The Insurance Regulatory and Development Authority of India (IRDAI) issued an order against Liberty General Insurance Co. Ltd. following an on-site inspection that revealed multiple regulatory violations. The most significant action resulted in a penalty of ₹1 crore for violations related to outsourcing and payments made to insurance agents and intermediaries (Charges 3 and 4). The Authority found that the insurer made extremely high and unreasonable payments, totaling over ₹21.84 crore in FY 2018-19, to entities related to insurance brokers and corporate agents. These entities were often not primarily engaged in the activities for which they were paid, leading the IRDAI to conclude the payments were likely made to circumvent regulations that restrict commission or reward payments to intermediaries whose non-insurance revenue exceeds 50%. The insurer was also cited for significant compliance failures, including engaging corporate agents for outsourced activities and failing to include agreed rates in contractual agreements with service providers.
The IRDAI also issued cautions and advisories on two other critical areas. Firstly, regarding Outsourcing Activity (Charge 1), the insurer was cautioned for delegating approval powers from the Outsourcing Committee’s Key Management Personnel (KMPs) to subordinates and for failing to maintain properly signed minutes for OC meetings. Secondly, concerning Protection of Policyholders’ Interests (Charge 2), the insurer was cautioned for misclassifying written customer “complaints” (expressions of dissatisfaction) as mere “service requests.” The IRDAI noted that this misclassification distorted the actual volume of complaints, despite the insurer claiming all cases were satisfactorily resolved. Charges related to the misstatement of payments in financial schedules and payments to Motor Insurance Service Providers (MISPs) were not pressed. In addition to the fine, the IRDAI has directed the insurer to conduct a thorough review of all vendor and intermediary agreements and submit a detailed action plan to rectify the systemic issues, particularly those related to due diligence and conflict of interest management in outsourcing.
Insurance Regulatory and Development Authority of India
Ref: IRDAI/E&C/ORD/MISC/121/10/2025
Order in the matter of Liberty General Insurance Co. Ltd.
1. Based on the
1.1. Show Cause Notice (‘SCN’) Reference No. IRDAI/E&C/2019/551/SCN/LR/007 dated 21st May, 2024.
1.2. Submissions made by the Insurer vide email dated 21st June 2024 in response to the aforesaid SCN.
1.3. Submissions made by the Insurer during the personal hearing held on 8th October, 2024 by the panel of Two Whole-Time Members of the Authority Comprising Shri Rajay Kumar Sinha-Member (Finance & Investment- ‘F&I’) and Shri Deepak Sood-Member (Non-Life).
1.4. Further submissions made by the insurer post-hearing vide email dated 15th October 2024 and 17th October 2024.
2. Background
2.1. The Authority had conducted an on-site inspection on M/s. Liberty General Insurance Co. Ltd. (‘Insurer’ or ‘Company’) from 16th December 2019 to 20th December 2019. The inspection report, inter alia, revealed certain violations of provisions of the Insurance Act, 1938 and Regulations, Guidelines and Circulars issued thereunder.
2.2. A copy of the inspection report was forwarded to the Insurer on 19th March 2020 seeking their response and the insurer submitted their response vide emails dated 10th June 2020, 21st September 2023 and 3rd October 2023.
2.3. On examining the submissions of the Insurer, an SCN was issued on 21st May, 2024. The Insurer replied to the SCN vide email dated 21st June, 2024.
2.4. As requested by the Insurer, an opportunity of the personal hearing was granted on 8th October, 2024 by the 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. On behalf of the Insurer, Shri Parag Ved (Chief Executive Officer), Shri Ritesh Jiwarajka (Chief Finance Officer), Shri Sameer Malgundkar, (Head-Operations & Customer Experience) and Ms. Apeksha Sawant (DVP-Legal & Compliance) and on behalf of the Authority, Shri RK Sharma (Chief General Manager), Shri TV Rao (General Manager), Shri Sanjay Kumar Verma (General Manager), Shri Manoj Asiwal (Deputy General Manager) and Shri Yash Arvind Patil (Assistant Manager) attended the hearing.
2.6. The submissions made by the Insurer vide its emails dated 10th June 2020, 21st September 2023 and 3rd October 2023 and submissions made after SCN vide email dated 21st June 2024, submissions during the personal hearing on 8th October, 2024 and further submissions made post-hearing vide emails dated 14th October 2024 and 17th October, 2024 have been carefully considered by the Authority and are summarized below:
3. Charge-1
3.1. Violation of Regulations-8 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
3.2. Inspection Observation_A-4
3.2.1. It was observed that the insurer maintained outsourcing process through electronic software system and the Chief Finance Officer (CFO), who was required to be a member of the Outsourcing Committee (OC) in terms of Outsourcing Regulations, delegated his approval Authority to Finance Controller (SVP-Finance). Similarly, the Chief of Operations (COO) designated the Head operations (SVP-Operations) and delegated their approval authority contrary to the Outsourcing regulations.
3.2.2. Therefore, the OC has further delegated their powers to approve Outsourcing Service Providers (OSP) to their subordinates who are not members of the OC though the delegation was approved by their Board.
3.2.3. The insurer did not maintain signed copy of the minutes of the OC and no documents were provided regarding annual performance evaluation and periodicity of inspection of OSPs.
3.3. Summary of Insurer’s Submissions:
3.3.1. The insurer submitted that the user department submits due diligence documents, which are approved by the Head of Department (HoD) and reviewed by the Compliance Officer (CO). After the CO’s approval, the documents go to the Chief Risk Officer (CRO), CFO, Finance Controller, and COO. Annually, the outsourcing policy is reviewed by the Board and Risk Management Committee.
3.3.2. Systemic controls for vendor engagements are in place, and vendor approval by SVP Finance may not be strictly construed as delegation of responsibility by CFO and it may be considered an additional control, Approval of vendors by SVP Finance is just one part of the outsourcing policy process. The insurer also submitted a copy of the Board approval of delegation to SVP (Finance).
3.3.3. The insurer also submitted that the Company conducted outsourcing committee meetings, as and when required to discuss various matters including vendors’ evaluation, outsourcing audits, and findings etc.
3.3.4. The insurer further submitted that the Company circulates outsourcing committee minutes via email instead of signed minutes to ensure authenticity.
3.3.5. During personal hearing, the insurer stated that all the transactions of vendors get reported to the OC on annual basis.
3.3.6. The insurer also stated that they would undertake corrective measures to ensure that OC of the Company will approve all OSPs (without any sub-delegation) as per the extant regulations.
3.4. Issues / concerns
3.4.1. Regulations governing outsourcing typically grant authority to the Outsourcing Committee comprising Key Management Personnel (KMPs), for very specific reasons. These reasons include the need for high-level oversight, accountability, and risk management. The submissions of the company seem to indicate that there is Outsourcing Committee comprising of CRO + CFO/Finance Controller + COO. While physical meetings may not be taking place, there is confirmation from all three over email. The authority to approve the vendor thereafter, in the system is delegated to SVP.
3.4.2. The OC is expected to deliberate on matters prior to making a decision and such deliberations must be recorded properly. Minutes serve as the official record of decisions made and discussions held during meetings. Without signed minutes, it becomes difficult to establish accountability, leading to lack of transparency in the decision-making process.
3.5. Decisions on Charge-1:
3.5.1. In light of the above, the insurer is cautioned for the lapse and advised to ensure that minutes of all OC are recorded properly and maintained. Compliance to Regulation-8 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 must be ensured at all times.
3.5.2. The insurer is instructed to present the matter before the Board. The insurer must ensure that the outsourcing policy and procedures align with relevant regulations and confirm compliance including the approval of outsourcing service providers by members (KMPs) of the outsourcing committee.
4. Charge-2
4.1. Violation of
4.1.1. Regulations-4(4) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017;
4.1.2. Regulations-17(1) IRDAI (Protection of Policyholders’ Interests) Regulations, 2017;
4.1.3. Clause-2 of Annexure-I under Regulations-17(2) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017.
4.2. Inspection Observation_A-6
4.2.1. It was observed that the insurer categorized ‘complaints’ as ‘service requests’ such as ‘Dispute of claim settlement’, ‘Delay in Survey / appoint of Surveyor’, ‘Dissatisfied with survey report’, ‘Repudiation of claim due to preexisting disease’, ‘Refund not received’, ‘Quantum of refund’, ‘Policy not received’, ‘Double Debit refund not received’ etc.
4.2.2. Based on the analysis for the month of January 2017, it was observed that the insurer registered the above categorised 92 complaints as service requests and the insurer captured 22 complaints only due to the wrong classification whereas total number of complaints should have been 22+92=114 in the particular month instead of 22 complaints.
4.3. Summary of Insurer’s Submissions:
4.3.1. The insurer submitted that Company has implemented a Standard Operating Procedure (SOP) for identifying service requests and complaints, in alignment with PPI Guidelines. Most customer grievance activities are automated for timely resolution. The SOP, submitted to the Authority, states that customer requests are treated as such unless unresolved within the prescribed Turn-around-time (TAT) or if the customer escalates it to a complaint. Multiple contacts within the TAT are also categorized as service requests.
4.3.2. The insurer further submitted that they had not breached any regulations. The insurer submitted the detailed analysis of all 92 requests, which, as per inspection team, were to be tagged as complaints.
4.3.3. In their written submissions the insurer has stated that they have “implemented CRM system and have integrated it with the IGMS and the same has been functioning appropriately”
4.3.4. During the personal hearing, the insurer acknowledged the fact that some of the grievances mentioned in observation were incorrectly tagged under the heads of ‘Dispute on claim settlement’, ‘Excess premium refund’, ‘Refund amount not received’, ‘Dispute on claim settlement’, ‘Delay in survey’, and ‘Repudiation of claim due to pre-existing disease exclusion’ etc. However, the insurer stated that none of the 92 sample cases were escalated to other Grievance Redressal Forums and they were satisfactorily resolved notwithstanding their classification in the system.
4.3.5. The insurer submitted latest Policyholders’ Protection Policy (earlier known as Grievance Redressal Policy) which was reviewed by their Board in its meeting held on 7th June 2024.
4.4. Issues / Concerns
4.4.1. The definition of “Complaint” given in Regulations-4 (4) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017 provides as under:
“Complaints means a written expression of dissatisfaction by a complainant with insurer, distribution channels, intermediaries, ……… ..”
Thus, any expression of dissatisfaction by a complainant should have been considered as ‘complaint’. Misclassification would lead to inaccurate reporting and distort the volume of complaints. This is likely to impact the insurer’s ability to address issues and monitor grievances.
4.4.2. The insurer’s submission that they have implemented CRM and integrated it with IGMS is noted as also the submission that the 92 sample cases identified in the inspection were satisfactorily resolved and none of the cases were escalated to other Grievance redressal forums.
4.4.3. Thus, while the insurer has procedures and mechanism to resolve complaints and grievances of policyholders, the classification followed is not in line with the extant regulations.
4.5. Decisions on Charges-2
4.5.1. In view of the above, the insurer is cautioned for the lapse and advised to ensure that definitions and classification as given in the regulations are strictly followed without any exception. The Insurer should undertake necessary action to review systems and processes and align with the correct classification of complaints.
5. Charge-3
5.1. Violation of
5.1.1. Regulations-10 (i) (b) and Regulations-15(b) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
5.1.2. Regulations-5(d), 5(e) and 6(e) (ii) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016.
5.2. Inspection Observation_A-7
5.2.1. The insurer entered into an agreement with related parties of Insurance Brokers (Muthoot Fincorp Ltd., KNZ Marketing Services, Bhavna Thakkar, Neel T Thakkar, Aditya Birla Finance Ltd, Mahindra & Mahindra, Muthoot Housing Finance Ltd and Muthoot Marketing SP) for servicing the activities outsourced such as Data Entry, Display of Signage, Policy Printing and delivery to customers, distribution of marketing material including brochure, pamphlets, cash / cheque collection and issuance of acknowledgement to policyholders/prospects etc. and made the following payments of Rs.21.84 crore during FY 2018-19.
| Name | FY 2018-19 Amount in Rs. | FY 2017-18 Amount in Rs. |
| Muthoot Fincorp Limited | 10,021,000 | 7,879,470 |
| MJBR Marketing and Financial Services Ltd. | 0 | 16,100,000 |
| KNZ Marketing Services | 34,392,142 | 12,104,755 |
| Bhavna Thakker | 10,917,793 | 10,820,800 |
| Neel T Thakker | 5,269,520 | 2,585,900 |
| Aditya Birla Finance Limited | 44,454,400 | 35,742 |
| Mahindra & Mahindra | 82,864,555 | 15,246,110 |
| Muthoot Housing Finance | 10,501,842 | 4,199,298 |
| Muthoot Marketing SP | 20,000,000 | 23,400,000 |
| Total | 218,421,252 | 92,372,075 |
5.2.2. The main object clause of these related parties of insurance brokers have been examined and it is observed that these entities are not primarily engaged in the activities for which the pay-outs have been made. Moreover, the payments made during 2018-19 to the related parties of insurance brokers are quite exorbitant and not reasonable which is evident from the table given below:
| Name of the Insurance Brokers | Payments made to Insurance Brokers (Amount in Rs.) | Payments made to corresponding related parties. (Amount in Rs.) |
| Muthoot Insurance Broker Pvt. Ltd | 2,07,99,530 | 5,43,92,142 |
| Muthoot Risk Insurance and Broking Services Private Ltd. | 1,20,09,907 | 3,05,01,842 |
| Aditya Birla Insurance Brokers | 35,47,21,315 | – |
| Mahindra Insurance Brokers Ltd. | 8,17,11,726 | 8,28,64,555 |
| Peraj Insurance Brokers Pvt. Ltd | 46,52,161 | 1,61,87,313 |
| Total | 47,38,94,639 | 18,39,45,852 |
5.2.3. It appears that Insurer is making excess pay-outs or utilizing the services of these entities for solicitation of insurance business.
5.3. Summary of Insurer’s Submissions:
5.3.1. The insurer submitted that, since the Company had very limited brand presence, significant efforts were required to increase awareness of its products among intermediaries and customers. For this purpose, the Company engaged various service providers for marketing its brand and products. This activity yielded results for the Company, and despite its low brand presence, the Company has grown year on year.
5.3.2. The insurer also submitted that the Company requires a specific declaration from vendors if any of their related parties are insurance intermediaries. In cases where a vendor discloses such a relationship, the same is reported to the Authority in accordance with the Outsourcing Guidelines. Additionally, some of these business houses are so large and diverse that it is very difficult to identify all the related parties within them unless the vendors themselves make the declaration.
5.3.3. The Company checks vendors’ Memorandum of Association to ensure they are authorized for the contracted activities. Accordingly, the payments were made for services rendered and expressly fall under outsourcing activities. As per their understanding, these payments were not commissions and could not be construed as such.
5.3.4. During the personal hearing, the Insurer stated that all the companies mentioned in the observation have been on-boarded through proper agreements. However, the insurer admitted that agreement with Mahindra and Mahindra Financial Services, Aditya Birla Finance Ltd., Bhavana Thakker do not contain the agreed rates.
5.3.5. It is the submission of the insurer that the payment to Aditya Birla Finance Ltd. was booked as payable but never paid except Rs. 6,899 which was actually paid to Aditya Birla Insurance Brokers. Remaining amount was written back in books.
5.4. Issues / Concerns
5.4.1. After examining the MOA / other publicly available documents of the entities, it is concluded that the related parties of Insurance Brokers i.e. M/s Muthoot Fincorp Ltd. Mahindra and Mahindra Financial Services Ltd., Muthoot Housing Finance Ltd., Ms Bhavna Thakkar and Mr Neel T Thakkar are not primarily engaged in the activities for which payments were made and do not have the expertise in the services purported to have been offered.
5.4.2. The Company’s reliance on vendors to self-declare any relationships with insurance intermediaries raises concerns about their due diligence processes. The insurer acknowledged their difficulty in identifying related parties within large, complex business houses, indicating potential gaps in internal controls. The insurer’s outsourcing committee has failed to carry out the required due diligence.
5.4.3. The erroneous payment booked to Aditya Birla Finance highlights inadequate financial controls. Even though the error was corrected, it indicates a lapse and oversight that could be symptomatic of broader financial management issues.
5.4.4. The insurer has clarified that the payment of Rs.8,28,64,555/- was actually made to M/s Mahindra Insurance Brokers Ltd. during 2018-19 but not to the related party i.e. Mahindra & Mahindra Financial Services Ltd. as mentioned in the inspection observation. Further, during the personal hearing, the insurer also confirmed that the payment of Rs.35,00,000/- was made to Mahindra & Mahindra Financial Services Ltd. However, the insurer has failed to provide the necessary details regarding the substantial amount of Rs.8,17,11,726 paid to M/s Mahindra Insurance Brokers Ltd. during the same period, as highlighted in the inspection observation. The failure of insurer to provide comprehensive details of payments before the personal hearing indicates potential deficiencies in the insurer’s governance framework. The incomplete and incorrect payment details raise concerns about the robustness of internal controls and compliance mechanisms of the insurer.
5.4.5. The insurer’s acknowledgement that agreements with the related parties of insurance brokers, including Mahindra and Mahindra Financial Services and Aditya Birla Finance Ltd., did not contain agreed rates is a significant compliance failure. This oversight raises serious concerns about the insurer’s adherence to regulatory standards and internal governance practices. Such deficiencies in contractual agreements could, not only jeopardize financial integrity, but also expose the insurer to potential risks of conflicts of interest and regulatory violations.
5.4.6. The invoices raised by the service providers do not disclose full details of the expenses or provide a substantiating basis for the amounts billed. Moreover, the invoices raised by M/s Muthoot Housing Finance Ltd. includes the amount of Rs.6,77,000/- (on sample basis) for rent for sub-letting of movable assets but no such service or activity were mentioned and agreed in the agreement. The insurer failed to provide any justification about the billed amount related to rent for sub-letting of movable assets and substantiating basis of the amount mentioned in the invoices.
5.4.7. The payments made to related parties were extremely high and unreasonable. While it may be legal to use entities related to intermediaries for advertising and publicity purposes, the amounts involved are excessive and are for the activities in which these entities are themselves not predominately engaged, leading the Authority to conclude that these payments were not made for the services alleged to have been obtained but for some other purpose which is outside the purview of the regulations.
6. Charge-4
6.1. Violations of
6.1.1. Regulations-6(c) IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016.
6.1.2. Regulations-14(vi) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
6.1.3. Regulations-10(i)(b) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017.
6.2. Inspection Observation_A-8
6.2.1. The insurer engaged Corporate Agents (CA) – Aditya Birla Housing Finance Ltd (ABHFL), Orix Auto Infrastructure Services Ltd. (OAISL) and Kozencherry MM Financial Services Ltd. (KMMFS) for the services related to outsourced activities of seminars and other event management programs, awareness campaigns, policy printing, signage and other display material, distribution of marketing material including brochure, pamphlets etc.
6.2.2. The insurer made payments of Rs.3,97,74,152 and Rs.2,32,72,421 during the financial years 2018-19 and 2017-18 respectively to the above service providers in the name of outsourcing which otherwise would have booked under commission / remuneration and rewards account.
(Amount in Rs.)
| Name | FY 2018-19 | FY 2017-18 |
| Kozhencherry MM Financials Services Pvt. Ltd. (KMMFS) – related party of CA – Muthoottu Mini Financiers Ltd. | 45,45,900 | 1,19,69,700 |
| Orix Auto Infrastructure Services Ltd. (OAISL) – CA | 2,22,28,452 | 71,92,721 |
| Aditya Birla Housing Finance Ltd. (ABHFL) – CA | 1,29,99,800 | 41,10,000 |
| Total | 3,97,74,152 | 2,32,72,421 |
6.2.3. Thus, these payments were made only to circumvent the regulatory prescription that no corporate agent should be paid rewards where the remuneration from insurance business is less than 50% of their total revenues.
6.2.4. Main object clause of CAs did not carry anything related to the activities outsourced to them. Further, the regulations on outsourcing also prohibits engaging agents and insurance intermediaries for outsourcing activities.
6.2.5. The address and email id of KMMFS and M/s Mutthottu Mini Financiers limited are the one and same as per the Company Master Data as downloaded from MCA.
6.3. Summary of Insurer’s Submissions:
6.3.1. The insurer submitted that the Payments made to ABHFL were for services provided before becoming a corporate agent. The insurer also submitted that Outsourcing agreement with OAISL is a procedural slippage within the outsourcing process and the same shall be strengthened. In the case of KMMFS, vendors were on boarded based on declarations of no relationship with any insurance intermediary.
6.3.2. The insurer also submitted that the Company believes these payments were for outsourced services, as per duly executed agreement between parties, not commissions for soliciting the insurance business, and thus were legitimate and not improper.
6.3.3. Further, the insurer submitted that the payments made for marketing services provided by the entities indicated by the Authority were largely due to procedural lapse and the Company has reviewed all such arrangements and confirms that now no such payments are being made by the Company.
6.3.4. During the personal hearing, the insurer reiterated the submissions made in response to the SCN and the insurer acknowledged that the address and email ids of the KMMFS was of one of the Corporate Agents.
6.4. Issues / Concerns
6.4.1. Clause 10.1.b of outsourcing regulations mandates that there shall be clause in the deed / bye laws of the vendor enabling it to undertake the activities outsourced. The main object clauses of ABHFL and KMMFS did not cover the outsourced activities for which they were engaged. This raises concerns about whether these entities were even authorized to perform the tasks they were contracted for.
6.4.2. The insurer acknowledged a ‘procedural slippage’ in its outsourcing agreement with OAISL, which indicates a lack of adherence to the proper outsourcing process and suggests potential systemic issues in how outsourcing contracts are handled.
6.4.3. The insurer’s submission that they were ‘not aware’ of the related-party relationship in respect of KMMFS demonstrates a failure in due diligence. This lack of awareness raises significant concerns about the insurer’s ability to properly evaluate vendors and ensure compliance with regulatory guidelines related to related-party transactions. Clause 15 (d) of the Outsourcing Regulations require that in case of intermediaries or group entities, outsourcing committee has to specifically approve the consideration amount which was not done in the instant case.
6.4.4. Address and email ids of KMMFS was that of one of the corporate agents, which was also acknowledged by the insurer. Despite such apparent evidence, the insurer has failed to identify the relationship of KMMFS with Muthoottu Mini Financial Ltd which raises serious concern on their intention and due diligence process.
6.4.5. The insurer admitted that agreements with M/s Kozhencherry MM Financial Services Ltd. (related party of Corporate Agent-Muthoottu Mini Financial Ltd.) did not contain agreed rates, which is a significant compliance failure. The absence of agreed contractual rates raises concerns about transparency, governance, and the potential for financial discrepancies.
6.4.6. The invoices raised by the service providers do not disclose full details of the expenses or provide a substantiating basis for the amounts billed.
6.4.7. The invoices raised by the service providers also indicate that the pay-outs are not reasonable or not commensurate with the services claimed to have been performed, particularly when Regulation 6(c) of the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016 prohibits the payment of any expenses other than commission or remuneration to an insurance intermediary whose revenue from activities other than insurance intermediation exceeds 50%.
6.4.8. In the given cases, all of the CA’s revenue from non-insurance intermediation activities exceeds 50%. Therefore, the pay-outs made under the head of outsourcing are in violation of this regulation.
6.5. Decisions on Charge-3 and Charge-4
6.5.1 In view of the above, 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 the violation of the provisions of Regulations-10 (i) (b) and Regulations-15(b) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 and Regulations-5(d), 5(e), 6(c) and 6(e) (ii) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016.
6.5.2 The Insurer is further directed to:
a) review their vendors’ agreements and agreements with Intermediaries or their related parties which are existing and make necessary changes to comply with extant Regulations / Guidelines on Outsourcing;
b) carry out due diligence before entering into outsourcing arrangements with the related parties;
c) get the prospective outsourcing arrangements specifically reviewed and approved by the Outsourcing Committee showcasing that the decisions to engage with entities for outsourcing any activities are based on sound business practices taking into account the cost and potential benefits of outsourcing against the risk that may arise.
d) submit a detailed action taken report addressing various corrective actions carried out and preventive measures put in place in respect of Charge-3 and Charge-4 to exercise oversight of, and accountability for, any outsourced material activity or function and avoid or properly manage any potential conflicts of interest.
7. Charge-5
7.1. Violations of
7.1.1. Regulation-2 (f) (ii) of the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016.
7.1.2. Clause-4 (b) & 5 of the Circular No. IRDAI/INSP/CIR/ONS/157/09/2018 dated 19th September 2018.
7.2. Inspection Observation_C-16
7.2.1. It was observed that the payments of Rs.65 lakh and Rs.12.50 lakh made to M/s. Aditya Birla Insurance Brokers Pvt Ltd and M/s Toyota Tsusho Insurance Brokers Pvt Ltd respectively towards the risks and advisories services on reinsurance were mentioned in operating expenses under Schedule-IV whereas it should have been mentioned under the head of ‘Commission and Rewards’ under Schedule-III of the Financial Statement.
7.3. Summary of Insurer’s Submissions:
7.3.1. The Insurer submitted that it is amply clear that the services availed were not related to solicitation of insurance business, therefore not mentioned under the head of reward and commission. Since the payments were made for services permitted under the Brokers Regulations 2018, they cannot be construed as ‘commission’.
7.3.2. As the service availed from the Brokers were operational in nature, the same were accounted under the head of operating expenses instead of the head of rewards, hence there is no breach of regulation.
7.3.3. During the personal hearing, the insurer reiterated the submissions made to the SCN.
7.4. Decision on Charge-5
The submissions of the insurer are taken on record and the charge is not pressed.
8. Charge-6
8.1. Violations of Clause-15 (5) (d) of the MISP Guidelines bearing Ref. No. IRDAI/INT/GDL/MISP/202/08/2017 dated 31st August 2017.
8.2. Inspection Observation_C-18
Payments of Rs.3.91 lakh and Rs.1.05 lakh were made to Motor Insurance Service Providers (MISPs) i.e. TS Mahalingam and Sons Finance Division (TSMFD) and BU Bhandari Auto (P) Ltd (BUBA)) respectively towards infrastructure support and marketing charges.
8.3. Summary of Insurer’s Submissions:
8.3.1. The insurer submitted that the Company engaged the services of BUBA for training its Motor Claims management employees. BUBA has large infrastructure set up at Pune, which was used by various insurance companies for training their Claims management employees.
8.3.2. In response to charge related to TSMFD, it is submitted that, the outsourcing arrangement continued with the said entity along with MISP relationship for brief period due to the entity have similar name i.e. “TS Mahalingam & Sons” and “TSMFD” and having different PAN, therefore skipped the due diligence process. Upon coming to know about the discrepancy the said arrangement was terminated.
8.3.3. The insurer also submitted that the said issue of TSMFD was also raised in MISP inspection conducted by the Authority on 1st August 2018 and the Authority vide Order dated 15th April 2021 has already penalized the Company for Rs.13 lakhs towards said violation.
8.3.4. Further, the insurer submitted that no payments have been made to the said MISP during FYs 2021-22, 2022-23 and 2023-24.
8.3.5. During the personal hearing, the insurer reiterated the submissions made earlier in response to the SCN.
8.4. Decisions on Charge-6
The submissions of the insurer are taken on record. Since, the insurer has already been penalized for the said violation no further action is warranted and charge is not pressed.
9. Summary of Decisions:
| Charge No. |
Violation of Provisions | Decision |
| 1 | Inspection Observation_A-4
Regulations-8 of IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 |
Caution & Advisory |
| 2 | Inspection Observation_A-6
a) Regulations-4(4) of IRDAI (Protection of b) Regulations-17(1) IRDAI (Protection of |
Caution & Advisory |
| 3 | Inspection Observation_A-7
a) Regulations-10 (i) (b) and Regulations-15(b) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. b) Regulations-5(d), 5(e) and 6(e) (ii) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016. |
Penalty of Rs.1 crore for Charge-3 & Charge 4 and Direction |
| 4 | Inspection Observation_A-8
a) Regulations-6(c) IRDAI (Payment of b) Regulations-14(vi) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. c) Regulations-10(i)(b) of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017. |
|
| 5 | Inspection Observation_C-16
Regulations-2 (f) (ii) of the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) |
Charge not pressed |
| 6 | Inspection Observation_C-18
Clause-15 (5) (d) of the MISP Guidelines bearing Ref. No. IRDAI/INT/GDL/MISP/202/08/2017 dated 31st August 2017. |
Charge not pressed |
10. The penalty amount of Rs.1 crore (Rupees-one crore) shall be remitted by debiting from shareholder funds by the Insurer 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 Mr Sanjay Kumar Verma, GM, Enforcement and Compliance Department of IRDAI at its email id – enforcement@irdai.gov.in with a copy to Accounts Department of IRDAI at its email id – accounts@irdai.gov.in.
11. Further,
a) 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.
b) The Insurer shall submit an Action Taken Report to the Authority on direction given within 90 days from the date of this Order.
12. 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
Dated: 28th October 2025
