Insurance Regulatory and Development Authority of India (IRDAI) has issued a warning to Acko General Insurance Limited for violating Section 64VB(1) of the Insurance Act, 1938. The violation was identified during an inspection conducted in July 2020, which found that the insurer had issued insurance certificates without receiving premiums from policyholders, resulting in a negative advance premium balance. Acko stated that this practice was limited to micro and high-frequency group insurance policies where delays occurred in premium remittances from master policyholders. While the insurer asserted that policyholders were protected, IRDAI concluded that the practice did not comply with the strict legal requirement to collect premiums before issuing coverage. The authority also noted that Acko’s admission of a continued negative balance showed a weakness in its accounting and remediation processes. Although Acko later confirmed that it had rectified the negative balances, IRDAI issued a warning and directed the company to ensure all future business practices strictly comply with the Insurance Act. The regulator stated that any recurrence would lead to more stringent action.
Insurance Regulatory and Development Authority of India
Order in the matter of M/s Acko General Insurance Limited
1. Based on the
1.1. Show Cause Notice (“SCN) reference No. IRDA / ENF / 2021 / 579 / SCN / LR / 039 dated 09th August, 2024 issued to Acko General Insurance Ltd. (“Insurer” or “Company”) in connection with the inspection conducted by the Authority from 13th to 17th July, 2020.
1.2. Submissions made by the insurer vide email dated 30th August 2024 in response to the aforesaid SCN.
1.3. Submissions made by the insurer during the personal hearing held on 03rd October, 2024 at 2.30 PM, by a panel of Two Whole Time Members of the Authority – Shri Deepak Sood (Member-Non-Life) and Shri Rajay Kumar Sinha (Member- F&I).
1.4. Further submissions made by the insurer vide email dated 10th October, 2024 and 18th November, 2024.
2. Background
2.1. The Authority had conducted a thematic inspection of the insurer from 13th to 17th July 2020. The inspection report, inter alia, revealed certain violations of provisions of the Insurance Act, 1938 and Regulations and Guidelines issued thereunder.
2.2. A copy of the inspection report was forwarded to the insurer on 13th October, 2020 seeking their response. The insurer provided their response vide letter dated 29th October, 2020.
2.3. On examining the submissions made by the insurer, Show Cause Notice (SCN) was issued on 09th August, 2024. The insurer replied to the SCN vide email dated 30th August, 2024.
2.4. As requested by the insurer, personal hearing was granted to the insurer on 3rd October, 2024 by the panel of Two Whole Time Members of the Authority – Shri Deepak Sood (Member-Non-Life) and Shri Rajay Kumar Sinha (Member- F&I).
2.5. On behalf of the insurer, Shri Animesh Das, MD & CEO; Smt. Karishma Desai, Chief Compliance Officer & CS and Shri Rohin Vig, CFO and on behalf of the Authority, Shri R K Sharma (Chief General Manager), Shri T.V. Rao (General Manager), Shri Sanjay Kumar Verma (General Manager), Shri Manoj Kumar Asiwal (Deputy General Manager), Shri Viswanath Valmiki (Manager) and Shri Atul Gupta (Asst. Manager) attended the hearing.
2.6. The submissions made by the insurer vide its letter dated 29th October, 2020, submission made after SCN vide email dated 30th August, 2024 and submission made during the personal hearing on 03rd October, 2024 and those made vide email dated 10th October, 2024 and 18th November, 2024 have been carefully considered by the Authority and are summarized below:
3. Charge 1 (Observation no. 14)
Violation of Section 64 VB (1) of Insurance Act, 1938;
3.1. Inspection Observation-14
3.1.1. The insurer was having an outstanding premium of Rs. 44.82 Lakh as on 31st March, 2020. The insurer in its response stated that the outstanding premium pertains to group insurance policies. However, it was observed that the insurer had issued the certificates of insurance without the receipt of insurance premium from the policyholders.
3.1.2. Instances of advance deposit of insurance premium going negative as under:
| S. No. | Period | Number of instances | Days negative |
| 1 | Issuance Jan 2020 | Two instances | 13-31 days |
| 2 | Issuance Dec 2019 | Nine instances | 3-25 days |
| 3 | Issuance Nov 2019 | Fourteen instances | 7-18 days |
| 4 | Issuance Jul-Oct 2019 | One instance | 13 days |
| 5 | Issuance Apr-Jun 2019 | One instance | 23 days |
3.2. Summary of Insurer’s Submissions:
3.2.1. The policies in question are all micro and high frequency insurance products, which are issued through Certificate of Insurance (COI) only after the insured has actually paid the premium to the group policyholder. Since these policies are issued real time, Acko keeps an advance premium from the group policyholder for an estimated premium for about a week’s estimated business. Before the issuance of the Certificate of Insurance (COI), the Company deducts the premium from the Advance Premium Deposit (APD) maintained with it or receives a confirmation (success token) via an API integration from the group policy holder for collection of premium.
3.2.2. The delay observed in the given case is due to delay in remittance of the insurance premium amount by the Master Policyholder (MPH) to the company, which is an operational process.
3.2.3. The insurer submitted that such instances of negative balances are tracked on a monthly basis. They further submitted that they stopped the business with a good number of Master Policyholders (MPH) who failed to make timely payment.
3.2.4. However, there may be cases of premium amount deposited by the MPH being in transit due to delayed bank processing, holidays, etc. However, in the interest of the customer / beneficiary, the company issues COI to the insured. Only in 4.16% cases, there may be a surge in business whereby there is a slight delay in receiving the premium by Acko.
3.2.5. While the insured already makes payment instantly and gets the policy issued or the money is deducted from the APD, the process of receiving the money becomes an operational process for the company to deal with. It does not lead to failure of premium payment on the part of the COI holder / insured.
3.2.6. During the personal hearing, the insurer confirmed that no policy is issued on the basis of bank guarantee for the cases where the APD goes into negative.
3.2.7. During the personal hearing, the insurer admitted that the practice of APD going into negative still persists. The insurer further submitted that they are taking various steps, including educating their partners and terminating the insurance policy in case of non-payment.
3.2.8. Vide email dated 10th October, 2024, the insurer informed that they have a negative APD balance of Rs. 52 Lakhs as on 31st August 2024 against an annual turnover of Rs. 2500 Crores. Vide email dated 18th November, 2024, the insurer submitted that they have met the timeline of having no negative APD balances with any of the MPHs by 30th November, 2024.
3.3. Decision on Charge 1 (Observation No 14)
3.3.1. In most cases, the group insurance policies are issued where the insurance premium was paid by maintaining an APD. However, in certain cases, the APD had gone negative – that is the insurance premium due had exceeded the advance premium deposit maintained with the insurer.
3.3.2. The insurer’s submission during the personal hearing that the insurance policies are funded at all times before coverage is provided, thereby protecting both the insurer and the policyholders, is not tenable as the intent of the Section 64 VB (1) is very clear that the premium must be collected by the insurer prior to the issuance of certificate of insurance. There are certain relaxations to the above said stipulation which are provided in Rule 58 of the Insurance Rules, 1939. There is no further deviation allowed in terms of the applicable law.
3.3.3. The insurer has not adduced any evidence to satisfy the Authority that the arrangements made with MPHs were in fact permissible in terms of Rule 58. Therefore, the insurer’s argument that they have adequate protection for themselves as well as the policyholder does not hold ground.
3.3.4. During the personal hearing, insurer admitted that the practice of APD going into negative persisted on the date of personal hearing also and such lapses may continue in the current financial year too. The insurer submitted that they would streamline their cash management practices to prevent negative balances, which could otherwise expose them to financial risks.
3.3.5. It is to be noted that receiving the “success token” from their partners is not comparable with receiving of the success token from the payment gateway and in any case does not tantamount to actual receipt of premium. The insurer must ensure strict compliance with Section 64 VB (1) of Insurance Act, 1938 by collecting the premium before the commencement of the risk.
3.3.6. The objective of Section 64VB (1) is to prevent situations where the insurers might be liable for the claims without receiving the consideration for the same hence impacting their financial stability and solvency. The framework prevents malpractices such as issuing cover without premium or delayed premium collection, which could otherwise lead to disputes and financial instability. Admission of continued negative APD balances indicate systemic weaknesses in premium accounting and insufficient remediation of the concerns by the insurer.
3.3.7. The insurer has taken corrective action as indicated vide email dated 10th October, 2024 and 18th November, 2024 and has confirmed that there are no more negative APDs. However, the violation of the Insurance Act provision with respect to the polices mentioned above is clearly established where the insurer failed to adhere to the requirements of section 64VB (1) of the Act.
3.3.8. In view of the above, the insurer is hereby warned for violating section 64VB (1) of Insurance Act, 1938. The insurer is directed not to follow any business practice or process that is not in absolute and strict compliance of Section 64 VB of the Insurance Act, 1938. Any recurrence of similar lapse shall be viewed sternly and stringent regulatory action, as deemed appropriate, shall be taken by the Authority.
4. Summary of Decisions:
| Charge No | Violation of Provisions | Decision |
| 1 | Section 64 VB (1) of the Insurance Act, 1938 | Warning and Direction |
5. Further,
5.1. 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.
5.2. The Insurer shall submit an Action Taken Report to the Authority on the Warning issued within 90 days from the date of this Order.
6. 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.
Deepak Sood
Member (Non-Life)
Rajay Kumar Sinha
Member (F&I)
Place: Hyderabad
Date: 14/08/2025
