The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a ₹1 crore penalty on ICICI Lombard General Insurance over lapses related to outsourcing practices, vendor management and corporate governance identified during a 2019 inspection.
The regulatory action relates to payments made by the insurer under the head “sales marketing and business support”. During FY2019, ICICI Lombard incurred ₹709.57 crore under this category, according to details cited in the order.
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₹35-37 Crore Paid to Agents of Other Insurers
Of the ₹709.57 crore expenditure, ICICI Lombard said about ₹35 crore to ₹37 crore was paid to individual agents of other insurers. IRDAI said the insurer used agents associated with other insurance companies for event management activities without adequate supporting documents. However, these activities were not classified as outsourced activities or reported in the insurer’s outsourcing returns. The regulator linked the shortcomings to outsourcing practices, vendor management and corporate governance.
IRDAI Flags Failure to Report Outsourced Activities
According to IRDAI, ICICI Lombard’s failure to classify the event management services as outsourced activities meant the related expenses were not reported through the required outsourcing returns.
“By not classifying event management services as outsourced activity, the insurer failed to report these expenses in the Outsourcing Returns thereby avoiding regulatory scrutiny in time,” IRDAI said in its September 7 order.
The regulator imposed the ₹1 crore penalty following its findings from the inspection conducted in 2019.
Penalty Follows Findings From 2019 Inspection
The case centres on the insurer’s classification and reporting of event management activities involving agents of other insurers. IRDAI said there were inadequate supporting documents for these activities and that the insurer had failed to classify them as outsourced or report them in outsourcing returns.
The ₹1 crore penalty was imposed over these lapses in outsourcing, vendor management and corporate governance.
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