Fraud monitoring guidelines for insurers to come into force on April 1

A set of guidelines as part of an updated insurance fraud monitoring framework for all insurers and distribution channels, including a board approved anti-fraud policy, will come into force on April 1, 2026.

The framework seeks to deter, prevent, detect, report and remedy fraud risks across the insurance industry, insurance regulator IRDAI said on the (Insurance Fraud Monitoring Framework) Guidelines, 2025, which will repeal the 2013 Insurance Fraud Monitoring Framework.

With zero tolerance to fraud as the principle, every insurer must have a fraud risk management framework specific to the nature of business, size, risk profile, overall business strategy, products, distributions channels and technology infrastructure.

Red flag indicators

Based on the lines of business, activities, past experience and trends, insurers ought to identify red flag indicators for detection of frauds and incorporate them appropriately in their operations.

Mooting a Board-approved anti-fraud policy as a measure to rein in fraud, IRDAI said such a policy should be relevant to the entire operations of the insurer’s business and activities and reviewed at least annually. From anti-fraud procedures; fraud investigation process, including internal turnaround times from identification to remedy; mechanism for appropriate action in case of non-compliance to the fraud risk; appropriate and adequate resources to the fraud monitoring unit; to due diligence procedures for staff recruitment and vendor engagement, the review will cover different aspects.

Classifying the frauds under various categories, from internal or those involving staff,; distribution channel; as well as policyholder fraud and/or claims fraud, IRDAI said the Risk Management Committee of the insurer will be responsible for effective implementation and oversight of the framework.

The insurer, as part of the framework, will have to establish a fraud monitoring committee and a fraud monitoring unit, with the latter independent from internal audit and for extending support to the committee. IRDAI also wants the insurer to establish and implement a robust cybersecurity framework to protect against evolving cyber frauds or threats.

The fraud monitoring framework also has sections pertaining to reinsurance and insurance distribution channel businesses.