Interest-free loan linked to insurance? It could be a fraud

Sharma had applied for a loan in several places to develop her business. He went ahead and inquired about the loan, curious about the interest-free part. “All I had to do was buy a few life insurance policies based on my loan needs. After 10 years, the policies would have expired and the loan company would have taken the money from the maturity as repayment of the loan, ”he said.

The appellant had him buy seven policies in the space of two to three months, promising him a loan of ??50 lakh. “I lost ??5 lakh. He promised that part of the money would be refunded, which he told me was for the GST (goods and services tax). I was told that the insurance policy papers would help me apply for a penalty for the loan, ”Sharma said.

Lalan Prasad Sharma, deputy director of Indian Railways in New Delhi, was promised a loan amount 10 times the premium he had to pay for a few policies. Omkar Nath of Indore was promised a personal loan at the rate of 3% if he took out life insurance. He already had an outstanding loan. Once the payment was made, the fraudster stopped taking his calls. The loan never came.

Such mis-selling of life insurance in the name of loans is prevalent not only in small towns, but also in subways.

Data from Insurance Samadhan, a Delhi-based grievance platform, shows that 70% of the complaints they receive in a month are related to abuse-selling insurance against the loan promise. Fraudsters pose as representatives of an insurance company or as third party agents. “There are several call centers engaged in this activity. They get the data of loan seekers and call them with interest free loan offers. Once they get a client, they bid the client to different brokers for the highest commission, ”said Shailesh Kumar, chief insurance officer and co-founder, Insurance Samadhan.

Insurance companies are aware of these frauds. “Promise to loan is one of the most important categories among the types of bad selling. We take strict action against any brokers / agents or our employees against whom we receive such complaints. We terminate their contracts immediately if fraud is found, ”said Nitin Mehta, Chief Client Officer, Bharti AXA Life Insurance.

The Bharti AXA Life audit team specifically asks clients if they have been promised a loan against the insurance before issuing the policy.

Scammers, however, are smarter.

“They tell them that the insurance company’s agents are calling customers for verification. If they hear “yes” they will charge their own commission. Customers end up saying they are buying the policy for tax planning purposes. The insurers will have the call recording. This poses a challenge if insurers dispute the customer’s complaint. We have managed to collect money on behalf of the insured, ”Kumar said.

Max Life has established an Policyholder Protection Committee which reviews quarterly trends in abuse grievances and recommends process improvements.

“We have zero tolerance for cases where sellers have been at fault,” said Manu Lavanya, director and chief operating officer, Max Life Insurance.

In some cases, if individual agents have poorly sold policies, they may sell their portfolios later to a larger broker.

“When the mis-selling is reported, the real person who mis-sold the policy may be out of the system or may be operating under a different name. Insurers are avoiding canceling the licenses of these bigger brokers, ”Kumar said.

So customers should ask the right questions and check the credentials of the person selling them the insurance.

“I felt like something was wrong with the loan document, but it all felt so genuine. They had shown me their website, ”Nath said.

To this, Naval Goel, founder and CEO of, suggests that when purchasing an insurance policy, make sure that you make the payment directly to the insurer’s bank account. “You must not pay to any third party, be it the broker or the agent. The premium payment must go to the insurer, ”he said.

Also, whatever claim the other party makes, write it down with the letterhead of the company they represent. Ultimately, if fraud does occur, report it to IRDAI so that more people know about it and can take preventative action.

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About Raymond E. Hughes

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