New Delhi: It started with an official-sounding call purportedly from the insurance regulator seeking to find out whether Pankaj Butalia was happy with his insurance policy and ended by highlighting another mis-selling fraud in India’s insurance market.
In this case, a man claiming to be an Insurance Regulatory and Development Authority (Irda) official said the regulator would facilitate Butalia exiting a policy he was unhappy with, promised that the amount would be invested in government securities on payment of a “transfer” fee and assured handsome returns. It eventually turned out that the scheme was planned by a broker who was in collusion with the employee of an insurance company and that the investment in government securities was actually the purchase of an insurance policy offered by a different insurer.
Butalia’s isn’t an isolated incident, and the ‘Irda call’ is rapidly taking on the contours of the Nigerian email scam. Several readers have apprised Mint about such calls. And the regulator itself admits that the scam started around a year back. “We have registered a case with the cyber police. These cases are being investigated,” said an Irda official who did not want to be identified as the regulator’s officials are not allowed to speak to the press.
The official confirmed that the regulator does not make calls to customers and also explained the mechanism of the fraud. “This is being perpetrated by some insurance intermediaries who pose as officials from Irda, take money from the investors, and put that money in new insurance policies. This is largely to sell insurance.”
Mint couldn’t immediately establish the number of customers who have fallen prey to the fraud and the value of insurance policies that have thus been transferred. The chief executive officer (CEO) of an insurance company said the problem wasn’t new.
“We had a similar experience in the past where another broker was involved. He was making calls to customers posing as an official from Irda. We have suspended our relationship with him,” said Amitabh Chaudhry, managing director and CEO, HDFC Life Insurance Co. Ltd.
“This is not a problem of one insurer. We have seen such complaints from other insurers as well. We are still investigating the source of these businesses,” said the Irda official.
“Wherever such calls have actually resulted in a fresh policy being issued, we are tracking the source of that business. This seems to be a parallel business model perpetrated by some insurance intermediaries to sell insurance policies,” this person said.
In some instances, the calls may be going to people who have complained to the regulator about insurance policies they have bought. “I think there is a leak in the database of complaints, because we have noticed that once a customer registers a complaint, he gets a call from these imposters in a matter of a few days,” said Chaudhry. Both Irda and HDFC Life are examining the issue as well.
HDFC Life is the insurer involved in the Butalia case and it has fired one of its employees, a salesman called Gagandeep Singh, for his participation in the fraud. Singh was caught taking money from Butalia under the guise of helping him surrender an existing policy.
Butalia, who has recorded the chain of events, said it began with a call from a Delhi landline number. The person at the other end identified himself as R.K. Sharma, claimed to work for Irda, and asked Butalia if he had any problems with any of his insurance policies. Butalia admitted that he had a problem with one insurance policy from a company because the value of his investment had depreciated from Rs.10 lakh to Rs.9.25 lakh. Sharma offered to encash the policy and, on payment of a “transfer” fee, move the money to government securities, which would give him Rs.13.5 lakh by end of January 2013.
Butalia agreed and he was put in touch with Rajat Sharma, who asked him to write a cheque favouring HDFC Life. HDFC Life, he was told, would manage his investment in government securities. Soon, Singh made an appearance to collect the cheque.
“At first, I was only reassured that after paying a fee of Rs.80,000, my policy would be encashed and moved to government securities. Then, at the time of writing the cheque, I was informed it needed to favour HDFC Life,” said Butalia.
A suspicious Butalia called Irda, which in turn informed the two companies.
HDFC Life caught Singh red-handed as he left Butalia’s house after collecting the cheque. Yet, he appears to be at the bottom of the chain.
“It was Rajat Sharma who had called up Butalia and had sent Gagandeep over to collect money. Sharma, who is employed with an insurance broking firm called Encompass Insurance Broking, posed as an employee of HDFC Life and came to Butalia’s house a day before to collect the cheques. Three of our employees were present there. Butalia refused to give him cheques because he didn’t have a valid ID card and Singh came into the picture. Singh is clearly hand-in-glove with the broker. We have terminated him from work and will file a criminal case against all those involved in this,” said Chaudhry.
Sharma, Gagandeep Singh and R.K. Singh could not be reached for comment.