Over 4 Lakh Complaints, Can’t Probe Each One: Insurance Regulator

On November 15, 2019, the Insurance Regulatory and Development Authority of India (IRDAI) admitted in the Rajasthan High Court that it received 4,09,750 complaints of unfair business practices in 2018-19 alone. “It is impractical to investigate each and every complaint,” said IRDAI in a written document submitted to the court. 

This document was produced as part of its defence while the court was hearing a PIL filed by whistleblower Nitin Balchandani, a former employee of ICICI Prudential Life Insurance Company Ltd. Balchandani had taken to the court with a complaint about rampant corruption in ICICI Prudential, which was affecting the poorest in rural Rajasthan. 

He claimed that he had repeatedly written to the IRDAI, Reserve Bank of India, Prime Minister’s Office and Serious Fraud Investigation Office (SFIO) detailing his findings and seeking action, but received no response. In 2018, he approached the high court with a PIL. Besides the fraud by the insurance firm, he highlighted the alleged inaction by the regulatory authorities and sought action against the officials involved.

In his PIL, he explained that he had recorded instances of farmers, widows, pensioners, students and senior citizens being defrauded by ICICI Pru Life. Although he had been raising the matter since 2015 with regulatory bodies, no action was taken. He had carefully documented over 250 cases of fraudulent sale of insurance by ICICI Pru Life.

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“With each case that we highlighted, we would get responses for that particular case and in some instances the money would be returned. However, no attempt was made to correct the systemic process through which the fraud was being carried out, and we would come across more instances of people being defrauded soon as one was resolved,” Balchandani, who has set up a registered firm called Insurance Angels—for helping those who have been sold insurance policies fraudulently—said. He resigned from his job at ICICI Pru Life in 2012, after highlighting instances of inappropriate sale of insurance that his bosses had allegedly preferred to ignore.

In his petition in the HC, Balchandani detailed instances where poor farmers seeking loan under the Kisan Credit Card scheme were sold insurance without their knowledge. Age and income details were manipulated so that insurance could be sold to students or people from the BPL category. The call verification process for sale of insurance was manipulated, and an employee of the bank would receive the call instead of the person to whom insurance was sold.

In its nine-page reply filed on November 15 this year, IRDAI states that it had taken note of these complaints and conducted inspections in the premises of ICICI Pru Life in September 2017 and again in June 2019. The “said (inspection) reports are under analysis” the reply stated.

IRDAI stated that the Integrated Grievance Management System (IGMS) was in place to take care of complaints, but did not elaborate on why each and every complaint could not be handled by this system. “The systems might be in place, but it is quite clear they do not work,” Balchandani said.

IRDAI was recently in the news after Finance Minister Nirmala Sitaraman submitted in Parliament that the recruitment procedure initiated in May 2019 by the regulatory authority was cancelled after it was found that things like basic qualifications and other criteria could be challenged in court. A total amount of Rs 22.47 lakh had already been incurred by the government as expenses on the process.

 Moneylife reported, “In fact, there were two vacancies for the post of AGM (Legal). However, out of 42 applicants, only three remained after the scrutiny. Out of these three, only one candidate appeared for the written examination. If there is only one candidate appearing for the written examination, how would IRDAI make the selection? This raises doubts about the recruitment process itself.” 

During the course of the hearings in the HC, Rajat Dave, counsel representing RBI, had stated that a reply in the matter would be produced by RBI too. Although the petitioner had made the RBI a party in the case, the court had not issued any notice to it.

Since 2017, the Special Operations Group (SOG) of Rajasthan police has been carrying out investigations in this matter. Speaking to The Wire in March 2018, MS Ranawat, then additional SP with SOG had, said, “So far our investigation has revealed fraud and serious violation of IRDAI guidelines. The bank and the insurance authorities also did not cooperate with the investigation and tried to mislead us. The scale of the fraud is massive.”

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Meanwhile, ICICI Pru Life had also filed a case against whistleblower Balchandani, accusing him of theft of confidential information and charging him under Sections 420 of the IPC and 66 of the IT Act. Balchandani spent a month behind bars, but with no evidence to back charges, the HC quashed the charges against him in January 2018.

On November 6, 2019, the court made it clear that replies were to be filed and no additional time would be granted to the respondents. The matter was listed for hearing in another three weeks. In its final order on December 2, 2019, the court abruptly dismissed the PIL. “The judges said the SOG of state police was investigating this matter. But they knew this all this while. Besides, a reply had not yet been filed by the RBI. I don’t know why the PIL was dismissed prematurely,” Balchandani said.

Commenting on the status of the case, Abdul Rehman, the current investigating officer in the case, told this reporter, “I have submitted a report to Jaipur. There are documents I have sought from ICICI that are still to arrive.”

It should be noted that business news website The Ken has recently had carried a report about rampant mis-sale of credit cards by private banks. In October 2017, an official of ICICI Bank in Madhya Pradesh set himself on fire and committed suicide, after complaining of impossible targets at work.

It is reported that IRDAI is set to launch cat (catastrophe) insurance to protect the poorest from the ravages of natural disasters. 

The author is an independent journalist.