NewsStocksIRDAI Imposes ₹1 Crore Penalty on Reliance General Insurance for Regulatory ViolationsIRDAI Imposes ₹1 Crore Penalty on Reliance General Insurance for Regulatory Violations
The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a ₹1 crore penalty on Reliance General Insurance Company for violating regulatory provisions. The violations include improper payments to insurance intermediaries, non-compliance with outsourcing regulations, and corporate governance issues. IRDAI's remote inspection revealed multiple instances of non-compliance, including payments to related parties of insurance brokers, unlicensed entities, and improper classification of outsourcing activities. The company has been directed to pay the penalty within 45 days, place the order before its board, and submit an action taken report within 90 days.
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The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of ₹1 crore on Reliance General Insurance Company for violations of regulatory provisions related to insurance intermediaries, outsourcing activities, and corporate governance norms. The penalty follows a comprehensive remote inspection that revealed multiple instances of non-compliance with established regulatory requirements.
Inspection and Regulatory Action
IRDAI conducted a remote inspection between December 27 and 31, 2021. Based on the findings, the regulator issued a show-cause notice to the insurer. The company submitted its responses and participated in a personal hearing before IRDAI issued its final order.
Key Violations Identified
The inspection revealed multiple instances where payments made by the insurer were not in compliance with regulatory requirements. The violations encompassed several categories of improper payments and procedural lapses.
| Violation Category | Details |
|---|---|
| Improper Payments | Payments to related parties of insurance brokers |
| Agent Violations | Payments to individual insurance agent associated with another insurer |
| Unlicensed Activities | Payments made to unlicensed entity |
| Corporate Agent Issues | Improper payments to certain corporate agents |
Outsourcing and Compliance Failures
IRDAI found that the insurer classified several activities as advertising and consumer awareness programmes, while the regulator concluded that these activities fell within the scope of outsourcing under applicable regulations. The authority observed significant procedural failures in the company's outsourcing practices, including:
- Failure to undertake required due diligence
- Lack of cost-benefit analysis
- Absence of conflict-of-interest checks
- Missing approvals by the outsourcing committee
Additionally, some payments were not reported under outsourcing returns despite exceeding prescribed thresholds, thereby avoiding regulatory scrutiny. The authority concluded that certain payouts amounted to unauthorised or overriding commissions disguised as marketing or awareness activities.
Regulatory Framework and Compliance Requirements
The penalty has been imposed under Section 102 of the Insurance Act, 1938, for violations of multiple regulatory frameworks, including:
- IRDAI (Insurance Brokers) Regulations, 2018
- IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Intermediaries) Regulations, 2016
- IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017
- Guidelines on Corporate Governance for Insurers
Compliance Directives
IRDAI has directed Reliance General Insurance to:
- Remit the penalty within 45 days from receipt of the order
- Place the order before its board
- Submit an action taken report within 90 days
The insurer retains the option to appeal the order before the Securities Appellate Tribunal under the Insurance Act, providing a legal recourse mechanism for challenging the regulatory decision.
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