IRDAI has imposed penalties totalling ₹3 crore in three separate orders against IndusInd Bank, ICICI Lombard General Insurance and Canara HSBC Life Insurance over violations involving insurance grievance handling, outsourcing and vendor management, and the sale of a policy to an 88-year-old customer outside the approved entry age.
Why Was IndusInd Bank Fined ₹1 Crore?
The Insurance Regulatory and Development Authority of India imposed a ₹1 crore penalty on IndusInd Bank in its capacity as a corporate agent after finding that it had failed to establish and implement an appropriate grievance redressal mechanism specifically for insurance policyholders.
The action followed an onsite inspection of the bank’s corporate agency operations conducted between June 19 and June 22, 2023. The inspection identified several issues under the Insurance Act, regulations, guidelines and circulars issued by IRDAI. A show-cause notice was subsequently issued on March 26, 2025.
The regulator found that the bank did not have a dedicated insurance grievance redressal mechanism. Its website displayed a grievance policy primarily intended for banking customers and did not provide an appropriate insurance-specific mechanism or information for policyholders.
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IndusInd Bank argued that its overall grievance system covered all products, including insurance, and that insurance-related complaints were recorded and monitored through its customer relationship management system. It also said its toll-free IVR system could handle such complaints.
IRDAI rejected the explanation, holding that a general banking grievance mechanism could not replace a policyholder-facing, insurance-specific channel through which customers could lodge complaints and understand the relevant escalation and reporting process.
What Did IRDAI’s Test Complaint Find?
IndusInd Bank told the regulator that its grievance redressal mechanism had been simplified and made accessible through its website, and later provided screenshots showing the revised system.
However, when IRDAI lodged a test complaint through the portal, it found no acknowledgement showing that a reference number, SMS or email had been generated or communicated to the complainant.
The regulator concluded that the bank had failed to put in place and implement an appropriate grievance redressal mechanism and imposed the ₹1 crore penalty. The bank was also directed to strengthen the system so that every complaint lodged by a policyholder immediately generates an acknowledgement number.
IRDAI also identified deficiencies in insurance renewal notices sent by the bank. According to the regulator, the notices were generic SMS reminders and did not contain all disclosures required under the applicable framework.
The regulator further found lapses concerning disclosures to IRDAI about penalties and actions involving the Reserve Bank of India, Securities and Exchange Board of India and the Enforcement Directorate. It also raised an issue over the bank’s website not prominently displaying its corporate agent registration number. Of five charges, one resulted in the ₹1 crore penalty, while three led to cautions and advisories and one was not pressed.
Why Was Canara HSBC Life Fined ₹1 Crore?
IRDAI separately imposed a ₹1 crore penalty on Canara HSBC Life Insurance Company over the mis-selling of a life insurance policy to an 88-year-old man.
The case involved a deferred annuity policy carrying an annual premium of ₹12 lakh and a four-year premium-paying term. The policy was sold through Canara Bank in February 2025.
IRDAI initiated proceedings after observing that the product specified an entry age of 30 to 80 years. The regulator found that adequate suitability and financial assessments had not been undertaken despite the customer’s advanced age and the significant premium commitment.
The regulator also identified deficiencies in the verification call, proposal form, disclosure of policy features and other parts of the solicitation process.
What Happened After the Policy Was Sold?
IRDAI found that the benefit illustration did not carry verifiable acknowledgement by the policyholder and that the customer information sheet and proposal form copy were not provided at the point of sale.
The regulator also noted that the premium was collected before policy issuance and that the consequences of the proposal’s death during the premium-paying term were not adequately disclosed.
When the matter came to its notice, the insurer met the policyholder and, at his request, refunded the full premium of ₹4.09 lakh, including the second-year premium, and reversed the commission.
The insurer also introduced corrective measures, including revised product brochures, policy documents and suitability assessment frameworks, along with video-based validation calls before issuance.
IRDAI said the deficiencies reflected failures in approved product features, suitability assessment, solicitation and verification, proposal processing, disclosure and internal controls. It also advised the insurer to conduct a comprehensive audit of policies sold to people above 75 years through Canara Bank and strengthen oversight of its corporate agents and distribution channels.
Also Read: https://the420.in/irdai-canara-hsbc-life-misselling-88-year-old-policy-penalty/
Why Was ICICI Lombard Fined ₹1 Crore?
IRDAI imposed another ₹1 crore penalty on ICICI Lombard General Insurance for lapses relating to outsourcing, vendor management and corporate governance requirements.
The principal issue concerned payments classified under sales marketing and business support. During FY2018-19, ICICI Lombard had incurred ₹709.57 crore under this head.
IRDAI’s examination found that the insurer had engaged individual agents of other insurers for activities described as event management, including arrangements for conferences, venues, food and beverages.
According to the regulator, invoices did not contain adequate supporting documents such as conference agendas, approvals, attendee lists, speaker details and related travel, hotel and catering bills.
Also Read: https://the420.in/irdai-icici-lombard-1-crore-penalty-outsourcing-lapses/
What Did IRDAI Find About the ₹35-37 Crore Spend?
IRDAI found that around ₹35 crore to ₹37 crore of the ₹709.57 crore expenditure was paid to individual agents of other insurers. These payments were classified under other service categories, while the underlying activities fell within the scope of outsourcing.
ICICI Lombard argued that the payments were made to service providers for legitimate event-management activities and were backed by agreements and invoices. It also maintained that the work was not intended to solicit insurance business and did not amount to commissions or rewards to agents of other insurers.
IRDAI rejected that position. It held that activities such as customer-connect programmes, seminars and public campaigns affect policyholder engagement, brand reputation and compliance communication and therefore fall within outsourcing when performed by third parties.
The regulator also identified shortcomings in vendor selection and due diligence. It said ICICI Lombard had not provided adequate documentation explaining the selection of individual agents of other insurers as service providers, raising concerns about potential conflicts of interest and whether the vendors had the necessary expertise.
What Other Lapses Did ICICI Lombard Face?
IRDAI also cited insufficient supporting documents, discrepancies between vendor addresses in agreements and invoices, and weaknesses in contractual controls, budgetary discipline and governance.
The regulator noted instances in which the number of event attendees increased substantially without documented justification, with related charges also rising. It further said the insurer had been unable to provide adequate records despite being given additional opportunities during the proceedings.
IRDAI concluded that ICICI Lombard had failed to properly classify and report outsourced activities, conduct adequate due diligence and cost-benefit analysis, and maintain sufficient vendor-management and internal-control mechanisms.
Two other charges did not result in additional monetary penalties. IRDAI noted unallocated premiums of ₹443 crore as of March 31, 2019, compared with ₹277 crore a year earlier. A separate issue concerned free-look cancellation requests, with 14 sampled cases not processed and refunded within the prescribed 15-day period.
The ₹1 crore penalty must be paid by ICICI Lombard from shareholder funds within 45 days of receiving the order. The insurer was also directed to place the order before its board, submit the minutes of the discussion within 90 days and provide an action-taken report to IRDAI.
What Do These Penalties Show?
The three orders show that insurance rules are not limited to paperwork. Banks and insurers are expected to protect policyholders through proper complaint systems, suitable product sales, clear disclosures and strong checks on vendors and agents. The penalties also underline that failures in customer protection and internal controls can lead to direct regulatory action.
About the author — Ayesha Aayat writes on cybercrime, digital safety, and emerging online threats. Her work focuses on public awareness, legal clarity, and technology-driven risks.
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