The Insurance Regulatory and Development Authority of India (IRDAI) has issued a landmark directive, commanding all insurers, reinsurers, and distribution partners to implement a “robust framework” aimed at eliminating fraud-related risks. Effective from April 1, 2026, the new guidelines enforce a “zero-tolerance approach” and mark a significant effort by the regulator to modernize risk management in an increasingly digitized and fraud-prone sector.
Dedicated Structures for Fraud Oversight
At the core of the new mandate is the requirement for insurers to create dedicated internal structures focused solely on combating fraud. Every company must now implement a board-approved anti-fraud policy that outlines precise procedures for deterrence, detection, and remediation.
To operationalize this, insurers are compelled to establish a Fraud Monitoring Committee (FMC) responsible for embedding fraud risk management into every aspect of business—from sales and underwriting to claims processing and distribution. Furthermore, a Fraud Monitoring Unit (FMU), distinct from the internal audit department, must be created to assist the FMC in the daily execution and review of anti-fraud measures. This dual structure, the regulator stated, is designed to ensure that the management of fraud risk is comprehensive and fully integrated.
Strengthening Cybersecurity and Data Protection
Recognizing the escalating threat from cyber and “new-age frauds,” the IRDAI has also mandated a major upgrade to the industry’s digital defenses. Insurers are required to adopt robust cybersecurity frameworks capable of withstanding evolving threats.
The directive stresses the need for continuous monitoring and upgrading of systems, including better access controls, more rigorous customer verification processes, and enhanced incident reporting databases. This is seen as a necessary step to protect both the companies and the policyholders whose sensitive data they handle.
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Mandatory Industry Collaboration and Data Sharing
A crucial element of the new framework is the establishment of a unified, industry-wide digital defense system. Insurers are now required to actively participate in the Fraud Monitoring Technology Framework managed by the Insurance Information Bureau of India (IIB).
This collaboration is intended to improve the detection and prevention of fraudulent activities through mandatory data sharing. Specifically, all insurers must share with the IIB details of their distribution channels, hospitals, third-party vendors, and, most critically, blacklisted fraud perpetrators. The IIB will then maintain a “caution repository” containing this information to safeguard the entire sector’s integrity. The IIB, in coordination with the Life and General Insurance Councils, is also tasked with adopting a unique identifier system and clear reporting timelines for feeding fraudulent activities into this central repository.
A Step Toward Global Best Practices
This comprehensive by IRDAI’s is intented to strengthen governance and transparency as the acceleration of digitalization simultaneously increases fraud risks. Reinsurers and distribution channels—excluding individual agents—must also establish fraud risk management systems proportionate to their operational scale and exposure levels.
Industry experts have hailed the directive as a significant step toward aligning India’s insurance sector with global best practices in risk management. With the April 2026 deadline looming, insurers are now prioritizing the creation of internal monitoring frameworks, enhancing staff training, and making significant investments in fraud-detection technologies to ensure full compliance with the new and strict mandate.
