Murky covers: Unscrupulous schemes to sell insurance products continue unabated  

June 2, 2010

Aaron Rodrigues

More and more dodgy schemes to sell insurance policies keep crawling out from the woodwork. But a number of insurance companies have preferred to maintain a deafening silence on these devious activities

Selling insurance translates into big money for agents. But a number of agents (and a few who are not authorised representatives of insurance companies) have been coming out with devious plans to sell policies to gullible investors. From operating multi-level marketing (MLM) schemes, blatant mis-selling of Unit-linked Insurance Plans (ULIPs), plastering of fake job applications all over the place and sending misleading text messages—every trick in the book is being tried to peddle insurance products.   
    
Moneylife has repeatedly highlighted these instances—but insurance companies have preferred to look the other way. Here are just a few of the cases that we have written on.

On 25 March 2010, agents from the Life Insurance Corporation of India (LIC) were trying new ways to trick people into buying insurance. A client was sold a policy under which she had to make a
one-time premium payment of Rs1 lakh for 10 years—she was assured a monthly pension of Rs5,000 for the rest of her life. Debt-oriented instruments can offer returns of no more than 6%-7%, while equity-linked products can manage maximum returns of 15%. So what was the basis on which the client was offered these impossible returns on an insurance product? LIC has not replied to any of the detailed emails sent to them, till date.

Here’s another scheme that came to light on 6 April 2010, again involving LIC. Swarg, a corporate agent for the State-run insurer, was running an MLM scheme in LIC’s ‘Jeevan Saral Policy’. According to this ‘scheme’, after buying a Jeevan Saral Policy for a yearly premium of Rs6,005, one could earn an extra income of up to Rs4,46,976 within two years by getting in three more members into buying the policy. These members would have had to rope in three more members, and so the chain would go on.

This time, LIC responded by saying that “MLM is not allowed for selling life insurance. If anyone is doing it, action will be initiated. It is not permissible.” Yet, we have not heard of any action taken by the insurer so far.


On 16th April we wrote on how there is a company called Team Life Care Co running a website in which it lists down all the Bajaj Allianz products that it sells. However, Team Life Care Co was running a mirror website through a company called TLC Insurance Pvt Ltd where it was peddling a bizarre MLM scheme.

Moneylife contacted both Team Life Care Co and TLC Insurance (India) Pvt Ltd and members from both companies confirmed that these entities were part of the same organisation and shared a common managing director, one Mr Jagannath. When we contacted Bajaj Allianz, their response was: “We wish to inform you that Team Life Care Co (India) Ltd is a Corporate Agent of Bajaj Allianz Life Insurance and they solicit business through approved specified persons only.” So how was TLC Insurance running the MLM scheme?

On 19 April 2010, we reported on how Jeevanseva, a direct marketing firm, was selling personal accident schemes from Reliance General Insurance in an MLM format.

Again, there was no response from the insurer.

Another company is so brazen in its approach towards peddling MLM schemes involving LIC products, that it calls itself ‘Rose Valley Chain Marketing System’. It has an elaborate chain marketing scheme, as the name indicates, and has no qualms in handing out brochures that detail its MLM product.

On 18 May 2010, an official from Rose Valley told Moneylife, “Once you reach a certain level, you don’t have to work anymore; you can earn commission bought by your chain.” As usual, there was no response from LIC when we told them about Rose Valley’s MLM scheme.

On 27 May 2010, we reported on how local trains in Mumbai were being plastered with advertisements of an ‘incredible’ deal being offered for selling life insurance products of Birla Sun Life Insurance. As per the ad, anyone who goes in for this scheme would work only for two hours a day, sell five policies a month. For doing all this, the agent would get a commission of Rs6,000 per policy sold, amounting to Rs 3.6 lakh a year.

Birla Sun Life responded by saying that these schemes were not according to the company’s rules and regulations. “Our legal and compliance officer is already in action. We will be taking appropriate action against the person involved.” We have spoken to them over the past few days; we still await the results of their investigation.

On 11 May 2010, we had sent a mail to the Insurance Regulatory and Development Authority (IRDA) regarding these issues. A Giridhar, IRDA’s executive director told Moneylife: “Selling insurance through unlicensed persons is illegal. We will act on the information.”

When such schemes are expressly prohibited by the regulator, why do they continue to proliferate? That’s the question that both IRDA and the insurance companies need to answer.— Aaron Rodrigues