NEW DELHI: Tinoo and Arvind Joshi, the suspended IAS couple from Madhya Pradesh, faced CBI raids soon after it was discovered that they had purchased life insurance policies from a private insurer. The high-value transaction could not have gone unnoticed.
But there are several thousand cases that go undetected. For long, life insurance policies have been seen as a passport to convert “black money” into “white”. There are multiple ways that agents use for anyone willing to bring unaccounted cash into the financial system.
Insurance industry executives and agents said the easiest way to do it is to pass on the commission to the client. For instance, if you buy a policy for Rs 1 crore, the commission amount of, say, Rs 20 lakh is given to the agent who then passes it on to the policyholder, although sharing of commission is illegal and can lead to cancellation of the agent’s permit.
In fact, that is one reason why relatives of businessmen, politicians and filmstars often become agents as the commission doesn’t need to be transferred to the insured and yet remains within the family.
But can someone with Rs 1 crore cash buy a policy? “It’s possible and agents are willing partners,” said a prominent development officer of Life Insurance Corporation. The development officer, who manages a group of agents for the company, claimed that there were several instances where Rs 50,000 – the permissible level of cash deposits – was deposited in cash on a daily basis and often went undetected. After a few days, the company issues a policy and the entire amount then gets “white”.
There are also allegations that micro insurance policies are the latest tool as several covers have been issued to “fake policyholders”.