IRDAI Imposes ₹1 Crore Penalty on Canara HSBC Life Insurance Over Policy Sales Violations
The Insurance Regulatory and Development Authority of India (IRDAI) has penalized Canara HSBC Life Insurance Company with a sum of ₹1 crore on account of the numerous shortcomings in the sale of a deferred annuity plan to an 88-year-old individual customer through Canara Bank, which served as the company’s corporate agent.
This particular case has received considerable coverage since the regulator has observed that the customer in question was sold the product despite the fact that he exceeded the permissible entry age in relation to the said policy. In addition to that, IRDAI pointed out shortcomings regarding the aspects of suitability assessment, verification, disclosure of policy features, proposal evaluation and monitoring of the sales process.
This issue is of high significance to senior citizens and their family members who buy insurance or pension products from the branches of banks.
What Happened in the Canara HSBC Life Case?
As per the order passed by IRDAI, the present case involves an 88 year old customer of Canara Bank who purchased Canara HSBC Life’s Smart Guaranteed Pension VI, which is a non-linked, non-participating individual deferred annuity scheme. In this scheme, the premium paid on annual basis is ₹2 lakh for four years, and daughter of the proposer is listed as the annuitant.
In the matter, one of the major problems observed by IRDAI was the age of the customer. The product approved had an entry age limit between 30 and 80 years, whereas the age of the proposer was 88 years. The question that arises here is whether the product should have been issued to the customer at all.
Regulator went on to analyze other problems in the case.
Why Did IRDAI Impose a ₹1 Crore Penalty?
The ₹1 crore fine was not imposed merely on the grounds that the customer was 88 years old. The IRDAI found deficiencies related to product eligibility, suitability, solicitation, verification, disclosures and internal controls.
The regulatory body observed that a proper suitability and financial analysis had not been performed despite the customer’s old age and large premium. Deficiencies were found in the verification procedures and proposal forms. There were concerns regarding the adequacy of communication of critical features of the policy and compliance with the policyholder protection guidelines.
In conclusion, IRDAI found that the deficiencies taken together constituted violations and imposed the fine under Section 102 of the Insurance Act, 1938.
Was the Customer’s Money Refunded?
Yes. Following the bringing of this matter to the notice of the insurer, the customer chose to terminate their relationship with the insurer and the insurer returned ₹4.09 lakh, which included the second-year premium, as per the details provided about the case. The commission was also returned.
However, the return of the payment does not absolve the insurer from the violation of regulations.
This needs to be highlighted because the ₹4.09 lakh amount pertains to the amount refunded to the policyholder, whereas the ₹1 crore amount pertains to the regulatory fine levied against the insurer. These two amounts play entirely different roles.
Why Is This Case Relevant to Senior Citizens?
It is very important to note that one of the most critical aspects highlighted in this case is product suitability.
There could be many instances where an insurance/annuity product is something that is very much suitable to the customer. In some cases, the product in question may not be at all appropriate for an elderly customer due to the nature of their needs, financial goals, and so forth.
The finding of the regulator reinforces the principle that mere signing of paperwork does not suffice.
Why Buying Insurance Through a Bank Does Not Remove the Need for Verification
A lot of consumers believe that whenever a particular insurance product is available at a bank branch, then it comes with the endorsement of the bank itself or has been made keeping in view the requirements of the consumer himself/herself.
This belief can be dangerous as well.
It is possible for a bank to be a corporate agent or a partner for marketing purposes for an insurance company and hence the insurance product can come through banks. In the present scenario, Canara Bank served as a corporate agent through which Canara HSBC Life was available.
What Has IRDAI Ordered Canara HSBC Life to Do?
This regulatory order has implications more than the financial fine of ₹1 crore.
The Insurance Regulatory and Development Authority of India has asked Canara HSBC Life to conduct an audit of the policies issued by it to proposers or policyholders aged above 75 years through Canara Bank for three financial years ending March 31, 2026. This will help identify any problems relating to the eligibility and suitability of the product and its disclosures.
In addition, IRDAI has asked the insurer to review its monitoring system for corporate agents with respect to the products offered, suitability, and the proposal form. It is expected that an Action Taken Report will be provided within 90 days.
Furthermore, IRDAI has ordered the insurer to implement the Bima-ASBA facility effectively.
What Should Policyholders Learn From This?
The case provides an obvious lesson to any buyer of insurance, especially senior citizens.
First, before paying the premium, it is important to ensure that the individual is really eligible to buy the product. It is equally necessary to get the complete copy of the policy, learn about the proposer and annuitant or insured, and study carefully the period for which the premium is being paid and its benefits.
Moreover, one needs not take anything just at face value. The key promises and representations made verbally by the salesperson need to be matched with the policy brochure and policy itself.
Finally, for senior citizens, it might be useful to seek help from a relative in making such decisions.
What Does This Mean for Canara HSBC Life Customers?
The penalty of ₹1 crore is related to the regulatory findings in respect of the specific sales practices under investigation by the IRDAI. This does not mean that all the policies issued by Canara HSBC Life Insurance are necessarily null and void because of the regulatory action.
It would be wrong for policyholders to believe that their existing policies have become null and void or otherwise been rendered invalid on account of this regulatory action.
In case of any problem in respect of the existing policy, one should refer to the terms and conditions of the policy and make a complaint using the proper channel available to the insurer.
Why This Could Be a Warning for the Insurance Industry
This case is a broader message regarding the way in which insurance products are marketed, especially through bancassurance routes.
This ruling from the regulator is an indication that the insurers may be incurring serious consequences if product eligibility, customer suitability, and disclosures are ignored.
In addition, it is a sign that regulators are increasingly concerned about ensuring the protection of vulnerable customers, especially elderly individuals who commit huge sums of money into their insurance policies.
Thus, the penalty of ₹1 crore is not just limited to this single instance.
Conclusion
A ₹1 crore penalty on Canara HSBC Life by IRDAI has been levied following some observations that related to the issuance of a deferred annuity policy to an 88-year-old policyholder despite the fact that the age of entry for the said product was stated to be 80 years.
Though the premium amount paid by the policyholder, i.e., ₹4.09 lakh, had been refunded back to him, it became very clear through the regulator that the refund of the premium does not absolve the company from the regulatory violation.
The most important lesson that can be drawn from the case of Canara HSBC Life is that no one should think that any insurance product is suitable simply because it has been sold by a bank.
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