New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of Rs 1 crore on Reliance General Insurance Company for multiple violations of regulatory norms related to insurance intermediaries, outsourcing practices and corporate governance.

The action follows a remote inspection conducted between December 27 and 31, 2021, which flagged several compliance lapses. Based on the inspection findings, IRDAI issued a show-cause notice on November 29, 2024, seeking explanations from the insurer.

Reliance General Insurance submitted its responses in January 2025 and was granted a personal hearing on March 5, 2025. After reviewing the submissions, the regulator passed its final order on December 26, 2025.

According to the order, IRDAI found that the insurer had made payments in violation of existing regulations, including transactions involving related parties of insurance brokers, an individual agent associated with another insurer, unlicensed entities, and certain corporate agents.

The regulator also observed that several expenses were classified as advertising and consumer awareness programmes, but in reality qualified as outsourcing activities under prevailing rules. IRDAI said the company failed to conduct mandatory due diligence, cost-benefit analysis, conflict-of-interest assessments, and did not obtain approvals from the designated outsourcing committee in multiple instances.

In addition, some payments exceeded prescribed thresholds but were not disclosed in outsourcing returns, allowing the insurer to bypass regulatory oversight. IRDAI noted that certain payments effectively amounted to unauthorised or overriding commissions, which were shown as marketing or awareness-related expenses.

The penalty has been imposed under Section 102 of the Insurance Act, 1938, for violations of regulations governing brokers, commissions, outsourcing and corporate governance.

IRDAI has directed Reliance General Insurance to pay the penalty within 45 days of receiving the order, place the order before its board, and submit an action taken report within 90 days. The company has the option to appeal before the Securities Appellate Tribunal. IANS