How insurance advisers exploited ICICI Pru’s ‘100% refund’ pension plan-OxBig News Network

ICICI Prudential launched a product called ‘ICICI Pru Guaranteed Pension Plan (GPP) Flexi with Benefit Enhancer’ in January 2024, offering customers the option to surrender the policy any time and claim a 100% refund on the premiums paid until then. The insurer claimed it was the “industry’s first annuity product offering 0% surrender charges and 100% refund of premiums”.

The company is now looking to claw back the commissions and rewards it gave to advisers—intermediaries between an insurance company and its customers—who exploited a loophole in the pension product’s marketing and sales pitch. Mint couldn’t ascertain the amount ICICI Prudential is looking to recover.

Surrendering or closing an insurance policy before its maturity date typically results in a payout lower than the total premiums paid until then. ICICI Prudential structured its GPP Flexi Benefit Enhancer product to offer an exit route to customers facing financial constraints.

However, a few ICICI Prudential employees and advisers found a loophole in the product’s 100% refund guarantee, two ICICI Prudential executives told Mint on condition of anonymity.

Advisers selling insurance policies are typically paid a percentage of a policy’s annual premium as commission. But if a customer surrenders the policy within a so-called free-look period, usually 30 days, the adviser has to return the commission.

ICICI Prudential’s 100% refund guarantee for its GPP Flexi Benefit Enhancer product allowed its advisers to pocket the commissions upfront while customers could surrender the policies beyond the initial period without losing their investments, according to the two executives. Only the tax on the premium paid (4.5% in first year premium) would have been lost.

“Zonal and regional heads nudged advisers to push this product as a one-time payment product. Most of them (advisers) invested their own money (in the name of their relatives) or got high-net-worth individual clients to invest in it with a view to surrender the policies after the free-look period gets over or after a year,” one of them said.

Pankaj Gupta, founder of BeeMaaa Spectrum Insurance, said all insurance companies and brokers need to come together under the guidance of the Insurance Regulatory and Development Authority of India to blacklist advisers, employees and clients involved in such malpractices.

“Such incidents are common but only by a handful of advisers/employees who aim at pocketing upfront commissions/incentives in different ways,” Gupta said, not referring to any particular insurance company. “They may sell a client a policy and manipulate them to get it cancelled so that the client gets back the premium. A part of commission they might share with the client. They then move on to another insurance company to do the same.”

ICICI Prudential did not reply to queries emailed on 1 and 2 July.

90% surrendered

The first of the two ICICI Prudential executives mentioned above shared an internal screenshot illustrating potential gains advisers could earn from the GPP Flexi Benefit Enhancer product.

Say an adviser had a relative purchase the pension policy at an annual premium of ₹10 lakh. The adviser would receive an upfront commission of 8%, or ₹80,000, and an additional ₹80,000 as a reward that ICICI Prudential was offering to promote the product. The adviser’s relative could later surrender the policy and get their ₹10 lakh investment back.

“After the GPP launch, many locations including Kerala, Karnataka, Tamil Nadu, and Delhi clocked 2-3x average monthly business in the March quarter of FY24 alone. Over half of it was from GPP Flexi Benefit Enhancer alone,” said the first executive quoted earlier.

About 90% of the GPP Flexi Benefit Enhancer product sold so far had been surrendered as of June this year, the executive added. While some customers surrendered their policy after the 30-day free-look period, others did after a year, when the renewal premium was due, according to the second executive mentioned above.

ICICI Prudential’s ‘savings including annuity’ registered a drop of 4.8% year-on-year in the fourth quarter of 2024-25 (January-March 2025) due to a 57.8% on-year decline in annuity payouts. In the fourth quarter of FY24, ICICI Prudential had registered a 11.8% increase in ‘savings including annuity’.

ICICI Prudential shares have gained about 3% this year. On Wednesday (9 July) afternoon, the shares were up more than 2% at ₹680.75 each while the benchmark Nifty 50 and Sensex indices were nearly unchanged.

Earlier this year, when ICICI Prudential realised that its 100% refund offer was being exploited, it notified advisers that any surrender of the GPP policy before the third premium payment would result in a clawback of commissions and rewards. In January, the insurer also increased the free-look period for its GPP Flexi Benefit Enhancer policy to 15 months.

“It appears that some regional or zonal managers engaged in channel stuffing to artificially inflate sales figures and make financial performance appear better than it actually is,” said Abhishek Kumar, the founder of Sahaj Money, a financial advisory firm. “When someone is insulated from the consequences of their actions—typically because another person or company bears the burden—there’s a clear incentive to take undue advantage. This risk is particularly high in insurance products.”