The proposal has been released through a consultation paper after amendments to insurance laws under the “Sabka Bima Sabki Raksha Act, 2025.”
IRDAI stated that it has already constituted the fund and transferred an initial corpus of ₹800 crore.
Why IRDAI has proposed the fund
According to the consultation paper, India’s insurance industry has grown steadily over the years, but insurance awareness and financial literacy remain low in several parts of the country, especially in rural and underserved areas.
The regulator noted that many policyholders often do not fully understand their insurance policies, renewal requirements, claims procedures, or available grievance mechanisms.
IRDAI also highlighted that unclaimed insurance amounts exceeded ₹29,305 crore at the beginning of FY2025, including maturity proceeds, death claims, and surrender values that policyholders or nominees could not recover.
The regulator said the absence of a dedicated funding mechanism has limited long-term and coordinated policyholder education initiatives in the insurance sector.
What the proposed fund may support
Under the draft framework, the proposed fund would be used for policyholder education, awareness campaigns, grievance support systems, and technology-based consumer services.
IRDAI has proposed conducting insurance literacy programmes through educational material in regional languages, workshops, outreach initiatives, and media campaigns. The consultation paper states that these initiatives are intended to improve understanding of insurance products, policyholder rights, claims processes, and grievance redressal mechanisms.
The regulator has also proposed using the fund to support digital policyholder services such as multilingual helplines, chatbots, digital assistance platforms, policy reminders, and alerts regarding unclaimed benefits.
Proposal for centralised policyholder alerts
One of the proposals in the consultation paper is the creation of a centralised alert framework for policyholders affected by common events such as floods, storms, or other catastrophic incidents.
According to IRDAI, policyholders may receive alerts through SMS, email, WhatsApp notifications, mobile applications, or IVRS calls. The regulator said such communication may help policyholders take timely action under their insurance policies and support faster claims processing during emergencies.
Focus on grievance redressal
The draft framework also proposes strengthening policyholder grievance systems and supporting the Insurance Ombudsman network.
IRDAI has suggested improving digital complaint-handling platforms, simplifying grievance filing processes, and increasing accessibility for vulnerable consumers, including senior citizens and rural policyholders.
The consultation paper also mentions the possibility of redeveloping digital grievance platforms to make them more responsive and efficient.
Infrastructure for unclaimed insurance amounts
The regulator has proposed building infrastructure to help policyholders and nominees trace unclaimed insurance amounts more effectively.
This may include the development of a centralised portal, integration of insurer databases with identity registries, and outreach programmes aimed at locating beneficiaries and reducing unclaimed amounts.
Proposed sources of the fund
According to the consultation paper, the proposed fund may receive contributions from grants by central and state governments, voluntary contributions from institutions, penalties collected by IRDAI from insurers and intermediaries, and undistributed disgorgement amounts.
IRDAI has also sought public comments on whether insurers should contribute a percentage of gross direct premium income toward the fund and whether such contributions should differ between life and non-life insurers.
Proposed governance structure
To oversee the fund, IRDAI has proposed the creation of a Fund Management Committee comprising IRDAI officials, representatives from insurance industry bodies and the Insurance Ombudsman framework, along with independent members from consumer advocacy, financial inclusion, and insurance academia.
The committee would be responsible for publishing annual programmes, budgets, expected outcomes, and performance indicators related to policyholder education and protection activities.
Consultation process underway
IRDAI has invited comments from stakeholders and the public on the proposed framework and draft regulations.
The consultation process is expected to conclude in July 2026, after which the regulator may finalise the regulations governing the Policyholders’ Education and Protection Fund.
