Outsourcing Governance Under the 2024 IRDAI Operations Regulations: What Indian Insurers Can and Cannot Hand Off

For most of the last decade, an insurer's outsourcing decisions were governed by the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, a prescriptive rulebook that listed permitted and prohibited activities in detail. That standalone instrument no longer stands on its own. The IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 consolidated and replaced it, pulling outsourcing into a single operations-focused framework alongside policyholder-protection and allied-matter requirements.

The consolidation is not a cosmetic renaming. The 2024 framework marks a shift away from the prescriptive style of the 2017 regime toward a more principle-based outsourcing model. Instead of leaning on a long enumerated list of do's and don'ts, the new approach sets the boundary of what cannot be handed off and then places the responsibility on the insurer's board to design controls that keep outsourced work safe.

For a chief operating officer reading the change, the practical message is that the regulator has moved the burden of judgement onto the insurer. Where the old rules told you what to do, the new ones tell you what outcomes to protect and expect you to build the governance that gets there. That is a heavier accountability, not a lighter one.

The clearest part of the 2024 framework is the bright line it draws around core decision-making. The regulations prohibit outsourcing the decision-making on four functions:

1. Product design.
2. Actuarial functions.
3. Enterprise-wide risk management.
4. Policyholders' grievance redressal.

The distinction that matters is between the decision and the procedure. The framework permits procedural aspects to be outsourced while reserving the underlying decision to the insurer. A vendor may run the workflow, capture data or operate a system that supports actuarial work or grievance handling, but the judgement that shapes a product, signs off a reserving assumption, sets risk appetite or resolves a policyholder complaint must remain with the insurer's own people.

For brokers, this line is reassuring. The functions that touch policyholder outcomes most directly, product, pricing discipline, risk control and complaint resolution, are the ones the regulator insists the insurer owns. A broker placing a client's programme can take comfort that the insurer cannot delegate away the judgement behind the cover.

The 2024 framework puts accountability for outsourcing squarely on the board. An insurer's board must do five things rather than treat outsourcing as an operational afterthought:

• Put in place an outsourcing policy that governs how and what the insurer outsources.
• Constitute an outsourcing committee to oversee arrangements.
• Review outsourced activities at least annually.
• Establish internal controls around outsourced work.
• Provide IRDAI inspection access to outsourcing arrangements.

Why the annual review is the load-bearing requirement

Of these, the annual review is where governance either works or quietly fails. A policy and a committee can exist on paper, but the annual review is the moment the board has to look at every material arrangement, confirm the vendor is still performing, check that no prohibited decision-making has drifted into the contract over the year, and decide whether to continue, renegotiate or exit. An insurer that treats the review as a formality is the one that discovers a control gap only when a regulator does.

The inspection-access requirement reinforces the point. Because IRDAI can examine outsourcing arrangements directly, the insurer cannot hide a weak control behind a vendor boundary. The arrangement, the contract and the oversight trail all have to stand up to inspection.

Brokers are not the regulated party here, but they live downstream of an insurer's outsourcing choices. Policy issuance, endorsement processing, claims intimation desks, document management and parts of customer servicing are routinely run by third parties. When those functions stutter, the broker feels it first because the client calls the broker, not the insurer's vendor.

The 2024 framework gives a broker a sharper set of questions to ask. When service from an insurer degrades, the broker can reasonably ask whether the function is outsourced, whether the insurer's outsourcing committee is reviewing the vendor's performance, and whether the decision the broker needs (a coverage call, a grievance resolution) is being made by the insurer rather than a vendor that is not allowed to make it.

The practical takeaway for a broker's operations team is to map, for each insurer it works with, which servicing touchpoints are outsourced and where the insurer's own decision-makers sit, so escalation goes to the right place the first time.

Whether you sit on the insurer side or advise from the broker side, the durable lesson of the 2024 regime is documentation discipline. A principle-based regime rewards an institution that can show its reasoning and penalises one that cannot.

For an insurer, a defensible outsourcing file holds the board-approved outsourcing policy, the constitution and minutes of the outsourcing committee, a register of every material arrangement, the contracts with their decision-authority and inspection-access clauses, the evidence of the latest annual review, and the internal-control documentation for each outsourced function. Each piece answers a question an inspector will ask: what is your policy, who oversees it, what have you outsourced, what does the contract say about decision rights and access, and when did you last check.

The contracts deserve particular care, because the prohibited line lives or dies in the wording. A contract that lets a vendor handle procedural aspects of actuarial or grievance work is fine; one that lets it make the decision is not, and that difference often comes down to a single clause. Reading those clauses precisely, and comparing them across vendors and against the regulation, is exactly the kind of wording-level work that decides whether an arrangement is compliant.

Sarvada gives commercial insurance brokers structured, searchable access to insurer policy wordings and the intelligence around them, so the people advising on and relying upon outsourced insurer functions can ground their reading in the actual contractual and regulatory detail rather than assumption. Request Access to build that wording-level discipline into how you assess insurer arrangements.