Sucheta Dalal :Reliance insurance agent involved in chain-marketing scheme
Sucheta Dalal

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Reliance insurance agent involved in chain-marketing scheme   

April 19, 2010

 Even as the Insurance Regulatory and Development Authority (IRDA) is busy fighting a turf war with market regulator SEBI, pyramid schemes are being peddled by corporate agents of various life insurance companies. One such company is Jeevanseva Infotech India Pvt Ltd, a corporate agent of Reliance General Insurance, though the company’s website makes no mention of Reliance products.

Jeevanseva, a direct marketing firm based in Hyderabad, is actively engaged in multi-level marketing (MLM) of Reliance personal accident policy. The group regularly conducts sales-pitch meetings in some pockets of Amravati, Mumbai and Pune. Direct marketing firms are expanding their product offerings to include insurance products which offer high commissions. Jeevanseva has a host of other products on offer, including Goat’s milk tablets.

To become a member of the organisation, a person has to pay Rs1,550 as policy premium. If the member ropes in one client, he gets a commission of Rs150; if he ropes in two members, he gets a commission of Rs300, and so on. The policyholder has to renew his membership with Jeevanseva by paying Rs550 annually. The policy provides an accident cover of Rs3 lakh. The new member has to join under an existing ‘associate’ (read ‘policyholder cum agent’) of Jeevanseva. The existing member stands to benefit by recruiting new members. Thus, the chain keeps expanding.

Multi-level marketing is not permitted by the insurance regulator. An email query sent to Reliance General Insurance officials remained unanswered till the time of writing. Such MLM schemes clearly violate Section 42 of the Insurance Act, 1938, which prohibits appointing sub-agents and passing on commissions/kickbacks. Also, IRDA certification is mandatory for selling insurance products.

According to IRDA regulations, an insurance agent has to undergo a 100-hour training course to get a licence for the first time. When Moneylife contacted a distributor of Jeevanseva, he insisted that no training is required to sell insurance policies. Jeevanseva officials did not reply to our queries.

So, are insurance companies like Reliance aware of such activities by their registered corporate agents and deliberately turning a blind eye?
“It’s not that the insurance companies are not aware of it, but one can’t prove that. The agent can do anything. The agent’s actions are not ratified by the company. The issue has to be taken to IRDA because the company will wash its hands off the matter,” said a financial planner.

Jeevanseva is just one instance of MLM marketing. There are many such cases of pyramid schemes devised to sell insurance policies. Moneylife had earlier reported two cases of insurance agents resorting to chain-marketing schemes (Read here and here ). — Moneylife Digital Team


-- Sucheta Dalal