IRDAI Slaps Rs 1 Crore Penalty on IndusInd Bank Over Grievance Redressal Failures
IRDAI fined IndusInd Bank Rs 1 crore for grievance redressal lapses, ordering it to strengthen its mechanism and report back in 90 days.
IRDAI fines IndusInd Bank Rs 1 crore for failing to set up a dedicated insurance grievance mechanism.
IRDAI: The Insurance Regulatory and Development Authority of India (IRDAI) on September 10 imposed a penalty of Rs 1 crore on IndusInd Bank, following enforcement proceedings into lapses in the bank’s grievance redressal mechanism for insurance policyholders, along with deficiencies in renewal notices and disclosures to the Authority and on the Corporate Agent’s website. The action stems from an onsite inspection conducted in June 2023.
The order was passed after IRDAI’s Competent Authority considered the findings of the inspection, submissions made by the bank, and a personal hearing conducted before a panel of two Whole-time Members. The proceedings established violations relating to renewal notices, the grievance redressal mechanism for insurance policyholders, disclosures to the Authority, and disclosures on the Corporate Agent’s website.
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IRDAI: Generic Banking Channels Used Instead of Insurance-Specific Grievance Systems
On examining the case, IRDAI found that IndusInd Bank had failed to establish a dedicated, policyholder-facing grievance redressal framework for its insurance distribution business. The bank was found to be improperly relying on generic banking mechanisms rather than providing insurance-specific IVR or website channels for policyholders to raise grievances.
The order also noted a deficiency uncovered during the enforcement process itself. After the bank had promised compliance, it submitted representations along with screenshots of a grievance portal. IRDAI carried out a test verification of the portal and found it to be non-functional, with the portal failing to generate complaint acknowledgements.
IRDAI: Bank Directed to Strengthen Grievance Framework and Submit Action Taken Report
After considering the facts and the bank’s submissions, IRDAI imposed the Rs 1 crore penalty under Section 102 of the Insurance Act, 1938, citing violation of Regulation 20(1) of the IRDAI (Registration of Corporate Agents) Regulations, 2015.
Beyond the monetary penalty, the Competent Authority directed IndusInd Bank to strengthen its grievance redressal mechanism. The bank has also been directed to place the order before its Board and to submit an Action Taken Report (ATR) to the Authority within 90 days from the date of the order.
In addition to the penalty and directions, IRDAI issued cautions and advisories concerning other compliance deficiencies identified during the inspection, including gaps in renewal notices, disclosure of regulatory actions to the Authority, and prescribed disclosures on the Corporate Agent’s website regarding its registration and role as an insurance intermediary.
In its press release, IRDAI said it remains committed to ensuring policyholder protection, transparency, accountability and compliance with the regulatory framework across the insurance sector, and that it will continue to take appropriate supervisory and enforcement action wherever regulatory violations are observed.
