Policybazaar Under Fire: IRDAI Imposes ₹5 Crore Fine for Major Violations
India’s most prominent insurance aggregator, Policybazaar, is facing intense scrutiny after the Insurance Regulatory and Development Authority of India (IRDAI) imposed a whopping ₹5 crore penalty on the company. The fine, announced on August 4, 2025, stems from a range of violations committed during its time as a web aggregator, including lapses in governance, product promotions, and compliance.
Let’s break down what went wrong—and what it means for you, the consumer.
What Did Policybazaar Do Wrong?
IRDAI found 11 serious violations under the Insurance Act, 1938 and the IRDAI (Insurance Web Aggregators) Regulations, 2017. These are not minor missteps—they point to widespread issues in how the company handled user trust, regulatory obligations, and insurance distribution.
1. Misleading Product Rankings
Policybazaar reportedly showcased certain ULIP and health insurance plans as “Top Plans” or “Best Term Insurance,” without offering clear, objective criteria.
Example: A policy tagged as the “Best Term Plan of 2023” may not have actually been the best—it might have been featured for commercial reasons rather than genuine consumer benefit.
This kind of biased promotion misleads customers into believing that certain products are endorsed or approved by IRDAI, when in fact they may just be aggressively marketed.
2. Conflicts of Interest in Leadership
Some senior Policybazaar officials were serving as directors in other insurance-related entities—without seeking IRDAI’s approval. This raises a red flag for conflict of interest, as it compromises the neutrality expected from web aggregators.
3. Delayed Premium Transfers
One of the most alarming findings was that Policybazaar delayed transferring premiums to insurance companies after receiving payments from customers.
Why it matters:
If a customer pays a premium but the aggregator delays passing it on, the policy may not be active. In case of an accident or health emergency during that period, claims may be denied.
4. Irregular Commission and Outsourcing Practices
Policybazaar had opaque outsourcing contracts and paid high commissions to third-party agencies. Many of these agreements lacked proper documentation, violating standard industry norms.
5. Poor Policy Mapping and Call Recording
Around 1 lakh telemarketing-led policies weren’t properly mapped to Authorized Verifiers (AVs). Moreover, call recordings were either missing or incomplete—a direct compliance breach.
Penalty Breakdown: ₹1 Crore Each for 5 Major Violations
| Violation Area | Penalty Amount |
|---|---|
| Biased product promotion | ₹1 crore |
| Conflict of interest in governance | ₹1 crore |
| Delayed premium remittance | ₹1 crore |
| Outsourcing & commission issues | ₹1 crore |
| Policy mapping & call record gaps | ₹1 crore |
Other lapses, such as unauthorized commission levels and lack of verification protocols, drew additional advisories and warnings from IRDAI.
So, Should You Be Worried as a Customer?
1. Don’t Rely on “Top Plans”
Always cross-check insurance recommendations. Marketing labels like “Editor’s Choice” or “Top 5 Plans” may not reflect actual performance or suitability.
What to check instead:
- Claim settlement ratio
- Premium vs coverage
- Network hospitals (for health)
- Policy exclusions
- Add-ons or riders
2. Ensure Policy Activation
After making a payment, confirm with the insurer (not just the aggregator) that your policy is active and the premium has been received.
You can usually verify this:
- Through the insurer’s customer care
- Using online portals or mobile apps
3. Demand Full Transparency
Don’t be swayed by celebrities or emotional ads. Always read the fine print. Ask for clear documentation, especially when buying through an online portal.
What is an Insurance Web Aggregator (IWA)?
At the time of these violations, Policybazaar was operating as an Insurance Web Aggregator (IWA)—meaning it was only allowed to compare policies, not actively promote or sell them like agents.
But in February 2024, Policybazaar secured a Composite Broker License, giving it more freedom to sell and distribute policies directly. However, the IRDAI’s penalty relates to its prior role as a web aggregator, where stricter neutrality rules apply.
About Policybazaar
- Founded: 2008
- Parent Company: PB Fintech Ltd.
- Policies Sold: Over 4.2 crore
- Market Position: India’s largest online insurance aggregator
Despite its massive scale and success, the recent penalty highlights a growing concern in India’s ₹85 lakh crore ($1 trillion+) insurance market: growth cannot come at the cost of regulatory compliance.
Final Thoughts: What You Can Learn From This
This incident serves as a wake-up call for online insurance buyers:
- Always question product rankings.
- Double-check that your policy is active.
- Understand your rights as a digital consumer.
As digital insurance becomes the norm, regulatory vigilance and consumer awareness must go hand in hand.