Flipkart imposed ₹1.06 cr. penalty by IRDAI for violations of insurance e-com, corporate agent norms

Insurance regulator IRDAI has imposed penalties totalling ₹1.06 crore on Flipkart for violations of insurance e-commerce and corporate agents norms.

Of these ₹1 crore is for violation of the Insurance E-commerce Guidelines, 2017 clause which stipulates that an insurance intermediary can enroll only insurers to the extent allowed on its Insurance Self-Network Platform (ISNP). No other insurance intermediary or agent are allowed.

Insurance Regulatory and Development Authority of India (IRDAI) Member (Distribution) Satyajit Tripathy and Member (F&I) Rajay Kumar Sinha in the order said the ISNP certification was granted to Flipkart Internet Pvt Ltd (FIPL) to facilitate online solicitation of insurance policies in a direct, integrated manner with insurers. Regulatory scrutiny, however, showed when a prospective customer visited FIPL’s ISNP-approved website and clicked on the insurance/buy insurance button, he/she was redirected to another insurance intermediary’s webpage, where the purchase was completed.

FIPL contended it only provided digital advertising space to the insurance intermediary, without any referral or intermediary agreement.

IRDAI said the financial arrangement between FIPL and the insurance intermediary was not purely for advertising but potentially linked to insurance redirection, which is a regulatory violation.

‘Unauthorised method of insurance solicitation’

“It may be noted FIPL misused its ISNP certified platform by integrating it with an insurance intermediary’s website instead of directly with insurers. The redirection of customers was not an advertisement but an unauthorised method of insurance solicitation,” IRDAI said, imposing Rs.1 crore penalty. FIPL discontinued the redirection after the Authority brought it to its notice.

A ₹6 lakh penalty was imposed on FIPL for continuing with sale of insurance policies after applying for renewal of its certificate of registration. “The filing of a renewal application does not grant automatic extension of registration unless explicitly communicated by the Authority. The sale of insurance policies without a valid CoR constitutes a direct violation of Clause 3(ii)(a) of Schedule III read with Regulation 26 of IRDAI (Registration of Corporate Agents) Regulations, 2015,” IRDAI said.

While FIPL ceased operations upon receiving the query, it had by then, in a span of less than a week, solicited and sold a substantial number of policies,” it said.

Remit within 45 days, option to appeal

The insurance regulator has directed FIPL to remit the Rs.1.06 crore penalty within 45 days and also take it to the notice of the company’s Board. FIPL can prefer an appeal before the Securities Appellate Tribunal.

In the same order, IRDAI let off the e-commerce entity majority owned by Walmart with a warning and advisory for procuring as many as 70,000 policies with just one specified person. “This raises serious concerns regarding FIPL’s compliance with regulatory requirements,” it said.

On alleged violation of a regulation in the IRDAI (Registration of Corporate Agents) Regulations, 2015 that require firms with a majority shareholding by foreign investors to furnish an undertaking pertaining to related party transactions and Board composition, the regulator decided not to press charges. “By not providing the undertaking as per Schedule AA and by not having resident Indian citizens as majority Directors in the board, FIPL allegedly violated Regulation 8(A) of IRDAI (Registration of Corporate Agents) Regulations, 2015. Given FIPL has resubmitted the undertaking and restructured its board in compliance…, the Authority decided not to press charges for this violation,” IRDAI said.