Page 11 - The Insurance Times February 2026

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Update

IRDAI fines Reliance Gen- Insurers seek clarity from IRDAI on director overlap
eral Insurance Rs 1 crore restrictions
over disguised commis- Insurance companies, through industry bodies such as the Life Insurance

sions Council and the General Insurance Council, have approached the Insurance
Regulatory and Development Authority of India seeking clarity on new pro-
The Insurance Regulatory and Develop- visions restricting common directorships across financial entities.
ment Authority of India (IRDAI) has
imposed a penalty of Rs 1 crore on The provision, introduced through recent amendments to insurance laws,
bars a director or officer of an insurance company from simultaneously hold-
Reliance General Insurance for routing
unauthorised payouts in the guise of ing a similar position in another insurer in the same line of business, a bank,
or an investment company. Industry representatives argue that the clause
marketing and consumer awareness could significantly affect bank-promoted insurers, where several directors cur-
expenses, effectively amounting to dis-
rently serve on both the bank and insurance company boards.
guised commissions. The order was is-
sued following the regulator's examina- According to sources, the councils wrote to the regulator around two weeks
ago, requesting interpretational guidance to ensure compliance. While the
tion of the insurer's transactions span-
restriction originates from government-led legislative changes, insurers be-
ning FY2019 to FY2021.
lieve the regulator's clarification is essential, particularly on transitional ar-
According to IRDAI, the insurer chan- rangements and applicability to existing board structures.
nelled payments to insurance brokers,
The industry maintains that it supports stronger governance and conflict-of-
agents, corporate agents and even
interest safeguards but has sought clarity to avoid unintended disruptions.
unlicensed entities under heads such
The regulator may, in turn, consult the government on interpretative as-
as consumer awareness, marketing
pects of the provision before issuing guidance to insurers.
and advertising. These expenses, the
regulator found, were not genuine
promotional spends but mechanisms penses, insurers risk distorting compe- IRDAI gains sharper pow-
to bypass commission-related regula- tition and encouraging mis-selling.
tions. ers to curb mis-selling
The penalty underscores IRDAI's tight-
The watchdog observed that such prac- ening scrutiny of expense practices through commission rules
tices undermine transparency in insur- amid broader efforts to rein in high The Insurance Regulatory and Develop-
ance distribution and violate the intent acquisition costs and improve gover- ment Authority of India (IRDAI) is set
of commission and expense manage- nance standards in the insurance sec- to tighten norms aimed at preventing
ment norms laid down under the Insur- tor, particularly at a time when mis-selling, following expanded powers
ance Act and IRDAI regulations. By affordability and fair conduct are cen- granted under the Sabka Bima Sabki
masking commissions as marketing ex- tral to the "Insurance for All" agenda. Raksha (Amendment of Insurance

10 February 2026 The Insurance Times