mapping and call-record shortcomings

 

Premium remittance delays

 

Additional violations—such as excess commissions, lack of due diligence on AVs, and missing call-record data—resulted in advisories and formal caution. 

 

The total ₹5 crore penalty must be paid within 45 days, and the company has the right to appeal before the Securities Appellate Tribunal (SAT).

 

Background: What Is an IWA and What Changed for Policybazaar?

At the time of inspection, Policybazaar was operating as an Insurance Web Aggregator (IWA) — an entity allowed to list and compare insurance products but not push or sell them like agents or brokers.

 

However, in February 2024, Policybazaar obtained a Composite Broker License, allowing it to officially distribute and sell policies. But the violations were traced to its time as a web aggregator—where stricter neutrality rules apply.

 

Point to note: Policybazaar, founded in 2008 and now a subsidiary of PB Fintech Ltd., remains India’s largest insurance aggregator. Since inception, it has sold over 42 million policies, underlining its scale and reach. Despite its success, the penalty underscores a regulatory red flag for the $1 trillion-plus online insurance ecosystem: compliance cannot be sacrificed for growth.

 

 Why This Matters to You

1. Check Before You Click

Never rely solely on “Top Plans” or “Editor’s Choice” labels when purchasing insurance online. Always look at:

 

Claim settlement ratio

 

Premium vs. benefits

 

Hospital network (for health insurance)

 

Exclusions and riders

 

Use IRDAI’s comparison portals or consult a fee-only advisor if unsure.

 

2. Demand Transparency

This episode is a reminder that consumer protection in digital insurance needs strengthening. Ask questions, read the fine print, and don't be swayed by “celebrity endorsements” or emotional marketing.

 

3. Track Policy Activation

After buying a policy via any platform, verify directly with the insurer that the policy is active and your premium has been received. You can usually do this via the insurer’s helpline or customer portal.