The Insurance Regulatory and Development Authority of India has imposed a penalty of Rs 1 crore on IndusInd Bank for alleged violations of norms governing corporate agents. According to the sector regulator, the lender failed to establish a dedicated and functional grievance redressal mechanism for insurance policyholders, choosing instead to handle customer complaints through its general banking grievance system rather than an insurance-specific platform.
Deficiencies Uncovered During On-Site Inspection
Under regulatory guidelines, entities acting as corporate agents must provide policyholders with dedicated avenues to register and resolve insurance-related complaints. These requirements mandate insurance-specific channels, such as an Interactive Voice Response system or a specialized portal on the corporate agent’s official website.
The lapses came to light during an on-site inspection carried out by the insurance regulator in June 2023. While the bank offered assurances during the inspection and subsequent enforcement proceedings that it would rectify the gaps, regulatory verification revealed otherwise. Although IndusInd Bank submitted details and screenshots of a grievance redressal portal to substantiate its corrective actions, regulatory testing determined that the system was non-functional and failed to generate acknowledgments upon complaint submissions.
Statutory Violations and Additional Cautions
Taking note of these shortcomings, the regulator ruled that the inability to maintain an effective redressal infrastructure breached regulatory provisions applicable to corporate agents. Consequently, it invoked Section 102 of the Insurance Act, 1938, levying a Rs 1 crore fine for the violation of Regulation 20(1) of the IRDAI (Registration of Corporate Agents) Regulations, 2015.
Beyond the monetary penalty, the proceedings highlighted several other compliance deficiencies. The authority issued cautions and advisories regarding lapses in insurance renewal notices, the failure to report regulatory actions, and non-compliance with disclosure mandates on the bank’s portal regarding its role and registration as an insurance intermediary.
Emphasis on Verification and Transparency
Corporate agents are legally required to publish detailed information on their websites regarding their intermediary status, ensuring policyholders understand the institution’s role in distributing policies and know how to seek redress.
The enforcement action underscores that regulatory compliance extends beyond procedural filings or verbal assurances. The regulatory authority actively verified the operational status of the platform submitted by the bank, concluding that the practical failure of the tool warranted statutory action along with formal advisories to ensure future adherence.
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