In an order, IRDAI's whole-time member (WTM) for non-life, Deepak Sood, and Rajay Kumar Sinha for finance & investment, said, "...the insurer has not been able to establish the genuineness of the payments made for sales marketing and business support, including those made to individual agents of other insurers for event management services. The insurer’s failure to report the payments for outsourced financial commitments violates disclosure and compliance requirements. It is also concluded that the insurer did not undertake due diligence or cost-benefit analysis. The absence of a board-approved vendors' management policy for selecting third-party vendors and evaluating non-outsourcing activities, coupled with weak internal controls, creates significant operational and governance gaps.
The action follows an on-site inspection of the insurer conducted between 16th and 27 September 2019. IRDAI had subsequently issued a show-cause notice (SCN) in July 2024 and a supplementary SCN in December 2024. The insurer made submissions and was given personal hearings in October 2024 and March 2025 before the matter was decided.
The principal issue related to payments made under the head ‘sales marketing and business support’. During FY18-19, ICICI Lombard had incurred ₹709.57 crore under this head. IRDAI's examination of a sample of invoices and agreements found that the insurer had engaged individual agents of other insurers for activities described as event management, including arrangements for conferences, venues, food and beverages. Several invoices did not have adequate supporting documents such as conference agendas, approvals, attendee lists, details of speakers and related travel, hotel and catering bills.
According to IRDAI, payments of around ₹35 crore-₹37 crore out of the ₹709.57 crore were made to individual agents of other insurers. The regulator said the insurer had classified these payments under other service categories, while the underlying activities fell within the scope of outsourcing. This meant that the expenses were not appropriately reported in outsourcing returns.
The insurer argued that the payments were made to service-providers for legitimate event management activities and were supported by agreements and invoices. It also maintained that these activities were not intended to solicit insurance business and, therefore, did not constitute payment of commission, remuneration or reward to agents of other insurers. The company further contended that event management was not a core activity normally undertaken by insurers and therefore fell outside the scope of the outsourcing regulations.
IRDAI rejected this contention. It held that activities such as customer-connect programmes, seminars and public campaigns affect policyholder engagement, brand reputation and compliance communication and, therefore, fall within the definition of outsourcing when performed by a third party. The regulator also said that the fact that an activity was non-core or involved specialised logistical capabilities did not exempt it from outsourcing-related compliance requirements.
The regulator also found deficiencies in vendor selection and due diligence. ICICI Lombard failed to provide adequate documentation explaining the selection of individual agents of other insurers as service-providers. IRDAI said this raised concerns about potential conflicts of interest and whether such vendors had the necessary expertise to provide event management services.
The absence of adequate supporting documents was another concern. IRDAI said invoices alone were insufficient to establish compliance, as the regulator required documentary evidence to verify the nature, scope and actual delivery of the services. The regulator also noted discrepancies between vendor addresses appearing in agreements and invoices and said that relying solely on PAN verification did not adequately address deficiencies in vendor due diligence.
The order also highlighted instances in which the number of event attendees increased from 100 to 560 without documented justification and in which agreed rates increased substantially. In one instance cited by IRDAI, a rate of ₹1,000 was increased to ₹5,000. The regulator said such deviations, without appropriate justification and supporting documentation, reflected weaknesses in contractual controls, budgetary discipline and governance.
IRDAI further observed that the insurer had been unable to provide adequate records, despite being given additional opportunities during the proceedings. The regulator pointed out that outsourcing-related records must be retained for five years after the end of the outsourcing contract and rejected the insurer's explanation that employee attrition, management changes and loss of IT assets had made it difficult to retrieve older records.
Based on these findings, IRDAI concluded that ICICI Lombard had failed to properly classify and report outsourced activities, conduct adequate due diligence and cost-benefit analyses and maintain sufficient vendor management and internal control mechanisms.
The order also dealt with two other charges, although no additional monetary penalty was imposed. IRDAI observed that ICICI Lombard had unallocated premiums of ₹443 crore as of 31 March 2019, compared with ₹277 crore a year earlier. In sample cases, around ₹10 crore had not been allocated, while small proposal balances of less than ₹100 were pending for refund. The regulator advised the insurer to ensure compliance with the applicable regulations and master circulars.
A separate charge concerned free-look cancellation requests. In 14 sampled cases, requests were not processed and refunded within the prescribed 15-day period. The insurer attributed 11 cases to a technical error and said the issue was confined to October 2018 and had subsequently been rectified. IRDAI took the submissions on record but warned that recurrence of similar lapses would invite stringent regulatory action.
The ₹1 crore penalty is to be paid by ICICI Lombard by debiting shareholder funds within 45 days of receipt of the order. The insurer has also been directed to place the order before its board, submit the minutes of the discussion and submit, within 90 days, an action taken report to IRDAI.
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