IRDAI Creates Rs. 800 Crore Fund to Strengthen Policyholder Awareness
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed the creation of a dedicated Policyholders’ Education and Protection Fund (PEPF) with an initial corpus of Rs. 800 crore to improve insurance awareness and strengthen consumer protection.
The initiative comes amid concerns over rising unclaimed insurance amounts, including maturity proceeds, death claims and surrender values. As of April 2025, unclaimed funds held by insurers had crossed Rs. 9,305 crore, highlighting the need for greater policyholder awareness and outreach.
Through a consultation paper, IRDAI has proposed establishing a structured framework for policyholder education activities through the new fund. The proposed mechanism aims to create a more organised approach towards awareness campaigns, consumer education and protection initiatives.
The regulator believes that stronger awareness among customers can help improve understanding of insurance products, reduce disputes and encourage informed decision-making. The proposed fund is expected to become an important pillar in strengthening policyholder confidence and improving participation in the insurance ecosystem.
Rise in Early Policy Exits Raises Concerns Over Life Insurance Mis-Selling
The Reserve Bank of India’s Financial Stability Report has highlighted concerns over increasing early exits from life insurance policies, with surrender and withdrawal payments surpassing maturity benefits. The trend indicates possible policyholder dissatisfaction and raises concerns regarding product suitability and mis-selling practices.
According to the report, total benefits paid by life insurers increased to Rs. 7.3 lakh crore in FY26 from around Rs. 5 lakh crore in FY22. However, the composition of these payouts showed a significant rise in surrenders and withdrawals, which accounted for nearly 38.3% of total benefits, exceeding maturity payouts of 36.9%.
The RBI noted that frequent policy exits can affect insurers’ asset-liability management by disrupting long-term investment assumptions. High surrender levels may also indicate issues related to unsuitable product sales or changing customer preferences.
The report highlighted that rising distribution costs among private life insurers could further increase the risk of acquisition-driven mis-selling. IRDAI is working on distribution reforms, including better benefit illustrations and improved product suitability measures, to address these concerns.
IRDAI Flags Data Collection Practices as Dark Patterns in Insurance Sales
IRDAI Chairman Ajay Seth has raised concerns over insurers seeking excessive personal information from customers before allowing access to product details or premium quotations, describing such practices as potential “dark patterns”.
Dark patterns refer to digital practices that influence users into sharing information or making decisions they may not have otherwise taken. According to Seth, customers should be able to compare insurance products, pricing and benefits without being forced to provide unnecessary personal details.
IRDAI has commissioned a study through a public policy institute to identify and monitor the use of such practices by insurers over a nine-month period. The regulator has also sought information from insurance companies regarding their compliance with norms related to avoiding dark patterns.
Seth emphasised the need to expand insurance coverage among the “missing middle” and suggested that insurance penetration should be measured by the number of people covered rather than only premium contribution to GDP.
The regulator is also working on distribution reforms aimed at improving product suitability and ensuring stronger customer protection.
Bima Sugam Expected to Launch Insurance Products by September-End
The Insurance Regulatory and Development Authority of India (IRDAI) expects insurance products to become available on the Bima Sugam digital platform by the end of September, according to Chairman Ajay Seth.
Bima Sugam is designed as a unified digital marketplace connecting insurers, distributors and policyholders. The platform aims to allow customers to compare, purchase, service and manage insurance policies through a single digital interface.
Although the project has experienced delays, IRDAI expects product integration to be completed by September-end. The regulator is also preparing a consultation paper on distribution reforms, which is likely to be released by the end of July.
Seth highlighted that the insurance sector has significant growth potential and needs to expand beyond metropolitan markets by focusing on Tier-II, Tier-III cities and rural areas. Greater trust, improved governance and customer-centric products will be important for future growth.
He also stated that insurers should consider public listings based on genuine capital requirements rather than transparency alone. Additionally, he emphasised linking a portion of key managerial personnel remuneration with product performance, claim settlement and grievance handling outcomes.
RBI Flags Rising Commission Costs and Mis-Selling Risks in Insurance Sector
The Reserve Bank of India (RBI) has raised concerns over increasing commission payouts by private insurers, stating that higher distribution expenses could increase the risk of mis-selling in the insurance sector.
According to the latest Financial Stability Report, private insurers have shown a sharper increase in commission expenses compared with public sector insurers. While public insurers have maintained relatively controlled growth in commissions, private players have adopted more aggressive commission strategies.
In the life insurance segment, the commission ratio of private insurers nearly doubled between FY22 and FY26, even as their operating expense ratio remained broadly stable. The RBI noted that rising distribution costs have grown faster than premium expansion, putting pressure on margins and increasing the possibility of sales driven by acquisition costs rather than customer suitability.
In the general insurance segment, public sector insurers continue to operate with a higher but stable expense base, while private insurers have recorded a significant rise in commission expenses.
The RBI stated that high distribution costs across the industry are affecting underwriting margins, which remain under pressure.
IRDAI has also been focusing on controlling expenses and improving customer outcomes. Recently, the regulator linked variable pay and incentives of CEOs, managing directors and key management personnel with policyholder outcomes, claims performance and customer satisfaction.
The regulator is also expected to introduce reforms to rationalise commission structures following changes brought through amendments to insurance laws.
IRDAI Introduces Reforms to Strengthen Insurance Growth and Policyholder Protection
The Insurance Regulatory and Development Authority of India (IRDAI) has approved a series of reforms aimed at improving governance, increasing operational flexibility and strengthening policyholder protection across the insurance sector.
The measures are designed to support implementation of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, while creating a more supportive regulatory framework for insurers.
The reforms include amendments relating to actuarial functions, finance and investment activities, as well as changes in registration, capital structure, share transfers and mergers of insurance companies.
According to IRDAI, the revised framework will provide insurers with greater flexibility in investments, facilitate capital infusion, simplify restructuring processes and strengthen financial governance. The regulator stated that these changes aim to improve ease of doing business while maintaining policyholder protection.
A major initiative approved by IRDAI is the Policyholders’ Education and Protection Fund Regulations, 2026. The fund will support insurance awareness programmes, improve grievance redressal systems, use technology for better customer services and assist in tracing unclaimed insurance amounts.
The regulator believes these reforms will enhance transparency, strengthen consumer confidence and support sustainable growth of the insurance industry.
IRDAI Grants Licence to ProTec General Insurance, Fourth Approval in 2026
The Insurance Regulatory and Development Authority of India (IRDAI) has granted a certificate of registration to ProTec General Insurance, allowing the company to commence general insurance operations in India.
The new insurer is a joint venture between the M Pallonji Group and True North’s Divya Sehgal. The approval marks the fourth insurance licence issued by IRDAI during 2026.
IRDAI stated that the company has been approved to undertake general insurance business under the applicable regulatory framework. Earlier in the year, the regulator granted licences to Kiwi General Insurance, Prudential HCL Health Insurance and Allianz Jio Reinsurance.
The regulator said the increasing number of approvals reflects strong investor interest in India’s insurance sector and the impact of reforms introduced through the Sabka Bima Sabki Raksha Act.
Following the government’s decision to permit 100% foreign direct investment in insurance, IRDAI noted that one life insurer and one general insurer have already increased foreign ownership beyond the earlier 74% limit to full ownership.
The entry of new insurers is expected to increase competition, encourage innovation and support expansion of insurance coverage in India.
IRDAI Approves Patanjali-Led Acquisition of Magma General Insurance
The Insurance Regulatory and Development Authority of India (IRDAI) has approved the acquisition of Magma General Insurance by Patanjali Ayurved and DS Group, clearing the final regulatory requirement for the proposed transaction.
The approval will allow Patanjali Ayurved, known for its consumer products and wellness businesses, to enter India’s insurance sector by becoming the promoter of the general insurance company. The deal is valued at nearly Rs. 4,500 crore.
Under the transaction, Patanjali Ayurved will acquire a 73.6% stake in Magma General Insurance, while DS Group will acquire a 24.5% stake. The shares are being purchased from Sanoti Properties, owned by Adar Poonawalla, along with other existing shareholders.
Following completion of the transaction, Patanjali is expected to support the insurer’s expansion plans through additional capital infusion, while DS Group will participate as a strategic investor.
The acquisition marks Patanjali’s entry into financial services and reflects growing interest from established consumer businesses in India’s expanding insurance market. The development is expected to increase competition and bring new approaches to insurance distribution and customer outreach.
ProTec Receives Insurance Licence as IRDAI Approves Regulatory Reforms
The Insurance Regulatory and Development Authority of India (IRDAI) has granted a certificate of registration to ProTec General Insurance, making it the fourth insurance company to receive regulatory approval in 2026.
The approval allows ProTec General Insurance to undertake general insurance business under the existing regulatory framework. With this addition, the licences issued during the year include two general insurers, one health insurer and one reinsurer.
Along with the licence approval, IRDAI has approved a series of regulatory amendments covering areas such as investment norms, capital infusion, insurer registration, share transfers, mergers and policyholder protection.
The decisions were taken during the regulator’s board meeting held in Hyderabad on July 28. The amendments to actuarial, finance and investment regulations are aimed at providing insurers with greater flexibility while strengthening governance standards.
IRDAI said the reforms are intended to support implementation of recent insurance law changes, improve ease of doing business and create a stronger regulatory framework for the growing insurance sector.
IRDAI Chairman Emphasises Affordable and Transparent Insurance for All
IRDAI Chairman Ajay Seth has highlighted that achieving the goal of “Insurance for All” requires products that are accessible, affordable and suitable for different sections of society.
Speaking at an event organised by the Insurance Brokers Association of India, Seth said insurance products must be designed according to the needs and financial capacity of customers across different regions and income groups.
He stressed the importance of transparency and informed consent, stating that customers should have complete understanding of insurance products before making purchase decisions.
According to Seth, improving insurance penetration requires the right incentives linked with quality of sales rather than only focusing on business volumes. He suggested that distribution practices should encourage responsible selling and better customer outcomes.
The IRDAI chairman also emphasised that transparency can address several challenges faced by the industry, including customer trust issues and unsuitable product sales.
The comments come as the regulator continues to introduce reforms focused on improving governance, strengthening distribution practices and enhancing policyholder protection.
