IRDAI slaps ₹1 crore fine on ICICI Lombard for outsourcing violations
IRDAI’s penalty stems from an on-site inspection conducted by IRDAI in September 2019, which found that the insurer had paid ₹709.57 crore during FY2018-19 under the head “Sales Marketing and Business Support.”
IRDAI has imposed a penalty of ₹1 crore on ICICI Lombard General Insurance Co. Ltd.
DELHI – IRDAI: The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of ₹1 crore on ICICI Lombard General Insurance Co. Ltd. for violating outsourcing regulations and corporate governance norms, according to an order dated September 7, 2026.
The penalty stems from an on-site inspection conducted by IRDAI from September 16 to 27, 2019. A copy of the inspection report was forwarded to the insurer in November 2019, and the company responded in January 2020. A Show Cause Notice (SCN) was subsequently issued on July 8, 2024, followed by a Supplementary Show Cause Notice (SSCN) on December 17, 2024, after the regulator determined that the original SCN had not adequately examined non-conformity with outsourcing and corporate governance norms.
The insurer was granted personal hearings on October 9, 2024 and March 25, 2025, before a panel comprising Whole-Time Members Rajay Kumar Sinha (Member, F&I) and Deepak Sood (Member, Non-Life). ICICI Lombard’s Managing Director & CEO Sanjeev Mantri and Chief Finance Officer Gopal Balachandran were among those who attended the hearings on behalf of the company.
IRDAI: ₹709 crore spend, only part of it explained
The core finding: during FY2018-19, the insurer paid ₹709.57 crore under the head “Sales Marketing and Business Support.” A review of invoices and agreements showed the insurer had engaged individual agents of other insurance companies for event management work — including conferences, seminars, customer connect programmes, and health/motor vehicle camps — without classifying these arrangements as outsourcing under IRDAI’s 2017 outsourcing regulations.
While ICICI Lombard acknowledged paying around ₹35-37 crore to such agents, it could not explain the remaining ₹672-674 crore, IRDAI said. The regulator’s examination of ledger records, which ran into over two lakh transactions, also found on a sample basis that the insurer had paid at least ₹2.35 crore to agents of other insurers for similar event management work in FY2017-18 — indicating the practice predated the inspection year.
The order also flagged unexplained discrepancies in the underlying invoices: event attendance in some cases jumped from an originally agreed 100 people to 560, and billed amounts exceeded contracted rates by up to five times (from ₹1,000 to ₹5,000), without documented justification. The insurer attributed the attendance mismatch to unpredictable footfalls and the rate differences to events running longer than scheduled, but IRDAI said these explanations did not address the absence of contractual safeguards, prior approvals, or expense caps.
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IRDAI: Insurer’s defence and IRDAI’s rebuttal
In its defence, ICICI Lombard argued that event management is not a “core” insurance activity and therefore falls outside the definition of outsourcing, citing IRDAI’s own 2011 guidelines that classified activities as “Core” or “Non-Core.” IRDAI rejected this argument, holding that customer connect programmes, seminars and public campaigns directly affect policyholder engagement and brand reputation, and are therefore squarely within the outsourcing framework under Regulation 4(i)(e) of the 2017 regulations.
The insurer also submitted that it had strengthened internal controls, verified vendors via PAN details, and had a Vendor Management Process in place. IRDAI was not satisfied, noting that the company failed to produce supporting documentation for vendor selection even after a second personal hearing, and that address mismatches between agreements and invoices pointed to weak due diligence.
IRDAI concluded that the insurer had failed to conduct due diligence, skipped a cost-benefit analysis, and did not effectively implement a Board-approved outsourcing policy — in violation of Regulations 8(i), 10(iii), 14(iv) and (vi), 17(ii)(c) and (d), and 21 of the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, along with Clause 6 of the Guidelines for Corporate Governance for insurers in India.
Invoking Section 102 of the Insurance Act, 1938, IRDAI imposed the ₹1 crore penalty, to be remitted from shareholder funds within 45 days of the order through NEFT/RTGS, with intimation to the regulator’s Enforcement & Compliance department in Hyderabad.
IRDAI: Two more charges draw advisories
Two other charges from the same inspection resulted in advisories rather than penalties. On unallocated premiums, IRDAI found the insurer held ₹443 crore and ₹277 crore as of March 2019 and March 2018 respectively as Corporate Deposits pending allocation to policies, including roughly ₹10 crore in small proposal balances under ₹100 that remained unrefunded. On free-look cancellations, the regulator found that in a sample of 14 cases, refunds were not processed within the mandated 15-day window — an issue the insurer attributed to a technical error confined to October 2018 that has since been rectified.
ICICI Lombard has been directed to place the order before its Board at the next meeting and submit an Action Taken Report to IRDAI within 90 days. The regulator warned that any recurrence of similar lapses on the free-look cancellation front would invite stringent action. The insurer retains the right to appeal the order before the Securities Appellate Tribunal under Section 110 of the Insurance Act, 1938.
