IRDAI unveils reforms to boost insurance sector, improve policyholder protection

Among the key decisions was the approval of amendments to the IRDAI (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026, and the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) (Amendment) Regulations, 2026.

Policyholder protection takes centre stage

According to IRDAI, the changes will provide insurers with “greater operational and financial flexibility through liberalised investment norms, a facilitative framework for capital infusion and corporate restructuring, and streamlined provisions relating to transfer of shares and amalgamations, while strengthening actuarial oversight and financial governance.” The regulator said the reforms are expected to improve ease of doing business, enhance financial resilience and support insurers’ long-term growth without compromising policyholder interests.

A major policyholder-centric initiative approved by the regulator is the IRDAI (Policyholders’ Education and Protection Fund) Regulations, 2026, which operationalise the Policyholders’ Education and Protection Fund (PEPF) established under Section 16A of the IRDA Act, 1999, as introduced through the SBSR Act.

According to IRDAI, the PEPF establishes “a dedicated institutional mechanism to promote insurance awareness and literacy, strengthen grievance redressal mechanisms, leverage technology to improve policyholder services, facilitate the tracing and recovery of unclaimed insurance amounts, and support other initiatives aimed at empowering and safeguarding policyholders.”

Insurance intermediaries get revised framework

In another move to strengthen accountability in insurance distribution, the regulator has approved amendments to the regulations governing insurance intermediaries.

A key feature of the reforms is the mandatory tagging of the authorised salesperson to every insurance proposal, policy and certificate of insurance. “The requirement enhances accountability and traceability across the insurance distribution process, strengthens regulatory oversight and promotes greater transparency for policyholders,” IRDAI said.

The amendments also introduce perpetual registration for intermediaries through an annual fee regime, replacing periodic renewals. The revised framework streamlines compliance requirements, aligns the regulations with the SBSR Act and Foreign Investment Rules, and strengthens governance through enhanced disclosure and accountability standards, the regulator said.

These changes are expected to reduce compliance costs while enabling intermediaries, third-party administrators and surveyors to focus on delivering better and more accessible services to policyholders.

Establishing regulatory certainty, new non-life firm approved

To reinforce confidence in the regulatory framework, it has also approved the IRDAI (Manner and Procedure for Imposition of Penalties) Regulations, 2026. The new regulations establish a transparent, uniform and proportionate enforcement framework under the Insurance Act, 1938, and the IRDAI Act, 1999.

According to IRDAI, the regulations provide “a structured process for initiation of proceedings, issuance of show-cause notices and passing of reasoned orders, thereby promoting consistency, fairness and transparency in regulatory actions.” The framework would enhance regulatory certainty for regulated entities while strengthening accountability and public confidence in the insurance sector, it said.

Meanwhile, the regulator granted a Certificate of Registration to ProTec General Insurance Ltd, allowing the company to commence general insurance business under the applicable regulatory framework. This is the fourth registration approved by IRDAI during calendar year 2026, comprising two general insurers, one health insurer and one reinsurer.

It also highlighted encouraging progress in implementing the capital reforms introduced under the amended law. Following the government’s decision to permit up to 100% foreign investment in insurers, two insurance companies — one life insurer and one general insurer — have already increased foreign shareholding beyond the earlier ceiling of 74%.

The regulator said the development signals enhanced investor confidence, is facilitating greater capital inflows and reaffirms the country’s position as an attractive destination for long-term investment in the sector.