Flipkart fined Rs 1.06 crore by IRDAI for insurance norm violations: Report

Flipkart Internet Private Limited (FIPL) has been fined Rs 1.06 crore by the Insurance Regulatory and Development Authority of India (IRDAI) due to multiple violations related to insurance sales practices. Primarily, FIPL was found redirecting consumers to an insurance intermediary's site instead of directly to the insurer's site, which contravenes IRDAI's Insurance Self-Network Platform (ISNP) norms, the Economic Times reported. 

This redirection can cause potential mis-selling and diminish accountability. "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." 

Further issues arose when FIPL continued to solicit and procure insurance policies after its Certificate of Registration expired. The Certificate expired on 25th September 2024, yet FIPL went on to sell approximately 400 retail motor policies between 26th September and 1st October 2024. This action exposes policyholders to several legal ambiguities and service-related complications. 

Additionally, FIPL was found to have violated the IRDAI (Registration of Corporate Agents) Regulations, 2015, by selling over 70,000 insurance policies with only one trained specified person. The lack of adequate personnel meant consumers did not receive the necessary guidance, thus impacting the post-sale support crucial for such complex financial products.

"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," as noted by Manini Roy, Associate Partner at TAS Law. 

Replying to the order, Flipkart told Business Today: "Flipkart operates with a strong commitment to regulatory compliance and the highest standards of governance. We are currently evaluating the contents of the order."

This situation highlights consumers' pitfalls when purchasing insurance through well-known e-commerce platforms like Flipkart. Many consumers remain unaware that they are redirected to other companies, causing confusion about accountability for post-sale services and claims processing. FIPL’s actions have raised concerns regarding the transparency and reliability of insurance transactions through these platforms.