Selling insurance but not handling customer grievances:
IRDAI fines IndusInd Bank Rs 1 crore; here's what policyholders should know
Sep 11, 2026
Synopsis
IndusInd Bank faces a Rs 1 crore penalty from IRDAI for failing to provide an adequate, insurance-specific grievance redressal mechanism for policyholders. Despite claims of an overall system, the regulator found a lack of dedicated channels and inadequate information, highlighting a crucial distinction between banking and insurance customer service.
If you buy an insurance policy through a bank, you may assume that the bank's complaint channels will also handle insurance-related issues. But the Insurance Regulatory and Development Authority of India (IRDAI) has made it clear that a corporate agent must have an appropriate mechanism specifically accessible to insurance policyholders.
Very recently, IRDAI imposed a Rs 1-crore penalty on IndusInd Bank, acting as a corporate agent, after finding out that it lacked an adequate insurance-specific grievance redressal mechanism.
The order, dated September 10, 2026, also records other lapses relating to renewal notices, regulatory disclosures and the bank's website. However, these observations resulted in caution and advisory rather than a monetary penalty.
Why did IRDAI impose a Rs 1 crore penalty on IndusInd Bank?
During its onsite inspection in June 2023, IRDAI found that the bank did not have a dedicated mechanism through which insurance policyholders could lodge complaints. The grievance policy displayed on the bank's website was primarily designed for banking customers and did not clearly set out the insurance-related complaint and escalation framework.
The bank argued that it had an overall grievance redressal mechanism covering its products, including insurance, and that insurance complaints were tracked through its customer relationship management system.
IRDAI, however, said a general banking customer-service system was not a substitute for an insurance-specific, policyholder-facing mechanism through which customers could identify where and how to raise an insurance complaint.
What was wrong with the bank's insurance complaint process?
The regulator found that the bank's toll-free number and IVR system did not provide an option for policyholders to lodge insurance-related grievances.
It also found that the bank had not provided adequate insurance-specific grievance information on its website.
The issue continued even after the bank told IRDAI that it had introduced an enhanced mechanism. When the regulator tested the complaint portal, no acknowledgement number, SMS, or email was generated after a complaint was lodged.
IRDAI treated this as a serious concern because the bank had told the regulator in its representation that a revised mechanism was functional.
What did IRDAI direct IndusInd Bank to do?
Along with the Rs 1 crore penalty, IRDAI directed the bank to revisit and strengthen its grievance redressal mechanism.
A key requirement is that every insurance complaint lodged by a policyholder or complainant should immediately generate and issue an acknowledgement number.
This is important for policyholders because an acknowledgement or reference number creates a record of when the complaint was lodged and allows the customer to track its progress and pursue escalation if necessary.
What other lapses did IRDAI find?
The regulator identified other compliance issues, but these did not attract a financial penalty.
Renewal notices did not contain all required information
IRDAI found that the bank was sending renewal reminders to customers through SMS, but these did not contain all the information required under the post-sale code of conduct.
In particular, the SMS did not clearly remind policyholders of their duty to disclose changes affecting the policy since inception or the previous renewal. It also did not advise customers to retain records and correspondence relating to the renewal.
The regulator cautioned the bank and advised it to ensure continued compliance. The bank also hadn’t properly disclosed its role as a corporate agent
IRDAI found that the bank's website did not adequately display its IRDAI corporate-agent registration number and did not prominently disclose that it does not underwrite insurance risk or act as the insurer.
The regulator said customers accessing the website should be able to understand the bank's role as an insurance intermediary and know the life and general insurers with which it had arrangements to solicit, procure and service insurance products. This charge resulted in a caution and advisory rather than a financial penalty.
What does the IRDAI order mean for insurance policyholders?
The key takeaway is that a bank selling an insurance policy is not merely a point of sale. As a corporate agent, it has separate responsibilities towards insurance policyholders, including having an accessible mechanism for handling insurance-related grievances.
The IRDAI order is significant from a policyholder-protection perspective because it reinforces that insurance sales cannot be treated as a mere documentation exercise. Under the IRDAI’s policyholder-protection framework, insurers and relevant distribution channels are required to ensure that the solicitation process is transparent, that the customer is provided sufficient information to make an informed decision, and that reasonable care is taken to ensure product suitability, explains Tejaswi Dudeja, Senior Associate, SKV Law Offices.
If you have bought insurance through a bank and need to raise a complaint, make sure to use the appropriate insurance grievance channel and retain the acknowledgement or reference number. Keep copies of your policy documents, premium receipts and correspondence so that you have a clear record if the matter needs to be escalated.
[The Economic Times]
