Irdai asks insurers, distributors to form fraud risk management framework

Irdai has asked insurers and reinsurers to implement anti-fraud frameworks and cybersecurity systems by April 2026, including data sharing and blacklisting via IIB

The Insurance Regulatory & Development Authority of India (Irdai) has asked insurers, reinsurers and distributing channels to form a framework to address and manage risks emanating from fraud. The guidelines will be effective from April 1, 2026.

 

Irdai has asked insurance companies to target a zero tolerance for fraud and put in place an appropriate risk management framework. The companies are also expected to have a board approved anti-fraud policy, which includes red flag indicators, adequate procedures to deter, prevent, detect, report and remedy fraud, among others.

 

They also have to set up a fraud monitoring committee (FMC), which is responsible for operationalising the fraud risk management framework. They are also required to form a fraud monitoring unit, independent from internal audit, to support FMC in discharging its functions and effective implementation of measures suggested by FMC.

 

Irdai has also asked insurers to establish and implement robust cybersecurity framework to protect against evolving cyber frauds or threats to prevent Cyber of New Age fraud. This should also continuously monitor and strengthen systems and processes for fraud risk management, such as incident databases, customer verification, and access control.

 

Further, insurers also have to ensure that data available with insurers is effectively utilised to prevent frauds in insurance sector, all insurers shall participate in the Fraud Monitoring Technology Framework, as applicable to its businesses, made available by the Insurance Information Bureau (IIB) to help the industry combat fraud and protect policyholders and all stakeholders.

 

“All insurers shall share with IIB the details of distribution channels, hospitals, third party vendors and fraud perpetrators blacklisted, and IIB shall maintain the caution repository concerning all such details in order to safeguard the integrity of the insurance sector by preventing the involvement of those with a record of fraudulent activities,” Irdai said.

 

The IIB, in a joint consultation with Life Insurance Council and General Insurance Council, is also asked to adopt a unique identifier, procedure and timeless for reporting necessary details for caution repository to be maintained.

 

Reinsurers and distributing channels, except for individuals, have also been asked to form similar fraud risk management framework commensurate with their business size and risk profile.