Insurance watchdog IRDAI (Insurance Regulatory and Development Authority of India) fined e-commerce platform Flipkart Internet Private Limited (FILP) a whopping Rs 1.06 crore in its order dated April 07 for violating e-commerce norms in a matter related to online insurance distribution.Flipkart Internet Private Limited (FIPL), which was operating as a corporate agent and ISNP platform (Insurance Self-Network Platform) was found to be redirecting consumers towards the “Buy Insurance” section of the insurer intermediary who was advertising with them. As per IRDAI norms, ISNP platforms can only integrate with an insurer, and not another insurance intermediaries.
This is because, as Dinkar Sharma, Company Secretary and Partner, Jotwani Associates, said, “Redirection of insurance traffic not only blurs lines of responsibility but also exposes consumers to potential mis-selling and lack of accountability.”
Notably, an insurance intermediary is someone who facilitates purchase of an insurance policy, like an insurance agent, broker, or online insurance platforms such Policybazaar, InsuranceDekho and more.
As per a Flipkart spokesperson, the company is still in the process of evaluating the order. “Flipkart operates with a strong commitment to regulatory compliance and the highest standards of governance. We are currently evaluating the contents of the order”, they added.
What norms was Flipkart Internet found to be flouting?
In compliance with norms, FIPL should have redirected the prospective policyholder directly to the insurer’s site when the user clicked on the insurance/buy insurance button. Instead, Flipkart redirected the customer to the site of another insurance intermediary, where the insurance purchase was subsequently completed.As the IRDAI decision noted, “The advertisement agreement between FIPL and the insurance intermediary expired in March 2024. However, the redirection of prospective insurance customers continued until August 2024, indicating that this was not limited to an advertisement contract but an ongoing practice. The redirection was discontinued only after regulatory scrutiny, suggesting a lack of
voluntary compliance on FIPL’s part.”
Moreover, FlPL, as a corporate agent, continued to solicit and procure insurance long after its Certificate of Registration had expired and only stopped after IRDAI intervened. Notably, FIPL’s Certificate of Registration (CoR) expired on 25th September 2024, but it continued soliciting and procuring insurance policies through its website from 26th September 2024 to 1st October 2024, during which time it sold approximately 400 retail motor policies. This can cause multiple policy-related complications for policyholders.
Notes Chirag Gupta, Associate Partner, Alpha Partners, “The solicitation and sale of insurance policies after the expiry of the certificate of registration of a corporate agent exposes policyholders who transacted during this time to potential legal ambiguities and service-related complications.”
Additionally, FIPL was also found to be in violation of IRDAI (Registration of Corporate Agents) Regulations, 2015, which state that a “corporate agent shall solicit and procure a reasonable number of insurance policies commensurate with their resources and the number of specified persons they employ”.
However, FIPL sold over 70,000 insurance policies with only one trained Specified person, falling significantly short of trained resources who could explain to potential policyholders what they were buying into. (Please quote the person)
While FIPL argued that the purchase process was largely tech-driven with minimum manual intervention, it does not take away the fact that it directly impacts customers, since it critically undermines post-sale policy support, which is of utmost importance for policyholders.
“The absence of adequate trained personnel further worsens the consumer’s experience, especially when it comes to insurance, a complex financial product requires explanation and constant support”, adds Manini Roy, Associate Partner, TAS Law
What does it mean for the consumer?
Consumers are entitled to receive guidance from properly trained personnel andmust be made explicitly aware of who exactly they are buying insurance from—be it an insurer, an agent, or an intermediary.
But consumers often believe that generally, buying insurance policies through popular e-commerce platforms like Flipkart ensures legitimacy and transparency. However, many of us may not realize that we are being redirected from a platform like Flipkart to another company entirely when buying insurance online. This can create confusion about who is responsible for post-sale service, claim processing, or dispute resolution later on. (Please quote the person)
Clearly, as Alay Razvi, Managing Partner, Accord Juris notes, “If platforms are pushing insurance aggressively without ensuring enough trained personnel or post-sale service, it erodes consumer rights.”
