IRDAI Warns Reliance Nippon Life Insurance for Auditor Fee Conflict & Governance Lapses

The Insurance Regulatory and Development Authority of India issued an order against Reliance Nippon Life Insurance Company Ltd following a thematic remote inspection conducted in January 2022. The inspection revealed violations of the Insurance Act, 1938 and related regulations, leading to a Show Cause Notice in November 2024. After reviewing written submissions and conducting a personal hearing in February 2025, the Authority examined two charges.

For Charge 1, the insurer allowed the Executive Director, CEO, and CFO to determine the remuneration of joint statutory auditors without the mandated recommendation and approval of the Audit Committee and Board, contrary to Corporate Governance Guidelines. Although corrective action was taken from 2022 onwards, the Authority issued a warning and an advisory, directing the insurer to ensure full compliance.

For Charge 2, the Policyholders Protection Committee failed to review required issues such as repudiated claims, high surrenders, and unclaimed amounts, and the insurer submitted selective PPC minutes despite clear instructions. The Authority issued a warning and an advisory, requiring compliance with governance provisions, review of SOPs for surrender/foreclosure, analysis of repudiation causes, and improvement of systems to reduce unclaimed amounts.

Both charges resulted in warnings and advisories. The insurer must place the order before its Board and submit an Action Taken Report within 90 days. An appeal may be filed before the Securities Appellate Tribunal.

Insurance Regulatory and Development Authority of India

Ref. IRDAI/E&C/ORD/MISC/133/11/2025

Order in the matter of M/s Reliance Nippon Life Insurance Co Ltd

1. Based on the

i) Show Cause Notice (“SCN”) reference No. IRDAI/ENF/2023/737 / SCN /LR/075 dated 26^th November, 2024 issued to M/s Reliance Nippon Life Insurance Company Limited (Insurer) in connection with a thematic remote inspection conducted by the Authority from 10^th January, 2022 to 13^th January, 2022.

ii) Submissions made by the Insurer vide email dated 24^th December, 2024 in response to the aforesaid SCN.

iii) Submissions made by the Insurer during the personal hearing held on 10^th February, 2025 at 01.30 PM, by the panel of Two Whole Time Members of the Authority – Shri Rajay Kumar Sinha (Member-F&I) and Shri P K Arora (Member-Actuary).

iv) Further submissions made by Insurer vide email dated 24^th February, 2025.

2. Background

2.1. The Authority had conducted the thematic remote inspection of M/s Reliance Nippon Life Insurance Company Limited from 10^th January 2022 to 13^th January 2022. 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 21^st January, 2022 seeking their response and the response was received vide email dated 15^th February, 2022.

2.3. On examining the submissions made by the Insurer, show cause notice (SCN) was issued on 26^th November, 2024. The Insurer replied to the SCN vide email dated 24^th December, 2024.

2.4. As requested by the Insurer, personal hearing was granted to the Insurer on 10^th February, 2025 by the panel of Two Whole Time Members of the Authority- Shri Rajay Kumar Sinha (Member-F&I) and Shri P K Arora (Member-Actuary).

2.5. On behalf of the Insurer, Shri Ashish Vohra (Chief Executive Officer), Shri Pradeep Thapliyal (Appointed Actuary), Shri Nakano (Nippon Life), Shri R Bharathwaj (Chief Risk Officer), Smt. Ekta Thakurel (Company Secretary) and Shri Rajesh Kumavat (Compliance Officer) and on behalf of the Authority, Shri R K Sharma (CGM), Shri Sanjay Kumar Verma (GM), Shri Atul Gupta (Asst. Manager) and Shri Monu Moar (Asst. Manager) attended the hearing.

2.6. The submissions made by the Insurer in its email dated 15^th February, 2022, submission made after SCN vide email dated 24^th December, 2024 and submission during the personal hearing on 10^th February, 2025 and those made vide email dated 24^th February, 2025 have been carefully considered by the Authority and are summarized below:

3. Charge-1 (Observation-A2 (Part A, Observation 2)

Violation of Clause 6 and 7.1 of Corporate Governance Guidelines issued vide Circular Number IRDA/F&A/GDL/CG/100/2016 dated 18th May 2016.

3.1. Inspection Observation-A2 (Part A, Observation 2)

Quantum of remuneration paid to the Joint Statutory Auditor was not recommended / approved by the Audit committee and the Board. The Board and the Audit Committee in their meeting authorized Executive Director & Chief Executive Officer and Chief Financial Officer to decide the remuneration of the Statutory Auditors. It was observed that following expenditures were incurred towards remuneration to the joint statutory auditors:

3.2. Summary of Insurer’s Submissions:

3.2.1. Insurer submitted that the shareholders at the Annual General Meeting authorized the Executive Director and CEO and the Chief Financial Officer to finalize the remuneration to be paid to the Joint Statutory Auditors.

3.2.2. The fees were benchmarked as per industry standards and the terms of engagement and remuneration were set on specific recommendations and benchmarks provided by the Audit Committee.

3.2.3. The Audit Committee continues to be directly responsible for the recommendation of the appointment, remuneration, performance and oversight of the work of the auditors (internal/statutory/Concurrent) and the CEO, ED and CFO did not act arbitrarily.

3.2.4. During personal hearing, Insurer submitted that they have taken the corrective action in the year 2022 onwards. Now the remuneration of the Joint Statutory Auditor is recommended by the Audit Committee and approved by the Board.

3.3. Decision on Charge 1:

3.3.1. The involvement of the Executive Director & Chief Executive Officer and Chief Financial Officer in determining the remuneration of statutory auditors could create a potential conflict of interest. Statutory Auditors are meant to provide independent oversight of the financial statements. If the executive management decides their remuneration, it could compromise the auditors’ independence.

3.3.2. Given that corrective action has already been taken by the insurer, the Insurer is warned for the lapse and advised to ensure compliance with Clause 2.5 and 4.1 of Master Circular on Corporate Governance for Insurers, 2024 issued vide Circular No. IRDAI / F&I / CIR / MISC / 82 / 5 / 2024 dated 22.05.2024. Any repetition of similar lapse shall be viewed seriously and stringent regulatory action shall be initiated.

4. Charge-2 (Observation-C2 (Part C, Observation 2))

Violation of

a) Clause 7.4 of the Guidelines for Corporate Governance for Insurers in India notified by the Authority vide IRDA / F&A / GDL / CG / 100 / 05 / 2016 dated 18th May, 2016.

b) Clause 4(c) of circular No. IRDA / INSP / CIR / ONS / 157 / 09 / 2018 dated 19th September, 2018.

4.1. Inspection Observation-C2 (Part C, Observation 2)

4.1.1. The Policyholders Protection Committee (PPC) did not discuss / review certain issues as outlined in the Corporate Governance Guidelines. The committee did not review the repudiated claims with the reasons for repudiation. The surrender payable is dominating the unclaimed amounts to policyholders and this fact was not explicitly brought to the notice of the PPC by the insurer. Further, the insurer has not put up to the PPC, the reasons for such high surrenders unpayable and the steps taken or proposed to be taken by them to reduce the unclaimed amounts.

4.1.2. The insurer while sharing the agenda notes on 13th January, 2022 pertaining to their Board meeting added one last page, after conclusion of the agenda notes and the “thanks message”, to include the details of repudiation. This particular page was not found in the Board agenda notes previously shared by the insurer also. This raises doubts as to whether this particular page was actually there or added to the agenda notes after the inspection query.

4.2. Summary of Insurer’s Submissions:

4.2.1. Insurer submitted that both the Company’s Policyholders Protection Committee (PPC) and the Board is apprised of status of settlement of other customer benefits like surrenders, loans, partial withdrawals, including grievance analysis, unclaimed amounts, surrender and foreclosure pay­outs. Further, Claim repudiation with analysis of reasons was also presented to the both PPC and the Board.

4.2.2. With respect to submission of agenda notes on repudiation of claims, they submitted that the docket maintained of the notes included the last page as well. They further submitted that the same was identified during the field inspection itself and all accurate and complete information was made available to the Inspection team.

4.2.3. During personal hearing-

4.2.3.1. The Insurer submitted that the agenda note on unclaimed amount and on claim repudiation as required under Corporate Governance Guidelines are always discussed in quarterly PPC meeting.

4.2.3.2. With respect to unclaimed amount, the insurer submitted that they have made efforts over the years to reduce the unclaimed amount.

4.3. Post the personal hearing, the Insurer submitted

4.3.1. list of products where majority of unclaimed amounts is due to auto-surrender/foreclosure;

4.3.2. explanatory note on handling unclaimed amounts;

4.3.3. process followed by Operations along with triggers for various administrative actions;

4.3.4. SOP for auto-foreclosure/surrender; and

4.3.5. a copy of MOM dated 28-04-2023 of PPC.

4.4. Decision on Charge 2:

4.4.1. Although the insurer was specifically advised during personal hearing to provide the Minutes of the PPC Committee on a sample basis, the insurer submitted extracts of minutes of PPC Meeting held on 28^th April 2023 covering only two agenda items. This selective submission constitutes non-compliance with regulatory instructions and demonstrates a lack of adherence to comprehensive disclosure requirements.

4.4.2. Further, the extract of minutes under Item No. 9 indicates that the note on “Statistics of Claims and Reasons for Repudiation” for the period ended March 2023, was merely placed before the Committee for “noting” and instead of “review”. This indicates non-compliance with the Clause 7.4 of the Guidelines on Corporate Governance for Insurers in India, which mandates the Committee to review such details and related data. The insurer’s action reflects a procedural lapse in adhering to governance oversight requirements prescribed under the said guidelines.

4.4.3. In view of the above, the Insurer is warned against the failure to review the PPHI matters including repudiated claims, high surrenders and advised to ensure compliance with Clause 4.4 of Master Circular on Corporate Governance for Insurers, 2024 issued vide Circular Number IRDAI / F&I / CIR / MISC / 82 / 5 / 2024 dated 22.05.2024.

4.4.4. The insurer shall note that any recurrence of similar lapse shall be viewed sternly and stringent regulatory action, as deemed appropriate, shall be taken by the Authority.

4.4.5. The insurer is advised to

4.4.5.1. review SOP with focus on various triggers for auto surrender / foreclosure and ensure alignment with extant regulations to ensure equity and fairness to the policyholders;

4.4.5.2. review cause-wise analysis of repudiations and improve their underwriting practices to minimise or avoid potential repudiations due to non-disclosure of pre-existing illnesses through appropriate root cause analysis;

4.4.5.3. put in place proper systems and processes to reduce their unclaimed amounts in accordance with the extant Regulations/instructions of the Authority in this regard.

5. Summary of Decisions:

6. 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.

7. 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/-
Rajay Kumar Sinha
Member (F&I)

Sd/-
P K Arora
Member (Actuary)

Place: Hyderabad
Date: 25^th November, 2025