IRDAI has imposed a ₹1 crore penalty on Canara HSBC Life Insurance Company Limited over the sale of a deferred annuity policy to an 88-year-old customer.
The policy was sold through Canara Bank, the Insurance company’s corporate agent. It required the customer to pay an annual premium of ₹2 lakh for four years. His daughter, aged 57, was named as the annuitant under the policy.
What did the regulator find?
The regulator found several issues with how the policy was sold and processed. The product brochure specified an entry age of 30 to 80 years.
However, the policy was sold to a customer who was 88 years old. The Insurance company argued that this age limit applied to the annuitant and not the policyholder. The regulator did not accept this explanation.
The regulator also found that the Insurance company had not carried out an adequate suitability or financial assessment. The customer had declared an annual income of ₹10 lakh, while the total premium commitment over four years was ₹8 lakh.
The verification call before issuing the policy also raised concerns. During the call, the customer was told that the annuity would be paid to “you”. However, his daughter was listed as the annuitant and was supposed to receive the annuity.
There were also several inconsistencies in the proposal form. The city and state did not match, the bank details under the annuitant section belonged to the policyholder and one of the mobile numbers was incorrect.
The regulator also noted that the benefit illustration did not have verifiable OTP acknowledgement. The Customer Information Sheet and a copy of the proposal form were not provided to the customer at the point of sale.
The Insurance company had also collected the premium before issuing the policy, which was not permitted under the applicable rules.
The Insurance company refunded the premium
After the matter came to light, the Insurance company refunded ₹4.09 lakh, including the second-year premium, and reversed the commission.
It also made changes to its product documents and suitability process. The regulator said these corrective steps did not remove the violations that had already taken place.
The Insurance company has now been directed to review policies sold to customers above 75 years through Canara Bank over the last three financial years and report its findings.
What does it mean for you?
This case shows why you should carefully check an insurance policy before paying the premium. Look at the eligibility conditions, premium commitment, who will receive the benefits and what happens in different situations covered by the policy.
You should also check that the details in the proposal form are correct and that you receive the required policy documents and benefit illustration.
For long-term insurance products, understanding these details before you commit can help you avoid confusion later.
