Irdai floats proposal to tap insurer premiums for policyholder fund

Mumbai: India's insurance sector regulator has sought feedback on whether insurers should contribute a portion of their premium income to the Policyholders' Education and Protection Fund (PEPF), a new ₹800-crore corpus created for awareness and policyholder protection.

The proposal forms part of a consultation paper released by the Insurance Regulatory and Development Authority of India (Irdai) on Tuesday on the regulatory framework for the fund, which was constituted in March 2026 following the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. The law seeks to expand insurance coverage in line with the government’s goal of ‘insurance for all by 2047’, while enhancing protection for policyholders.

Irdai has specifically sought comments on whether insurers should be required to transfer a percentage of gross direct premium to the fund and, if so, what that percentage should be.

The regulator said the fund will support insurance literacy programmes, grievance redressal initiatives, technology-enabled services for policyholders and systems to help trace and recover unclaimed insurance amounts. The PEPF was created under Section 16A of the Irdai Act, 1999, inserted through the amended insurance law.

The fund can receive grants and donations from central and state governments, contributions from Irdai, penalties collected under insurance laws and other sources prescribed through regulations.

According to the consultation paper, income generated from investing the corpus may be used to finance nationwide awareness campaigns, strengthen grievance support systems and develop services such as proactive alerts for policyholders during natural calamities and emergencies.

Mint reported earlier that the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 increases the maximum penalty for insurers and intermediaries to ₹10 crore from ₹1 crore. Proceeds from these penalties will flow into the Policyholders' Education and Protection Fund.

The regulator has also proposed the creation of a Fund Management Committee to oversee the governance, administration, utilisation and performance monitoring of the fund.

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