BEWARE OF SPURIOUS CALLS AND FRAUDULENT OFFERS

Spurious calls in the name of regulatory organizations and government or quasi government authorities has been a problem which has been in prevalence for quite some time now. Recently some gangs have been exposed to a new scam of the Insurance Sector “Fake calls from IRDA”. This scam is to trap the existing policy holders who are not satisfied with their existing plan and are not getting desired returns, bonus or claims. People across India these days are receiving calls from Telephone Numbers of Metro cities and the tele-callers introduce themselves as representatives of IRDA. After disclosing their false identity they claim that this call is on behalf of IRDA to address the complaints and grievances of the policy holder. The person receiving such phone call gets convinced and starts sharing the problems faced with the existing insurance policy. On understanding the issue of the policy holders, these tele-callers convince that they will get the refund of the existing policy and the policy holder can withdraw the actual amount of the premium paid to company. These callers, the fake IRDA representatives, keep complete knowledge about functioning of insurance companies, regulatory authority and norms and then they make the other person convinced confidently and smartly with their conversation. When the policy holders believe that these calls are from IRDA Insurance Verification Department from Delhi or Hyderabad, they get trapped and loose more money for getting refund of the existing policy. Members of public have been receiving a lot of spurious calls in the name of officials of IRDA making fictitious and fraudulent offers. Insurance Regulatory and Development Authority (IRDA) is a regulatory body established by an Act of Parliament to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. The IRDA does not involve directly or through any representative in sale of any kind of insurance or financial products. Any person making any kind of transaction with such individuals/agents will be doing the same at their own risk. The Regulator has asked insurance companies to warn their customers against falling prey to fictitious calls and false offers. IRDA or its officials do not involve in activities like sale of any kind of insurance or financial products nor invest premiums. It does not announce any bonus. Insurers have been asked to include the above messages, along with voice-over of this content in clear terms with every advertisement/commercial issued in electronic media (TV/cinema halls, etc).  This new technique of making easy money could only be developed because there are many dissatisfied customers who have invested money without having complete knowledge of insurance industry. There are many Insurance Companies in India and millions of agents, advisors and franchisees working for these companies to make good money out of pockets of investors. In most of the cases the customers are sold policies without giving them required knowledge and without disclosing the details regarding commissions, type of investment, term of policy, lock in period, risk factors, maintenance charges, premium allocation charges, administration charges, surrender charges, mortality charges, switching charges, partial withdrawal charges, fund management charges and miscellaneous charges. At the time of maturity or surrender of a policy when policy holders do not get what they have been committed at the time of selling a policy, they get frustrated and feel cheated. And this frustration makes them victim of such fake calls where they lose more money in hope of getting benefit from existing computer. WHY SPURIOUS CALLS? In 2010-11, it was observed that members of general public were receiving calls from individuals who claim to be representatives of IRDAI and offering insurance policies o different insurance companies with various benefits. However, the problem was not very serious in nature. However, to caution members of public IRDAI first issued a public notice on November 1, 2010 informing the general public that IRDA is a regulatory body which does not involve directly or through any representative in sale of any kind of insurance or financial products. Any person making any kind of transaction with such individuals/agents will be doing the same at one’s own risk. It was also advised that if any member of the public notices such instances he/she may lodge a police complaint in the local police station. This was followed by issuing public caution in newspapers for greater reach. With the introduction of Do Not Call Registry and the coming into force of the “The Telecom Commercial Communication Customer Preference Regulations, 2010” with effect from 27th September, 2011 provided protection to telecom customers from unsolicited commercial calls. The calls contain offers of benefits of huge amounts to be released by authorities. As a pre-requisite for such payment, the callers insist upon fulfilment of formalities which include furnishing documents of identity proof and address proof, details of bank account, banking username, password, PIN etc. and finally insisting upon payment of money for fulfilling certain regulatory requirements. The payments are made mostly in cash or sometimes through cheque or net banking. The gullible persons who respond to such calls and who are lured by such offers lose their money and trust in the financial system.  DATA SECURITY STANDARD: There is evidence to show that there is data pilferage happening in the insurance sector. The Regulator is receiving complaints of spurious calls where policyholders are being asked to surrender their existing policies and get new ones. These calls cannot take place without details of the insured and the policy details. There are also instances of agents getting policy details of vehicle-owners and their motor insurance. There have been other calls where the caller positioning himself as an IRDAI official claimed that the insured was due to receive a refund in respect of his life insurance policy. The caller than sought to obtain bank credentials of the policyholder on the grounds that this was needed for effecting an online transfer. In all the spurious calls, the insurance company on whose behalf the call was made claimed that they had not authorised any tele sales person. IRDAI had carried out raids on call centres in the past along with enforcement authorities and shut down large operations. But due to lack of coordination with telecom regulator TRAI, it has not been able to prevent the mushrooming of fake call centres. IRDAI has decided to beef up its efforts on a comprehensive cyber security framework for the insurance sector in the wake of recent cyber attacks. The regulator has also decided to be proactive in light of the data breach in one of ATM transaction processing centres of a private bank. The data breach resulted in close to 3.2 million debit cards being compromised. The government has sought a report from the RBI on the incident. The complaints relating to spurious calls are included under the broader complaint category of unfair business practices in the Integrated Grievance Management System of IRDA which is the industry-wide repository of insurance grievance related information. The number of complaints of this nature as per IGMS. RISE IN FAKE CALLS AND MODUS OPERANDI: Incorporating the new kinds of calls in the name of officials of IRDA received by members of public, IRDA has shared the modus operandi used by one such spurious caller based on a complaint and provided links to the audio records of the spurious call to make members of public aware of the practices followed to cheat them. However, the problem of spurious calls has been on the rise in recent times. More importantly, the calls in the name of IRDAI or its officials rose significantly in 2013-14. In addition to such calls, there have been complaints of spurious calls made in the name of RBI, Income tax department, Finance Ministry etc and other insurance related agencies like Governing Body of Insurance Council, Life Insurance Council, insurance companies, and grievance management department of Central Government etc. The spurious callers are approaching customers either with fictitious offers of bonus on policies, returns, transfer of commission payable to agents etc. or on the threat that their money is transferred to someone else. In either case, the callers insist upon fulfilling certain formalities which include submitting KYC documents, giving their details of bank account, cheques, card etc. and seeking payment of money for reasons like taking a dummy policy, payment of income tax, service tax etc. or for subscribing to some nonfinancial offers. This is the modus operandi:

• The spurious callers call the victims repeatedly and introduce themselves as employees of IRDA.
• They would inform that proceeds of one’s insurance policy are being transferred to some other person.
• They would suggest the policyholder to visit IRDA at Hyderabad / Delhi and meet one particular officer who is responsible for transferring this money. They would give mobile numbers of this officer.
• On being called on the given number the person on the other side would introduce himself/herself as IRDA officer.
• They would inform that IRDA is maintaining money from such accounts where agents had committed frauds and this money is being returned to policy holders.
• The officer would tell that on policyholder’s mandate the due from existing policy is being transferred to some other person.
• When informed that no such mandate was given, they would indicate that somebody has committed fraud and that they will file an FIR with police in Hyderabad / Delhi. They would also give details of the FIR filed.
• For further assistance they would give another number. The person on this number would suggest that to get back the money, the policyholder has to engage the services of a particular company. The policyholder has to deposit the following documents:

1. An account payee cheque in the name of the company;
2. PAN;
3. First page of the policy document; and
4. Address proof.

They would further suggest that these documents be couriered and the details of the despatch including docket number etc be furnished to them. They would keep on calling for details of the despatch of cheque and documents and would assure the policyholder that the transfer of dues from the policy to other persons account would be stopped once they receive these documents. The consequence of such calls are that members of public fall for such offers or threats and make payment to the spurious callers through various modes like transfer of funds, sharing card and pin, issuing cheque etc. While in certain cases fresh policies are issued to these customers, in certain other cases money is being collected for non-financial purposes without any issue of policy. Sometimes, there is no proof of payment, more so in cases where payments are reportedly made in cash. CAUTION TO MEMBERS OF PUBLIC: Considering the extent of the problem and the impact of such calls on IRDAI’s efforts in protecting the interests of policy holders and ensuring the orderly growth of the insurance sector, IRDAI has taken up a campaign to caution members of public. IRDA issued a public notice on August 25, 2014 reiterating its caution to members of public to not fall prey to such spurious calls and fictitious offers. The emphasis was more on dissuading people from believing such spurious calls and acting upon them so that the problem does not manifest into a financial loss to members of public who make payment believing in the veracity of the calls and offers. Through the caution, IRDAI informed the members of public that:

• IRDAI does not involve directly or through any representative in sale of any kind of insurance or financial products.
• IRDAI does not invest the premium received by insurance companies.
• IRDAI does not announce any bonus for policyholders or insurers.
• IRDAI has put in place Grievance Redressal Cell in Consumer Affairs Department, Integrated Grievance Management System and IRDAI Grievance Call Centre to provide an alternate platform for registering grievances against insurers thereby facilitating resolution of customer grievances by insurers.
• IRDAI or its officials dealing with Grievance Management do not make calls in relation to complaints lodged with IRDAI as IRDAI plays a facilitative role and does not adjudicate upon or investigate into such complaints
• Any person making any kind of transaction with such individuals/agents will be doing the same at their own risk.

DON’T FALL PREY TO SPURIOUS CALLS: In spite of the best efforts in cautioning public there are several persons who complain about making payment to spurious callers. To get immediate relief when policy holders deposit money into the accounts of these fraud agencies, they never get any kind of refund and don’t even get a new policy. Many people across India are being cheated by such fake calls and the most important thing to investigate is that who the actual people behind this scandal are? The apprehension is that these people are intermediaries and franchisees of insurance companies. These agencies have their account codes with all insurance companies through which they are able to login to online software of a company and are able to view the policy details of a particular policy number with few verification details, which they already obtain from the person being trapped. These tele-callers do not have any connection with IRDA. Since, they are working in insurance sector, they have some knowledge about IRDA norms and policy plans. They make best efforts to convince the other person. For getting more business they attract people to buy policies of other companies for which they get good commission. First of all they will try to take money into their personal account. If the other person refuses to do so, they ask to make a cheque in the name of insurance company, which they will actually use for paying a premium of someone else’s policy for which they have already collected cash. And last of the last even if they issue a new policy, they earn good money as a commission or brokerage. If the policy holder tries to act smart and want to know the status of the refund, they submit a complaint on IGMS of IIRDA and give the reference number of complaint. The various categories in cases where payment is made based on spurious calls and the recourse available are briefly indicated below:

• The amount is paid to an individual- Being a fraud by an individual, the only recourse available is to take up the matter with police for necessary action.

 

• The amount is paid to a noninsurance related service provider or agency-In such cases, depending on whether the services promised by the agency have been provided or not, the individual has to take up the matter with such agency or the police for necessary action. IRDAI would not be in a position to intervene as the institution does not fall within its regulatory purview. 

The amount is paid to an insurance company and a policy is issued- Being a case of fraud, a complaint can be filed with police for necessary action against the telecallers as well as the insurance company whom they represent. However, as an insurance policy is issued by an insurance company, the person may make a complaint of mis-selling with the insurance company bringing to the notice unfair business practice adopted by the telecaller/agent/intermediary in selling the policy and seek changes in the policy or cancellation of the policy. The other channels of making a complaint offered by IRDAI can also be used for registering a complaint against the insurer such as writing to Consumer Affairs Department of IRDAI, sending an email to [email protected], making a call to toll free numbers (155255 or 1800 425 4732) of the IRDAI Grievance call  centre or online on the Integrated Grievance Management System (IGMS) (www.igms.irda.gov.in). It can be seen that the year 2016-17 has witnessed a reduction of about 68% over the previous year in terms of number of complaints and in terms of % share to the total UFBP complaints it has shown reduction of about 4.34%. This indicates that the extensive campaign for building awareness amongst public and cautioning them from falling prey to spurious calls taken up by both IRDAI as well by the Insurers have shown positive results. REGULATORY INITIATIVES:  The Insurance Regulator has taken various initiatives to spread awareness among the members of the general Public particularly against the spurious calls through a multi-pronged strategy. The modes of campaign used by IRDAI directly for cautioning public about such offers are public notices, press releases, advertisements in newspapers, radio spots, television advertisements, caution on the Internet websites of IRDAI and its consumer education website etc. IRDAI has already issued directions to all the life insurers to incorporate caution against such spurious calls in their publicity material – print, internet and electronic – as well as through SMS to their policy holders. Insurers themselves have also been independently taking up steps for cautioning public through print, electronic and internet media. The following are the various efforts taken in the direction of cautioning public from spurious calls and fictitious offers. A massive campaign cautioning general public against spurious callers and fictitious offers was carried out through television in 12 regional languages including Hindi. The IRDAI has been spreading the awareness against the spurious calls by placing the relevant material i.e. radio jingles, TV Advertisements, press release etc. on IRDAI’s Consumer Education Website (www.policyholder.gov.in), which is available both in Hindi as well as in English. The information sought by the visitors of IRDAI’s Consumer Education Website as part of feedback with reference to spurious calls, IRDAI guides them to deal with it during the monthly review of the feedback. It has launched an Insurance Awareness Campaign for a period of six months starting from 20th February, 2017 through broadcast of radio jingles in five languages (Hindi, Tamil, Telugu, Malayalam and Kannada) on All India Radio and Private FM radio channels on the following insurance related topics. IRDAI would continue with the initiatives for protecting policyholders’ interests and for promoting insurance awareness. An Education Website (www.policyholder.gov.in) is available both in Hindi as well as in English. IRDAI has filed police complaints against spurious callers and has advised all insurers to take up the matter with the police authorities concerned to take action against spurious callers. Insurance companies concerned have filed FIRs against spurious callers and have taken up the matter with the police authorities given the loss of reputation caused by such fake calls. Spurious calls of the nature indicated above cause loss of reputation to IRDAI and other agencies and also financial loss to the gullible public who pay money based on such calls in lure of the offers made. Considering the fact that the mission of Government as well as IRDAI is in promoting financial inclusion by improving access to insurance related services in life and non-life segments, such spurious calls would adversely affect the general sentiment of general public in relation to insurance. Given the fact that insurance is a complex financial product and is a subject matter of solicitation, the trust deficit caused due to such spurious calls can dissuade those who are apprehensive but interested in buying insurance because of the benefits of insurance. Since insurance is a product of risk protection, this can impact the general risk coverage of members of public rendering them more vulnerable to risks to their life and property. The premiums received from insured public forms the corpus for insurance companies to make long term investments in instruments such as Government securities and other securities. The money so invested serves as the investment for nation building. As a result, spurious calls are also indirectly hindering not only growth in the insurance sector but also development of the country through the premium funds available for development. Wherever the spurious calling has resulted into issuance of an insurance policy IRDAI takes up the complaint with the insurer concerned for resolution, which is updated by the insurer in IGMS. In case the complainant is not satisfied with the resolution provided by the insurer, he may take up the matter with insurance ombudsmen for amicable resolution or adjudication under the Redressal of Public Grievance Rules, 1998. Alternately, the complainant can file a complaint with Consumer Forum for deficiency of service; or take up before a criminal court for cheating or fraud; or file a suit in a civil court for breach of trust. IRDAI monitors the market conduct of insurers, agents and intermediaries. Further, during the course of on-site inspection and off-site monitoring of regulated entities like insurance companies, insurance agents, corporate agents and insurance intermediaries (brokers) for examining the compliance of these entities with the extant regulatory framework, IRDAI focuses on the process of soliciting, offering and selling insurance. Based on the findings, IRDAI initiates regulatory action against the insurers or intermediaries as per the provisions of the Insurance Act and Regulations. IRDAI on its part has been proactive in devising and implementing a multi-pronged strategy for spreading caution so that people do not fall prey to offers made by spurious callers. The realization of the fact that insurance is for risk protection and not for windfall gains can bring about caution in the members of public. So, there is a need for greater insurance awareness apart from the specific efforts taken by IRDAI in cautioning public against spurious calls. References: 

1. IRDA Annual Report 2015-16
2. http://www.policyholder.gov.in/Public_Notice___Spurious_Calls_262.aspx?NEWS
3. https://www.lifeinscouncil.org/code/Default.aspx
4. http://timesofindia.indiatimes.com/business/india-business/IRDAI-plans-data-security-standards/articleshow/55424006.cms
5. https://www.irda.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo23
6. hdfchealth.com/irda-public-notice-on-spurious-calls.aspx
7. Newspapers & Journals

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About the Author

JAGENDRA KUMAR Ex. CEO, Pearl Insurance Brokers 71/143, “Ramashram” Paramhans Marg, Mansarovar, JAIPUR-302020

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