Irdai submits proposal for collection of premium of insurance companies for insurance fund

Mumbai: India’s insurance sector regulator has sought feedback on whether insurers should contribute a portion of their premium income to the Policyholder Education and Protection Fund (PEPF), a new ₹800 million corpus created to inform and protect policyholders.

The proposal is part of a consultation document released by the Insurance Regulatory and Development Authority of India (Irdai) on Tuesday on the regulatory framework for the fund, which was set up in March 2026 following the enactment of the Sabka Bima Sabki Raksha (Insurance Laws Amendment) Act, 2025. The Act seeks to expand insurance coverage in line with the government’s goal of protection4 and assurance2000 for policyholders.

Irdai specifically sought comment on whether insurers should be required to transfer a certain percentage of gross direct premiums 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 services for policyholders and systems to help trace and recover unclaimed insurance sums. PEPF was created under Section 16A of the Irdai Act, 1999, inserted through the amended Insurance Act.

The Fund may receive grants and donations from the Central and State Governments, contributions from Irdai, penalties levied under the Insurance Acts and other sources prescribed by regulations.

It is used for awareness

According to the consultation document, income from investing the corpus can be used to fund national awareness campaigns, strengthen complaint support systems and develop services such as proactive warnings for policyholders during natural disasters and emergencies.

Mint had earlier reported that the Sabka Bima Sabki Raksha (Insurance Laws Amendment) Bill, 2025 increases the maximum penalty for insurers and intermediaries to ₹10 million from ₹1 crore. Proceeds from these penalties will go to the Fund for education and protection of insured persons.

The regulator also proposed the creation of a fund management committee to oversee the administration, management, utilization and performance monitoring of the fund.