Summary: The Insurance Regulatory and Development Authority of India (IRDAI), by Order Ref. IRDAI/E&C/ORD/MISC/116/9/2026 dated 7 September 2026, has imposed a penalty of ₹1 crore on ICICI Lombard General Insurance Co. Ltd. following an on-site inspection conducted from 16 September 2019 to 27 September 2019. The Order considers the insurer’s responses to the Show Cause Notice and Supplementary Show Cause Notice, submissions made during personal hearings and subsequent clarifications.
The principal action relates to Charge-1 concerning the insurer’s treatment of event-management and sales-marketing/business-support activities, payments made to individual agents of other insurers, vendor selection, due diligence, supporting documentation, outsourcing classification and reporting, and corporate governance controls. IRDAI held that event-management activities such as customer-connect programmes, seminars and public campaigns could fall within the outsourcing framework where they are activities normally undertaken by an insurer. The Authority found violations of specified provisions of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 and Clause 6 of the Guidelines for Corporate Governance for insurers in India, and imposed a penalty of ₹1 crore under Section 102 of the Insurance Act, 1938. The insurer was also advised to establish Board-approved systems and processes for service-provider selection, due diligence and cost-benefit analysis.
For Charge-2 concerning unallocated premiums and proposal balances, and Charge-3 concerning delays in free-look cancellation refunds, the submissions were taken on record and advisories were issued. The Order further requires the penalty to be remitted within 45 days, placement of the Order before the insurer’s Board, submission of an Action Taken Report within 90 days, and permits an appeal to the Securities Appellate Tribunal under Section 110 of the Insurance Act, 1938.
Insurance Regulatory and Development Authority of India
Press Release | 7th September 2026
Order in the matter of ICICI Lombard General Insurance Co. Ltd.
The Insurance Regulatory and Development Authority of India (IRDAI) passed an Order against M/s ICICI Lombard General Insurance Co. Ltd. (‘Insurer’), pursuant to an onsite inspection conducted during September 2019 and subsequent enforcement proceedings.
Based on the findings of the inspection, the submissions made by the insurer, and the personal hearing conducted before a panel of two Whole-time Members, certain violations relating to outsourcing of activities, vendor selection and due diligence, record maintenance, internal controls, governance and compliance with applicable regulatory requirements were established.
After due consideration of the facts and submissions, the Competent Authority imposed a monetary penalty of Rs. 1 crore (Rupees One Crore only) under Section 102 of the Insurance Act, 1938, for violations of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, and the Guidelines on Corporate Governance for Insurers in India.
The Competent Authority also issued advisories in respect of certain compliance deficiencies, including matters relating to unallocated premium and delays in processing of free look cancellation requests.
The insurer has been directed to place the Order before its Board and submit an Action Taken Report (ATR) within the stipulated period.
The detailed order is available at https://irdai.gov.in/web/guest/document-detail?documentId=9819555
IRDAI remains committed to ensuring robust governance standards, policyholder protection, transparency and accountability across the insurance sector. The Authority will continue to take appropriate supervisory and enforcement action wherever regulatory violations are observed.
Insurance Regulatory and Development Authority of India
Ref: IRDAI/E&C/ORD/MISC/116/9/2026
Order in the matter of ICICI Lombard General Insurance Co. Ltd.
1. Based on the
1.1. Show Cause Notice (SCN) bearing Reference No. IRDAI/E&C/2019/545/SCN/ LR/ 025 dated 8th July, 2024 and Supplementary Show Cause Notice (SSCN) bearing Reference No. IRDAI / E&C / 2019 / 509 / SCN / LR / 082 dated 17th December 2024 issued to M/s ICICI Lombard General Insurance Co. Ltd. (‘Insurer’ or ‘Company’) in connection with the on-site inspection conducted by the Authority from 16th September 2019 to 27th September 2019.
1.2. Submissions made by the Insurer vide email dated 12th August 2024 and 22nd January 2025 in response to the aforesaid SCN and SSCN respectively.
1.3. Submissions made by the Insurer during the personal hearings held on 9th October, 2024 and 25th March 2025, chaired by the panel of two whole-time Members of the Authority comprising Shri Rajay Kumar Sinha-Member (F&I) and Shri Deepak Sood-Member (Non-Life).
1.4. Further submissions made by the insurer vide email dated 25th April, 2025.
2. Background
2.1. The Authority conducted an on-site inspection on the Insurer from16th September 2019 to 27th September 2019. The inspection report, inter alia, revealed violations of the Insurance Act, 1938, Regulations and Guidelines issued thereunder.
2.2. A copy of the inspection report (along with the documentary evidences) was forwarded to the Insurer on 29th November 2019 seeking their response and response was received vide letter dated 21st January 2020.
2.3. A SCN was issued on 8th July, 2024 and the Insurer replied to the SCN vide email dated 12th August 2024.
2.4. A personal hearing, as sought by insurer was granted on 9th October, 2024 before a panel of two Whole-Time members of the Authority Shri Rajay Kumar Sinha-Member (F&I) and Shri Deepak Sood-Member (Non-Life).
2.5. During the hearing on Charge-1 of the SCN, several issues were identified, including misclassification of event management activities as ‘non-outsourcing,’ lack of a Board-approved Vendor Management Policy, and failure to provide supporting documents for invoices. These indicate potential non-conformity with the applicable outsourcing regulations and the Corporate Governance Guidelines.
2.6. The SCN dated 8th July, 2024 did not examine non-conformity with the applicable outsourcing regulations and Corporate Governance Guidelines, it was deemed necessary to issue a supplementary SCN pertaining to Charge 1 alone in order to satisfy the principles of natural justice by according reasonable opportunity to the Insurer to reply to all alleged violations. A Supplementary Show Cause Notice (SSCN) bearing Ref. No. IRDAI / E&C / 2019 / 509 / SCN / LR / 02 dated 17th December 2024 was issued to the insurer, providing an opportunity to make submissions and evidences the Insurer may have to the contrary. Vide letter dated 22nd January 2025, the insurer made submissions in response to SSCN and also sought an opportunity for personal hearing.
2.7. The Insurer was granted a personal hearing on 25th March 2025 before a panel of two Whole-Time Members -Shri Rajay Kumar Sinha, Member (F&I) and Shri Deepak Sood, Member (Non-Life). Further opportunity to submit clarifications and any evidences they might have missed was given to the Insurer post the second personal hearing.
2.8. On behalf of the Insurer, Shri Sanjeev Mantri (Managing Director & Chief Executive Officer), Shri Gopal Balachandran (Chief Finance Officer), Shri Amit Kushwaha (Head-Legal & Chief Compliance Officer) and Shri Vishu Arora (Vice-President-Corporate Legal & Compliance) and on behalf of the Authority, Shri R K Sharma (Chief General Manager), Shri Sanjay K Verma, (GM), Shri Manoj Asiwal (DGM) and Shri Yash Patil (Asst. Manager) attended both the hearings i.e. on 9th October 2024 and 25th March 2025.
2.9. The submissions made by the Insurer in its letter dated 21st January 2020, submissions made after SCN vide email dated 12th August 2024, SSCN vide email dated 22nd January 2025 and submissions during the personal hearings held on 9th October, 2024, 25th March 2025 and further submissions made post-hearing vide email dated 25th April 2025 have been carefully considered by the Authority. and are summarized below:
3. Charge-1
3.1. Violation of
3.1.1. Regulations-6(a) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016;
3.1.2. Section-40 (1) of the Insurance Act, 1938;
3.1.3. Regulations-8(i), 9, 10(iii), 14 (iv) & (vi) 17(ii) (c) & (d) and Regulation-21 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017;
3.1.4. Clause-6 of the Guidelines for Corporate Governance for insurers in India, ref: IRDA/F&A/GDL/CG/100/05/2016 dated 18th May 2016;
3.1.5. Clause-4(b) of IRDAI Circular No. IRDA/INSP/CIR/ONS/157/09/2018 dated 19th September 2018.
3.2. Inspection Observation_2-11
3.2.1. During Financial Year 2018-19, the insurer made payments of Rs.709.57 crore for Sales Marketing and Business Support. A random review of invoices and agreements indicated that the insurer had used agents of other insurers and made payments for event management services (e.g., lunch, venue, tea/coffee). These invoices lacked supporting documents detailing expenses such as Agenda of conference, Approval of Conference, list of attendees (target audience), name and mobile no.; of speakers and their related travelling bills, hotel bills, caterer bills of lunch and tea, etc. Further, the absence of supporting documents leads to reasonable doubts about the genuineness of the pay-outs made to individual insurance agents of other insurers. Moreover, the individual agents were not primarily engaged in the activities for which the payments were made.
3.2.2. The insurer’s actions appeared to circumvent the regulations and the Insurance Act by paying commission and rewards to the individual agents of other insurers whereas the insurers are prohibited from paying any remuneration or reward, whether by way of commission or otherwise for soliciting or procuring insurance business to any person except an insurance agent or an intermediary or insurance intermediary in the manner specified by the regulations and the insurer violated Regulations-6(a) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016. The business solicited by these agents was not booked under their names, as the payments were classified under other service categories to hide the true nature of the payments.
3.2.3. It was observed that the activities of ‘Sales Marketing and Business Support’ are normally undertaken by the insurer and fall within the scope of definition of ‘outsourcing’ as per Regulation-4 (i) (e) of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. The insurer failed to classify and disclose activities of Sales Marketing and Business Support (conduct of event management activities such as conference, seminar, training and advertising) as outsourcing, contrary to regulatory expectations and requirements. The insurer’s failure to report the payments for outsourced financial commitments violates disclosure and compliance requirements under Regualtion-21, which indicates an attempt to evade regulatory scrutiny. It was observed from the documentary evidence (Annexures 49–268 on agency licenses and agreements and details of payments made to Agents) that the insurer did not undertake due diligence or cost-benefit analysis before engaging individual agents of other insurers despite being aware that these agents lack any specialization in event management services thereby being in violation of Regulations-8(i), 9, 10(iii), 14 (iv) & (vi) 17(ii) (c) & (d) and Regulation-21 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
3.2.4. The absence of a Board-approved Vendors’ Management Policy for selecting third-party vendors and evaluating non-outsourcing activities, coupled with weak internal controls, creates significant operational and governance gaps. The insurer failed to implement early warning systems to assess risk exposure against tolerance limits on an ongoing basis, resulting in ineffective risk management. Misinterpretation of outsourcing definitions, poor documentation, and lack of processes for non-outsourcing activities have further exacerbated these issues. Additionally, failure to establish appropriate risk tolerance levels violated Clause-6 of the Corporate Governance Guidelines for insurers in India (IRDA/F&A/GDL/CG/100/05/2016 dated 18th May 2016).
3.2.5. Though the insurer acknowledged that an approximate amount of Rs. 35-37 crore was paid to the agents of other insurers out of Rs.709.57 crore under the head of sales marketing and business support, it failed to break-down the remaining Rs.672-674 crore, raising concerns over financial transparency and accountability. Moreover, the absence of supporting documentation for invoices from individual agents or failure to obtain such documents prevented the Authority from verifying genuineness of such payments.
3.3. Summary of Insurer’s Submissions:
3.3.1. The insurer submitted that the Company employs diverse strategies to boost brand recognition, promote products evolving customer demands, enhancing brand visibility, developing products, and maintaining a strong market reputation. Accordingly, the Company engages the services of various service providers for undertaking event management activities related to conferences, seminars, customer connect programs, and health/motor vehicle camps across India. These engagements were formalized through definitive agreements that clearly outlined the nature of the services to be provided, obligations of the service providers and the payment obligations of the parties.
3.3.2. The services were rendered to the Company’s satisfaction, fulfilling all obligations under the agreements. It is, therefore, submitted that all payments made by the Company were strictly in line with the terms and conditions of the agreements and are substantiated by invoices duly received by the Company. Moreover, taking note of the observation of the Authority, the Company further fortified its processes and strengthened its internal controls to ensure that any vendor / service provider empanelled by the Company is not engaged or affiliated as an agent / intermediaries with any other insurer.
3.3.3. The insurer also submitted that the services with respect to event management was utilized by the Company and the services of insurance agents of other companies was not utilized for the purpose of solicitation of insurance business. Accordingly, the insurer submitted that the payments were made for the services in accordance with the terms of agreements and the assertion that the individual agents of other insurers were not primarily engaged in the activities for which the payments were made is not correct. Accordingly, the insurer did not violate Regulation-6(a) of the IRDAI (Payments of commission or Remuneration or Reward to insurance agents and insurance intermediaries) Regulations, 2016.
3.3.4. The insurer further submitted that the payments were made to the Service Providers, with respect to the services availed by the Company, in accordance with the terms of agreement. Accordingly, the Service Providers were required to raise the invoice for the services provided by them. No supporting documents in respect to the underlying arrangements made/cost incurred by the service providers for the activities contemplated in the agreements, were required to be provided along with the same. It is further submitted that the Company has never intended to circumvent any of the regulatory prescriptions or prescriptions under the Insurance Act. The Insurer further submitted that presumption may not be drawn against the Company regarding the genuineness of transactions for unavailability of supporting documents and due consideration may kindly be accorded to the duly executed agreement and invoices provided during the course of inspection. The payment was made to these vendors for providing the event management services and no commission/remuneration / reward was ever paid to such vendors. Accordingly, it is submitted that the Company has not violated Section 40 (1) of the Insurance Act.
3.3.5. The insurer also submitted that the event management activities such as arranging conferences, seminar, customer connect programs and campaigns is one such category of activity/service. These activities require capability in planning, infrastructure management and logistics and would therefore specifically fall outside the ambit of definition of ‘outsourcing’. The insurer also emphasized that event management is not a core activity normally undertaken by any insurer across the industry particularly for the want of requisite bandwidth and in-house capability for conducting such activities.
3.3.6. The insurer explained that the IRDAI issued Guidelines on Outsourcing of Activities by Insurance Companies in February 2011, classifying activities into ‘Core’ and ‘Non-Core.’ Core activities, including insurance business functions and investment management, cannot be outsourced, while supporting activities may be outsourced with prescribed compliance. Non-Core activities include functions like housekeeping, security, and catering. Event management activities such as organizing seminars or conferences were neither classified as core nor non-core, indicating that these activities were not intended to be covered by outsourcing regulations, as insurers are not expected to handle them. Event Management Services are not typically performed by insurers in the normal course of business and therefore do not fall under the outsourcing scope defined by the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. Consequently, the regulatory requirements regarding the engagement of outsourcing service providers, due diligence, cost-benefit analysis, and reporting do not apply to these services, indicating no violation of Regulations 9, 10(iii), 14(iv), 17(ii)(c) & (d), and 21 of the 2017 Regulations. Regarding Regulation 14(vi), the Company conducts thorough reviews when selecting vendors to ensure they are not registered or associated with the Company as agents, intermediaries, or employees at the time of onboarding. The Company has strengthened its internal controls to prevent any conflicts for service providers engaged.
3.3.7. The Company engaged individual service providers based on their representations of competency for services outlined in agreements, which included warranties about their skills and legal compliance. The goal was to utilize their capabilities and local outreach for event management services, such as food and travel arrangements, venue setup, and technical services. The Company has a Vendor Management Process that distinguishes between outsourcing and non-outsourcing activities, ensuring services are accurately categorized, documented, and managed, thereby reducing operational risks and strengthening governance. A dedicated Vendor Management function verifies empanelment documentation and approvals. The Company’s vendor management and governance exemplify a disciplined and transparent approach to operational control and risk management, addressing gaps and reinforcing regulatory compliance. Therefore, the Company maintains that it has not violated Clause-6 of the Corporate Governance Guidelines for insurers in India.
3.3.8. The insurer also submitted that the total spend of Company under the head ‘Sales Marketing & Business Support’ expenses in the Financial Year 2018-19 was only 4.8% of the gross written premium and the Company had duly complied with the Expenses of Management prescription of the Authority for the said financial year.
3.3.9. The insurer reiterated the submissions made in response to SCN during the personal hearing and acknowledged that total payment made to individual agents of other insurers lies in the range of Rs.35 to 37 crores out of Rs.709.57 cores spent under the head of Sales Marketing and Business Support.
3.3.10. The insurer stated that these expenses are monitored by the Board or its committee as a part of Expenses of management and such expenses are incurred with the delegation of the powers conferred by the Board of Directors. The insurer confirmed that the said payments were not reported in outsourcing return as they fall under ancillary activities.
3.3.11. The insurer submitted its clarifications on the issues raised by the panel during the second personal hearing. Regarding the inconsistencies in vendor addresses between the agreement and invoice, the insurer clarified that the addresses listed in the agreement were based on the information provided by the vendors during empanelment. Additionally, the PAN details were verified to confirm the identity of the vendors / service providers. It is noteworthy that the PAN details are duly captured on the invoices, which clearly match those provided by the vendors. All payments to vendors were made only after verification of the PAN and bank details provided by the service providers/vendors.
3.3.12. Regarding the issue of increase from 100 to 560 persons, the insurer submitted that events may sometimes experience higher footfalls/attendance than initially anticipated. The insurer explained that it is not possible to restrict the number of attendees at such events, and additional participants must be accommodated to ensure the successful and smooth completion of organized events.
3.3.13. The insurer clarified, regarding the issue related to specified limits in the agreement being exceeded on invoices, that in a few instances, a venue may be booked for a specific time slot. However, the event duration may extend beyond the originally scheduled timeframe, resulting in the venue being used longer than initially agreed upon. Consequently, additional payments may be required beyond the agreed rate. Such payments were evaluated in accordance with the internal control framework adopted by the company, wherein the invoices underwent a structured review process, including verification by the operational team and approval by authorized signatories as per the company’s approval matrix.
3.3.14. With regard to the absence of trainer-related expenses in some invoices, the insurer submitted that utilizing the services of the trainer is not mandatory under the agreements and the services are utilized as and when required. The insurer, further, submitted that sometimes training/information sharing was also undertaken by the employees of the Company in the awareness programs/conferences. Such trainings mainly related to insurance products, regulatory framework and customer education strategies with a view to ensure effective and efficient delivery of the desired objectives.
3.4. Decision on Charge-1:
3.4.1. The insurer’s contention that event management activities fall outside the ambit of outsourcing cannot be accepted, as it is not consistent with the scope and intent of the applicable Regulation 4 (i) (e) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, which defines outsourcing as ‘the use of a third party to perform activities that would normally be undertaken by the insurer, now or in the future’. Activities, such as, customer connect programs, seminars, and public campaigns, directly affect prospect and policyholder engagement, brand reputation, and compliance communication-rendering them well within the scope of outsourced activities. Thus, these activities are normally required to be undertaken by the insurer, and ignoring this fact goes against both the letter and spirit of the outsourcing regulations.
3.4.2. The insurer’s argument that these activities are non-core or require specialized logistical capabilities does not exempt them from the regulatory outsourcing compliance. On the contrary, Regulation 10(iii) explicitly mandates due diligence and risk management for such third-party engagements. Even non-core activities, including outsourced services that impact customer service, brand reputation, insurance awareness conferences/seminars, or marketing staff training, fall squarely within the regulatory outsourcing framework. Therefore, the contention of the insured is rejected.
3.4.3. Regulation-5(viii) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 explicitly prohibits the outsourcing of ‘approving advertisement,’ which implies that other advertisement-related activities, though non-core, remain permissible for outsourcing.
3.4.4. The insurer failed to classify these activities as outsourced; assess the materiality of the outsourced activities; undertake a cost-benefit analysis; and effectively implement the Board-approved Outsourcing Policy. Accordingly, the insurer failed to implement the Board approved Outsourcing Policy in violation of Regulations 8 (i) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
3.4.5. During the personal hearing, the insurer admitted that payment of Rs.35 to 37 crore out of Rs.709.57 crores was made to individual agents of other insurers during the Financial Year 2018-19. However, the insurer failed to explain / provide break-up of the remaining amount of Rs.674.57 to Rs.672.57 crores though it was contested that they provided all the information. An examination of the aforesaid documentary evidence (Annexures- A46 to A48 of the inspection report) in the form of Ledger revealed over two lakh transactions of varying amounts which included some negative entries. On a sample basis, it was established that the insurer paid at least Rs.2.35 crores to individual agents of other insurers for arranging event management during the Financial Year 2017-18 as well.
3.4.6. By not classifying event management services as outsourced activity, the insurer failed to report these expenses in the Outsourcing Returns thereby avoiding regulatory scrutiny in time in violation of Regulation-21 of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. Further, these payments were made to individual agents of other Insurers without any due diligence which indicates deficiencies in internal controls.
3.4.7. The insurer submitted Process Manual-Vendor management (Version-1.0) dated 31st March, 2017 but failed to provide the supporting documents for selection of vendors even after second personal hearing. The selection of individual agents from other insurance companies raises regulatory concerns about potential conflicts of interest, which could affect business stability or lead to upfront compensation issues. Additionally, these agents may not be typically engaged in similar activities and might lack the necessary expertise in event management services. The insurer failed to demonstrate justification for selection of individual agents of other insurers for these services. In violation of Regulation-14 (vi) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, the insurer failed to refrain from contracting insurance agents of other Insurers to perform any activity (engaging in event management service) other than those activities that are allowed under the respective regulations.
3.4.8. The insurer submitted that the Company works with service providers based only on their statements suggests that there is no formal vendor selection process followed as the insurer failed to provide documentation related to reason/justification for selection of individual agents of other insurers. This could have created potential conflicts of interest or governance gaps. Additionally, not conducting its operations with due prudence, care and due diligence exposed the Company to risks when engaging vendors, leading to payments that do not deliver the intended results.
3.4.9. The Insurer has submitted that service providers are required to raise invoices only for services rendered and that no additional supporting documentation is contractually mandated. It has further contended that the absence of such documents should not, by itself, lead to any adverse inference regarding the authenticity of the transactions.
3.4.10. The Authority has considered the submission. While invoices may constitute primary accounting records, effective regulatory oversight necessitates adequate documentary support to enable verification of the nature, scope, and delivery of the services claimed. In the absence of such supporting material, it becomes difficult to independently ascertain the legitimacy of the expenditure.
3.4.11. This concern is compounded where there is no evidence of deliberation or approval by the Board-appointed Committee, nor any demonstration of adherence to Board-approved Standard Operating Procedures governing vendor identification and assessment. In these circumstances, invoices alone cannot be regarded as sufficient to establish compliance with governance and regulatory expectations.
3.4.12. Moreover, without a thorough vendor evaluation process, limited scrutiny of documentation, and a lack of insistence on supporting documents, the internal controls with respect to outsourcing governance are not adequate.
3.4.13. While PAN verification provides identity confirmation, address discrepancies between agreements and invoices raises regulatory concerns about vendor management practices. The insurer’s reliance solely on PAN without resolving address mismatches suggests deficiency in due diligence in maintaining updated vendor records, which could enable potential misuse.
3.4.14. Arguendo, even if the insurer’s explanation regarding unpredictable footfalls is accepted, it still failed to address contractual safeguards. A five-fold increase (from 100 to 560 persons) in attendees without documented justification indicates a lack of proper estimation, budgetary discipline, organized event planning, and compliance with agreement clauses. The insurer should have implemented a mechanism to cap expenses or seek prior approvals for such deviations.
3.4.15. The insurer’s attempt to justify a five-fold breach of agreed rates (from Rs.1,000/- to Rs.5,000/-) under the pretext of extended event durations is unacceptable and demonstrates deficiency in enforcing contractual obligations and governance standards. The absence of proper justifications along with documentary evidence for these payments raises concerns about deliberate circumvention of safeguards designed to prevent fraud and fiscal irresponsibility. Such conduct, is inconsistent with the fundamental principles of transparency and accountability that govern the functioning of an insurer. The failure to adhere to established governance standards reflects a serious lapse in internal controls and falls short of the fiduciary responsibilities expected to be discharged in the best interests of policyholders.
3.4.16. The insurer argued that the difficulty in retrieving specific reasons for billing discrepancies (2016-2018) arose due to employee attrition, management changes, and IT asset loss but that the passage of time does not inherently justify non-compliance with record-keeping obligations, as insurers are typically required to maintain audit trails for necessary verification and reconciliation. As per Regulation-17(iv) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, the Insurer is bound to preserve documents for five years from the end of the outsourcing contract period. The Insurer should have known that even the outsourcing providers are subject to the provisions of Insurance act,1938 and IRDA Act,1999 and rules/regulations thereof under Reg 14(iv) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. Even otherwise, the Insurer is expected to maintain the records for the scrutiny of the Regulator, specifically so in case of transactions involving financial implications and/or potential violations of regulations, especially when pointed out as part of Inspection which was carried out in the year 2019. Therefore, the Insurer’s argument as stated supra is rejected.
3.4.17. Even if the submission of the insurer that such payments do not fall under the purview of outsourcing is accepted, such payments, without transparency, accountability and proper documentation, reflects poor internal controls and governance which are not in compliance with clause 6 of the Guidelines for Corporate Governance for insurers in India, ref: IRDA / F&A / GDL / CG / 100 / 05 / 2016 dated May 18, 2016.
3.4.18. Therefore, the insurer has not been able to establish the genuineness of the payments made for Sales Marketing and Business Support including those made to individual agent of other insurers for event management services. The insurer’s failure to report the payments for outsourced financial commitments violates disclosure and compliance requirements. It is also concluded that the insurer did not undertake due diligence or cost-benefit analysis. The absence of a Board-approved Vendors’ Management Policy for selecting third-party vendors and evaluating non-outsourcing activities, coupled with weak internal controls, creates significant operational and governance gaps.
3.4.19. In view of the above referred concerns regarding accountability, transparency, internal controls, effectiveness of its governance practices, in exercise of the powers vested under Section 102 of the Insurance Act, 1938, the Authority hereby imposes a penalty of Rs.1 crore (Rupees-One crore) for violation of:
(a) Regulation- 8 (i), 10 (iii), 14 (iv) & (vi), 17 (ii) (c) & (d) and 21 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017; and
(b) the provisions of Clause-6 of Guidelines for Corporate Governance for insurers in India, ref: IRDA / F &A / GDL / CG / 100 / 05 / 2016 dated 18th May 2016.
3.4.20. Further, the insurer is advised to put in place systems / processes approved by the board for selecting service providers by carrying out due diligence, cost benefit analysis for providing services while adhering to extant regulations/circulars issued by the Authority from time to time.
4. Charge-2
4.1. Violation of
4.1.1. Regulation-8 (6) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017.
4.1.2. Clause-2 of the Master Circular Reference No. IRDA / F&I / CIR / F&A / 231 / 10 / 2012 on preparation of financial statements General Insurance Business of the Authority dated October, 2012 (VER-01).
4.1.3. Clause-6 of Guidelines for Corporate Governance for insurers in India, ref: IRDA / F&A / GDL / CG / 100 / 05 / 2016 dated 18th May 2016.
4.1.4. Clause-2 (1) (f) of Master Circular on Unclaimed Amount bearing Ref. No. IRDA / F&A / CIR / Misc / 173 /07/2017 dated 25th July 2017.
4.2. Inspection Observation_8-2
4.2.1. It was observed that the insurer had a balance of Corporate Deposit (CD) for Rs.443 crores and Rs.277 crores as on 31.03.2019 and 31.03.2018 respectively as unallocated premium which was pending for allocation towards policies as on 23rd September 2019.
4.2.2. It was also observed that insurer did not allocate Rs.10 crores approximately out of the sample cases. There were many proposals in respect of which individual small proposal balance of less than Rs.100 was pending for refund and these were included in the unallocated policy fund.
4.2.3. From the above, it is concluded that there was lack of proper accounting and control procedure for allocation of premium towards the concerned risk or policy or refund of proposal deposits.
4.3. Summary of Insurer’s Submissions:
4.3.1. The insurer submitted that out of Rs.10 crore (approx.) of unallocated premiums, Rs.5.25 crore were related to Govt. business and Rs.6.40 crore to Non-Govt. business. Unallocated premiums, mainly from Govt. business, have been utilized or refunded where possible, with unclaimed amounts transferred to the appropriate accounts as per regulations.
4.3.2. Regarding small proposal balances under Rs.100, the Company actively seeks to refund these amounts, though the cost often exceeds the refund amount. The General Insurance Council (GIC) has proposed raising the threshold to Rs.100. In response to the Authority’s observation, the Company has adjusted its processes to transfer unclaimed amounts under Rs.100 to the unclaimed amount account after the specified period.
4.3.3. The Company endeavors to clear such unallocated balances and transfers the amount that remain unclaimed for more than prescribed duration to the unclaimed amount account. Furthermore, in compliance with the ’Senior Citizen’ Welfare Fund (Amendment) Rules 2017, the unclaimed amounts held by the Company for over 10 years as of September of every year are transferred to Senior Citizen Welfare Fund on or before 1st March of every financial year.
4.3.4. During personal hearing, the insurer reiterated the submissions made earlier and further submitted that corrective action has already been taken to avoid such types of lapses in future.
4.4. Decision on Charge- 2
4.4.1. The submissions of the insurer are taken on record. The insurer is advised to ensure compliance of respective extant regulations / master circulars issued by the Authority from time to time.
5. Charge-3
5.1 Violation of Regulation 16 (3) of IRDAI (Protection of Policyholders Interests) Regulations, 2017 to be read with Regulation 14 (i) of IRDAI (Health Insurance) Regulations, 2016.
5.2 Inspection Observation_11-1
It was observed that the Free Look Cancellation (FLC) requests were not processed and refunded within 15 days [Sample size 14].
5.3 Summary of Insurer’s Submissions:
5.3.1 Insurer submitted that in 2 cases, customer agreed to retain the policy but he again raised the request for cancellation and the refund was made within 15 days from the date of second request. In the remaining one case, after receipt of NEFT details from the customer, the refund was made within 15 days thus there was no delay.
5.3.2 Insurer further submitted that 11 out of 14 FLC requests, there was technical error due to which cancellation payment was not released and the same was recognized at the time of reconciliation and accordingly full premium was refunded on 29th October 2018.
5.3.3 During the personal hearing, the insurer reiterated the submissions made in response to the SCN and further stated that this error pertained to the month of October 2018 only and the same has been rectified and not repeated thereafter.
5.4 Decision on Charge-3
5.4.1 The submissions of the insurer are taken on record. The insurer is advised to ensure compliance of the respective regulations / master circulars issued by the Authority from to time.
5.4.2 Any recurrence of similar lapses shall be viewed seriously and stringent regulatory action, as deemed fit, shall be taken by the Authority.
6. Summary of the Decision:
| Charge No. | Violation of Provisions | Decision |
|---|---|---|
| 1 | i. Regulation- 8 (i), 10 (iii), 14 (iv) & (vi), 17 (ii) (c) & (d) and 21 of IRDAI (Outsourcing Activities by Indian Insurers) Regulations, 2017;
ii. Clause-6 of Guidelines for Corporate Governance for insurers in India, ref: IRDA / F & A / GDL / CG / 100 / 05 / 2016 dated 18th May 2016. |
Penalty of Rs.1 crore and Advisory |
| 2 | i. Regulation-8 (6) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017;
ii. Clause-2 (1) (f) of Master Circular on Unclaimed Amount bearing Ref. No. IRDA / F&A / CIR / Misc / 173 / 07 / 2017 dated 25th July 2017; iii. Clause-6 of Guidelines for Corporate Governance for insurers in India, ref: IRDA / F &A / GDL / CG / 100 / 05 / 2016 dated 18th May 2016. |
Advisory |
| 3 | Regulation 16 (3) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017 to be read with Regulation 14 (i) of IRDAI (Health Insurance) Regulations, 2016. | Advisory |
7. The penalty amount of Rs.1 crore (Rupees-One crore) shall be remitted by the Insurer by debiting shareholder funds within a period of forty-five days from the date of receipt of this order through NEFT/RTGS (details of which will be communicated separately). An intimation of remittance may be sent to Shri Sanjay Kumar Verma, General Manager (Enforcement & Compliance) at the Insurance Regulatory and Development Authority of India, Survey No. 115/1, Financial District, Nanakramguda, Hyderabad 500032, email id [email protected] with a copy to [email protected]
8. Further,
8.1. The Order shall be placed before the Board of the Insurer in the upcoming Board Meeting and the Insurer shall provide a copy of the minutes of the discussion.
8.2. The Insurer shall submit an Action Taken Report to the Authority on direction given within 90 days from the date of this Order.
9. If the Insurer feels aggrieved by this Order, an appeal may be preferred to the Securities Appellate Tribunal as per the provisions of Section-110 of the Insurance Act, 1938.
Sd/-
Deepak Sood
Member (Non-Life)
Sd/-
Rajay Kumar Sinha
Member (F&I)
Place: Hyderabad
Dated: 7th September, 2026
