The discount, the blank form and the rejected claim
Deepak, a POSP, sells a family floater health policy with an annual premium of Rs 8,500. The customer, Mr Bose, haggles, and Deepak offers to pay Rs 1,500 'from his commission' as a discount. He collects Rs 7,000 in cash, but the proposal and receipt show the full Rs 8,500 premium. Deepak also gets Mr Bose to sign a blank proposal form, filling it later, and does not record that Bose was diagnosed with hypothyroidism three years ago. Five months later Bose is hospitalised and files a claim for Rs 65,000. The insurer rejects it for non-disclosure of the thyroid condition. Deepak tells Bose not to worry: 'We will complain to IRDAI; they will order the insurer to pay.'
1. Identify each act of misconduct in this sale and explain why it matters to the policy and the claim.
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There are four distinct problems.
- Rebating. Offering Rs 1,500 from commission as an inducement is prohibited under Section 41 of the Insurance Act, 1938 and under IRDAI's code of conduct. It distorts competition and is a disciplinary matter.
- Premium handling. Collecting Rs 7,000 while the record shows Rs 8,500 means either the insurer was short-paid or a false receipt was created. Premium must be paid to the insurer and a proper receipt issued; the mismatch undermines the contract itself.
- Blank proposal form. Getting the proposer to sign a blank form and filling it later destroys the underwriting record. The POSP must record the proposer's true answers and let the proposer verify and sign the completed form.
- Non-disclosure of hypothyroidism. This is a material health fact. The insurer priced and accepted the risk without it, which is the direct reason for the rejection.
Each item matters separately, but together they show a sale built on a false record.
2. Map the correct grievance route with timelines, and evaluate Deepak's statement that IRDAI will order the insurer to pay.
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The proper sequence is:
- Written complaint to the insurer's Grievance Redressal Officer, with acknowledgement and resolution within the regulatory timeline (currently 14 days).
- If unresolved or rejected, escalate on IRDAI's Bima Bharosa portal and/or to the Insurance Ombudsman within one year of the rejection. The Ombudsman can award up to Rs 30 lakh; the award binds the insurer, though the complainant may reject it and litigate.
- Courts remain available, but are a last resort.
Deepak's statement is wrong. IRDAI is the regulator: it licenses and supervises insurers, frames product and conduct rules and can penalise an insurer for systemic breaches. It does not adjudicate an individual claim or direct payment to a named policyholder. Bima Bharosa routes the complaint to the insurer and tracks it; it is not an order for payment. Promising a regulator-ordered payout is itself misleading.
3. What should Deepak do now, ethically and operationally?
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He should stop managing the story and correct the record.
- Tell Mr Bose the truth: the thyroid condition was a material fact, the insurer was entitled to ask about it, and the Ombudsman route is available but no payment is guaranteed.
- Write to the insurer disclosing his own rebating, the blank form and the premium shortfall, and regularise the premium through proper channels so that a valid receipt exists.
- Cooperate fully with the insurer's investigation and the grievance officer.
- Not contact the customer to change statements, withdraw the complaint or sign a fresh backdated form.
He should expect termination of his POSP appointment and possible IRDAI action. Concealing the rebate or the blank form would aggravate the position; voluntary disclosure is the only defensible course. He should also not offer to compensate Mr Bose personally in exchange for silence.