IRDAI Imposes ₹5 Crore Penalty on Policybazaar for Multiple Regulatory Violations

The Insurance Regulatory and Development Authority of India (IRDAI) has recently imposed a hefty fine of ₹5 crore on Policybazaar Insurance Brokers Pvt Ltd, a leading insurance aggregator in India and a subsidiary of PB Fintech. This action followed the regulator's detailed inspection and findings of multiple violations of the Insurance Act, 1938, and IRDAI regulations.

The ₹5 crore penalty, announced on August 4, 2025, includes breaches across 11 distinct charges. Key among the violations were governance lapses, flawed product promotion practices, and conflicts of interest. Notably, during June 1-5, 2020, IRDAI conducted an onsite inspection revealing that Policybazaar promoted several insurance products labeled as "top" or "best" without transparent criteria or adequate disclaimers, raising concerns about bias and misleading display to consumers.

The inspectorate specifically pointed out the display of the top five Unit Linked Insurance Plans (ULIPs) on the platform, featuring products from major insurers such as Bajaj Allianz, Edelweiss Tokyo, HDFC, SBI Life, and ICICI. The rankings lacked substantiation and failed to provide clear guidance to prospective buyers, undermining informed decision-making.

Another serious breach involved Key Managerial Personnel (KMP) of Policybazaar holding directorships in other companies, contravening exclusivity norms established by IRDAI. The regulator imposed a ₹1 crore penalty solely for this violation, emphasizing the potential conflicts of interest and governance risks.

Additional penalties addressed improper premium remittance practices, outsourcing agreements not in compliance, delays in fund transfers, and policy tagging issues. IRDAI's order also included directions and advisories for Policybazaar to ensure full compliance within specified timelines.

The penalty comes at a sensitive time for Policybazaar, whose shares have declined by nearly 17% year-to-date. Following the announcement, PB Fintech’s stock fell by as much as 2.5% amid bearish investor sentiment. The fine relates primarily to activities undertaken when Policybazaar functioned as an Insurance Web Aggregator before acquiring a composite broker license in February 2024.

This regulatory action underscores the growing scrutiny on digital insurance intermediaries in India, emphasizing transparent product representation and robust governance. Policybazaar has been given an opportunity to comply with IRDAI's directions and augment its internal controls to avoid future infractions.

Industry observers note the significance of the penalty in setting a precedent for accountability among online insurance platforms, advocating increased consumer protection and fair market practices.