Synopsis

An 88-year-old was sold a deferred annuity policy despite age restrictions, leading to a Rs 1 crore penalty for Canara HSBC Life. IRDAI found multiple lapses in sales, underwriting, and disclosure. The regulator's order highlights crucial lessons for senior citizens buying long-term insurance products, especially via bank branches.

An 88-year-old Canara Bank customer was sold a deferred annuity policy despite the product brochure specifying that the entry age should be between 30 and 80 years, according to the Insurance Regulatory and Development Authority of India (IRDAI).



The regulator has slapped a penalty of Rs 1 crore on Canara HSBC Life Insurance Company Ltd after uncovering multiple lapses in how the policy was sold, underwritten, issued and disclosed. The insurer had refunded Rs 4.09 lakh, including the second-year premium, to the policyholder and reversed the commission after the issue came to light. However, IRDAI said that this refund did not undo the regulatory violations.



The order offers several lessons for senior citizens and their families when buying annuity or other long-term insurance products, particularly through bank branches.

What was the insurance policy sold to the 88-year-old?

According to the IRDAI order, Mr Iyer, aged 88, was sold Canara HSBC Life Insurance Smart Guaranteed Pension VI, a non-linked, non-participating individual deferred annuity plan.



The annual premium was Rs 2 lakh, with a four-year premium-paying term and a four-year deferment period. The policy was issued in February 2025, and the annuity was scheduled to commence thereafter. The life assured/annuitant was his 57-year-old daughter.

Why did IRDAI find the sale inappropriate?

The regulator's primary concern was the proposer's age. The approved product brochure specified an entry age of 30 to 80 years. However, the policy was sold to an 88-year-old proposer.



Canara HSBC Life argued that the age limit applied to the annuitant because the insurance/annuity risk was based on the annuitant's life, not the proposer's age. IRDAI rejected this explanation, noting that the approved brochure did not distinguish between the proposer and annuitant and did not contemplate them being different individuals.



The regulator concluded that allowing an 88-year-old to buy the product as proposer was a deviation from the approved product features and amounted to mis-selling.

Why did IRDAI question the policy's suitability?

The Rs 2 lakh annual premium had to be paid for four years, making the total premium commitment Rs 8 lakh. This represented around 20% of the customer's self-declared annual income of Rs 10 lakh.



IRDAI found that there was no documentary verification of his financial capacity and said the customer's age and financial commitment should have triggered greater suitability and financial underwriting checks.



The regulator also noted that the insurer later introduced a control to cap the proposer's entry age at 75 years. However, this subsequent measure could not retrospectively fix the earlier violation.

What did IRDAI find wrong with the verification call?

The pre-issuance verification call did not accurately explain who would receive the annuity. During the call, the policyholder was told that the annual annuity of Rs 50,791 would be paid to him. According to the policy structure, however, his daughter was the annuitant and would receive the annuity.



IRDAI said the verification call was an important safeguard for informed consent and the misrepresentation concerned a fundamental feature of the product.

What inconsistencies did IRDAI find in the proposal documents?

The regulator identified several documentation and processing issues. The proposal form recorded Bangalore as the city and Maharashtra as the state. More significantly, the bank details entered under the annuitant section belonged to the 88-year-old proposer rather than his daughter.



IRDAI said these discrepancies raised concerns about the quality of proposal processing and underwriting oversight. One of the two mobile numbers recorded in the proposal form was also acknowledged by the insurer to be incorrect.

Were the policy documents and benefit illustration properly provided?

IRDAI found that the Customer Information Sheet (CIS) and a copy of the proposal form were not provided to the policyholder at the point of sale.



The regulator also found that the benefit illustration on record did not carry an OTP verification stamp. The insurer attributed this to a system error, but IRDAI said there was no verifiable acknowledgement establishing that the policyholder had confirmed the illustration.

Why did IRDAI object to the premium being collected before policy issuance?

The insurer collected the premium deposit on February 12, 2025, while the policy was issued on February 28.



The insurer said its systems did not have a mechanism to block the premium without collecting it and referred to the later introduction of Bima-ASBA. IRDAI rejected this explanation, stating that the applicable regulatory requirement prohibiting such premium deposits was already in force when the transaction took place.

Why was the Rs 4.09 lakh premium refunded?

After the social media post gained attention, the insurer met the policyholder. It subsequently refunded ₹4.09 lakh, including the second-year premium, and reversed the commission.



The insurer also told IRDAI that it had taken corrective measures, including revising the product brochure and policy document, strengthening its suitability framework and introducing video-based pre-issuance validation calls.



However, the refund did not close the regulatory issue. IRDAI said the policyholder himself opted for cancellation and full refund after being informed by the insurer's representative, which it considered significant in assessing whether the product had been appropriately sold.

Why did IRDAI impose a Rs 1 crore penalty despite the refund?

The Rs 4.09 lakh was the premium refunded to the customer; the Rs 1 crore is a regulatory penalty imposed on the insurer.



IRDAI imposed the penalty under Section 102 of the Insurance Act, 1938, citing violations relating to transparent solicitation, suitability, product representation, proposal processing, customer disclosures and corporate governance. So, the penalty is not compensation payable to the policyholder. It is a regulatory action against the insurer.

What else has IRDAI directed Canara HSBC Life to do?

Apart from the penalty, IRDAI directed the insurer to conduct an audit of policies sold to proposers/policyholders above 75 years of age through Canara Bank during the three financial years ending March 31, 2026.



The audit has to identify instances involving product eligibility, suitability and disclosure requirements and a report has to be submitted to the regulator within 90 days. The insurer was also directed to strengthen oversight of its corporate agents and ensure effective implementation of Bima-ASBA.

What is the key takeaway for policyholders?

The key takeaway is that a policy sold at a bank counter does not remove the insurer’s responsibility to ensure that the product is suitable for the customer. In this case, IRDAI found that no one checked whether an 88-year-old could afford Rs 8 lakh in premiums over four years, says Raheel Patel, Partner, Gandhi Law Associates.



For senior citizens, particularly when making a sizeable long-term commitment, the safest approach is to verify the product's eligibility, understand exactly who receives the benefits, and review the complete premium and benefit structure before paying.

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