Insurance agents to be banned from selling ponzi plans

Insurance watchdog, the Insurance Regulatory and Development Authority (IRDA) has decided to come out with stricter guidelines for insurance agents in order to prevent them from marketing ponzi schemes. This decision has been taken as a result of the Saradha scam, a financial scandal which ate into Rs. 200–300 billion of over 1.7 million depositors. This was caused by the collapse of a Ponzi scheme run by Saradha Group.

Under the new guidelines, both individual as well as corporate agents would have to submit written undertakings of having no association with private entities involved in the business of accepting public deposits. This stricture would be applicable to both public and private insurance companies as well as general and life insurance firms.

The authority will shortly ask insurance companies under its authority to collect the written undertakings from their regular and corporate agents, IRDA sources said.

The Saradha scam clearly revealed that several insurance agents most of who were associated with Life Insurance Corporation (LIC) of India, were doubling up as collection agents of different chit fund companies.

Source:  http://www.insuringindia.com/