The action comes after a remote inspection carried out by Insurance Regulatory and Development Authority of India between December 27 and December 31, 2021.
Based on the findings of this inspection, the regulator issued a show-cause notice to the insurer on November 29, 2024, seeking an explanation for the irregularities observed.
Reliance General Insurance submitted its replies in January 2025 and also presented its case during a personal hearing held on March 5, 2025.
After examining the responses, the regulator passed its final order on December 26, 2025.
In the order, IRDAI said the inspection revealed several instances where payments made by the insurer did not follow regulatory rules.
These included payments made to related parties of insurance brokers, an individual insurance agent linked to another insurer, an unlicensed entity, and some corporate agents.
Reliance General Insurance was yet to respond to IRDAI penalty.
The regulator also noted that the company had shown certain activities as advertising and consumer awareness programmes.
However, IRDAI concluded that these activities actually fell under outsourcing as per existing regulations.
It observed that the insurer failed to carry out mandatory due diligence, cost-benefit analysis, conflict-of-interest checks and approvals from the outsourcing committee in multiple cases.
IRDAI further pointed out that some payments crossed the prescribed limits but were not reported in outsourcing returns.
This, according to the regulator, helped the company avoid regulatory scrutiny. The authority said that some of these payments effectively amounted to unauthorised or overriding commissions that were presented as marketing or awareness expenses.
The penalty has been imposed under Section 102 of the Insurance Act, 1938, for violations of multiple regulations and guidelines governing brokers, commissions, outsourcing and corporate governance.
IRDAI has directed Reliance General Insurance to pay the penalty within 45 days of receiving the order.
The company has also been asked to place the order before its board and submit an action taken report within 90 days.
The insurer has the option to challenge the order before the Securities Appellate Tribunal under the Insurance Act.
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