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Informist, Tuesday, Jun. 24, 2025

MUMBAI – The Insurance Regulatory and Development Authority of India has imposed a penalty of INR 10 million on Edelweiss Life Insurance Co. Ltd. for certain violations of provisions of the Insurance Act, the authority said in a release on Tuesday. 

According to the release, the insurer was not capturing the bank account details of policyholders at proposal stage where premium amount exceeded INR 10,000. "The inspection team identified 230 such cases where premium refund amount is more than INR 10,000 while insurer mentioned the reason was the non-availability of details of bank account. The insurer was unable to share the information sought by the inspection team with respect to these cases," IRDAI said. 

Edelweiss Life Insurance had also paid INR 65.2 million for 2020-21 (Apr-Mar) and INR 72.2 million for the FY20 to their related parties Edelweiss Financial Service Ltd., the holding company, and Edelweiss Rural & Corporate Services Ltd., the group company. IRDAI observed that the insurer had paid the mark up of 12% on the cost allocated by the group companies to the insurer. "No explanation/justification for adding up of mark-up of 12% was rendered. Therefore, the Board/audit committee has failed to ensure that the transaction entered with the related parties are at arm's length price," the regulator said. 

Edelweiss said that the pooling of services occurs at the group level for cost optimisation purposes, and they have paid only their due share. However, the failure to properly classify and disclose payment details indicates lack of accountability and commitment to regulatory compliance in the insurer's overall approach, IRDAI said. 

Edelweiss Life paid Edelweiss Financial Services INR 15.9 million in FY20 and INR 15.9 million in FY21 under various heads. Similarly, the company paid Edelweiss Rural & Corporate Services INR 56.3 million in FY20 and INR 49.2 million in FY21 under various heads. "However, these payments were not considered as outsourcing and thus were not shown in the outsourcing return filed by the insurer...," the release said. 

Neither Edelweiss Financial Services nor Edelweiss Rural & Corporate Services are engaged predominately in the activities for which the payments have been made by the insurer, IRDAI said. "...the insurer failed to submit any documents pertaining to the approval process followed by them for engaging the services of Edelweiss Financial Services and Edelweiss Rural & Corporate Services," they said. 

Edelweiss Life also failed to submit any evidence to the effect that the mark-up in cost was an industry-wide practice. The insurer also failed to provide outsourcing policy or any other policy approved by the board to charge the marked-up cost to the shareholders.

The penalty amount should be remitted by debiting the shareholders' account within a period of forty-five days from Tuesday, IRDAI said. The order shall be placed before the board of the insurer in the upcoming board meeting and the insurer shall provide a copy of the minutes of the discussion to the authority. Edelweiss Life shall also submit an "action taken report" to IRDAI on directions given in the order within 90 days from Tuesday, IRDAI said.  End

Reported by Kabir Sharma

Edited by Akul Nishant Akhoury

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