MC EXPLAINER What led to the selloff in PB Fintech shares: IRDAI's regulatory action explained

Moneycontrol breaks down IRDAI's order and their implications.

What prompted IRDAI to investigate PolicyBazaar in 2020?

PolicyBazaar initially operated as an Insurance Web Aggregator (IWA) from 2020 until early 2024, a role that allowed it to host and compare insurance products online, but prohibited it from directly soliciting sales or making product recommendations. Web aggregators are typically expected to act as neutral facilitators, with strict limits on commissions and a ban on ranking insurers without citing an objective criterion.

In February 2024, the company received IRDAI’s approval to become a composite insurance broker, enabling it to engage directly with insurers and customers, solicit policies across both life and general insurance, and offer advisory services as well.

The current regulatory action dates back to June 2020, when IRDAI conducted a remote inspection of PolicyBazaar’s operations during its IWA tenure. The regulator reportedly found several irregularities in how the platform managed its sales processes, disclosures, partnerships, and premium flows.

While some of these issues were later addressed after the licence transition, IRDAI chose to pursue 11 charges specific to the aggregator period, the order disclosed by IRDAI said. After issuing a show-cause notice in October 2024, the regulator concluded its probe and on August 4, 2025, imposed Rs 5 crore in financial penalties.

What are the major violations that led to the Rs 5 crore fine?

The regulator found five violations, each attracting a Rs 1 crore penalty, under the Insurance Act, 1938 and IRDAI’s Web Aggregator Regulations.

Conflict of Interest due to Undisclosed Directorships: Senior executives at PolicyBazaar were found to have held directorships in other companies without securing the necessary approval from IRDAI. Dictatorships essentially means the executives were serving as board members in other companies, which could influence their decision-making or divide their loyalty, posing a conflict of interest with their primary role at PolicyBazaar. The names or positions of these executives have not been publicly disclosed. This was flagged off as a governance lapse as individuals in key managerial positions are typically expected to act solely in the interest of the aggregator entity. Holding external directorships - without disclosure - creates a potential conflict of interest. PolicyBazaar acknowledged the lapse regarding undisclosed directorships during its personal hearing in November 2024 following the show-cause notice and rectified the issue.

Misleading Promotion of Insurance Products: IRDAI found that PolicyBazaar promoted certain insurance products as “Top” or “Best” on its website without disclosing how those rankings were determined. For instance, it showcased five ULIP plans as “top-rated” without offering any data, methodology, or disclaimers to support the claim. This practice was deemed misleading and in violation of fair disclosure norms by the IRDAI.

Irregular Outsourcing Contracts with Insurers: PolicyBazaar entered into outsourcing agreements with insurers under which services such as telemarketing or call centres were charged on a “per seat” basis. For instance, an insurer might pay a fixed monthly fee, say Rs 30,000 per seat, for each telecaller assigned to handle their product leads on PolicyBazaar’s platform. However, these contracts lacked clear and defined scope, and did not include audited cost structures, which raised regulatory concerns. IRDAI reportedly observed that such vague commercial arrangements could lead to financial opacity and regulatory arbitrage. Moreover, as an aggregator, PolicyBazaar was restricted from engaging in certain types of monetisation models that resemble brokerage operations.

Unmapped Telemarketing Sales and Poor Call Verification: A significant number of insurance policies sold through PolicyBazaar’s telemarketing operations were found to be unmapped to specific Authorised Verifiers (AVs), or personnel responsible for verifying customer consent and ensuring compliant sales processes. Of the more than 4.3 lakh policies sold over calls, close to one-fourth had no clear AV mapping, according to IRDAI. This made it impossible to verify whether proper sales procedures were followed. Additionally, PolicyBazaar was unable to furnish call recordings and audit trails for many of these transactions, raising concerns about mis-selling and the lack of accountability in customer interactions.

Delayed Remittance of Collected Premiums: Under Section 64VB of the Insurance Act, aggregators are required to transfer premiums collected from customers to the respective insurance company within 24 hours. However, IRDAI found that PolicyBazaar routed these payments through its own payment gateway and nodal account, leading to delays of up to three days in some instances. The company reportedly attributed the delays to technical integration issues, but the regulator held that this breached a critical safeguard meant to protect policyholders.