An 88-year-old customer who had trusted his Canara Bank branch for 31 years was sold a deferred annuity insurance policy that was structured to start paying out years later, when he would have been around 93. The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a Rs 1 crore penalty on Canara HSBC Life Insurance Company over the sale of a deferred annuity policy to the 88-year-old customer. The regulator found multiple shortcomings in the way the policy was sold, including issues related to product suitability, verification, disclosures and the solicitation process.
The case came to IRDAI's attention after a social media post raised questions about the policy sold to the senior citizen through Canara Bank, which was acting as the insurer's corporate agent. IRDAI subsequently sought an explanation from the insurer and initiated proceedings
₹2 lakh annual premium, daughter named as annuitant
According to the regulator's findings, the policy was a deferred annuity plan requiring an annual premium of ₹2 lakh for four years. The 88-year-old was the proposer or policyholder, while his daughter was shown as the annuitant. The arrangement meant the senior citizen was making the premium payments even though the annuity benefit was linked to his daughter.
IRDAI's order noted that the approved product specified an entry age of 30 to 80 years, whereas the proposer was 88 at the time of the transaction. The regulator also found that an adequate assessment of the customer's financial circumstances and the suitability of the product had not been carried out
IRDAI flags several lapses in policy sale
The age issue was not the only concern raised by the regulator. IRDAI found deficiencies in the verification call, proposal form, disclosure of policy features and other solicitation processes. It also noted that the benefit illustration did not have verifiable acknowledgement from the policyholder.
The regulator further said the Customer Information Sheet and a copy of the proposal form were not provided at the point of sale. Premium was collected before the policy was issued, while the consequences of the proposer's death during the premium-paying period were not adequately disclosed.
Taken together, IRDAI treated these issues as failures involving product suitability, solicitation, verification, proposal processing, disclosure and internal controls. The action resulted in the ₹1 crore penalty under Section 102 of the Insurance Act, 1938.
₹4.09 lakh premium refunded
The customer eventually received a full refund of ₹4.09 lakh, including the second-year premium, after the matter came to the insurer's attention. The insurer also reversed the commission associated with the policy.Canara HSBC Life subsequently said it had taken corrective steps, including changes to its product brochure, policy documents and suitability assessment framework. It also introduced pre-issuance video-based validation calls.
IRDAI orders audit of policies sold to senior citizens
The regulator has also directed Canara HSBC Life to conduct a comprehensive audit of policies sold through Canara Bank to proposers or policyholders above 75 years of age.
IRDAI has additionally asked the insurer to strengthen its oversight of corporate agents and ensure effective implementation of the Bima-ASBA facility across its distribution channels. The company has also been directed to place the order before its board and submit an action taken report.
The episode also highlights why senior citizens and their families need to check the basic details of an insurance product before signing documents, particularly the policyholder, annuitant, premium-paying period, entry-age rules and when the promised benefits actually begin.
