India’s insurance regulator is asking the industry to weigh in on a question with direct cost implications: whether insurers should be required to pay into a new policyholder protection fund on an ongoing basis, and if so, how much. In a consultation paper on the proposed Policyholders’ Education and Protection Fund (PEPF) cited by The Hindu, the Insurance Regulatory and Development Authority of India (IRDAI) poses the question directly, asking whether regulations should require insurers to credit to the PEPF a percentage of gross direct premium written in India, and if so, what percentage would be appropriate and whether it should be uniform across life and non-life insurers or differentiated. The fund’s initial ₹800 crore (US$96 million) corpus came from a one-time government transfer rather than an industry levy, which means the consultation paper’s answer to this question will determine whether the PEPF becomes a recurring cost line for insurers going forward.
The levy question arrives alongside a separate, related change: the maximum penalty for violations of the Insurance Act and the IRDAI Act has been raised tenfold, from ₹1 crore to ₹10 crore, under the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, according to a legal analysis published by Clyde & Co. Under a related exposure draft on penalty procedures, all penalties IRDAI collects would be credited directly to the PEPF. Taken together, the two measures point toward a single regulatory direction: IRDAI is increasing the cost of non-compliance at the same time it is building the fund those penalties will feed into, regardless of how the separate levy question is resolved.
According to Tax Guru, IRDAI’s consultation paper notes the PEPF is modelled in part on the Reserve Bank of India’s Depositor Education and Awareness Fund (DEAF), proposing the PEPF be structured as a non-lapsable account audited annually by the Comptroller and Auditor General, consistent with the DEAF model. But on the specific question of ongoing industry funding, a closer parallel sits outside India. Singapore’s Policy Owners’ Protection (PPF) Scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), already operates the kind of premium-based levy IRDAI is now asking about. Membership is compulsory for all life and general insurers licensed by the Monetary Authority of Singapore (MAS), and scheme members pay annual, risk-based levies calculated as a percentage of liabilities under insured policies, or in some cases as a percentage of gross premium income. If IRDAI moves toward a similar structure, insurers operating in both markets would be working within a familiar funding model, though the PPF Scheme is narrower in purpose, functioning primarily as a guarantee against insurer failure rather than a broader literacy and grievance fund like the PEPF.
IRDAI’s consultation paper cites unclaimed maturity payouts, death claims, and surrender values exceeding ₹9,305 crore at the start of fiscal year 2025 as justification for the fund, a figure confirmed directly in the regulator’s own text. A separate figure, attributed to IRDAI’s Annual Report for fiscal year 2023-24 and reported by Business Standard, puts unclaimed amounts held by life insurers alone at ₹20,062 crore at roughly the same point in time, the end of FY24. The two figures do not reconcile in an obvious way; Insurance Business Asia was unable to confirm the precise scope of either figure against IRDAI’s original report and recommends readers treat both numbers with caution pending clarification from the regulator.
IRDAI issued the consultation paper on June 23, 2026, and the comment period closes on July 13, 2026, according to the indicative timeline set out in the paper. Insurers and intermediaries planning to respond should submit comments before that date.
For insurers, the practical questions to track in the coming weeks are the size of any proposed levy, whether it would be applied uniformly across life and non-life insurers, and how the four proposed utilization categories – education and awareness, grievance redressal support, unclaimed-amount recovery infrastructure, and technology-based policyholder services – would be funded if the levy proposal is not adopted. Neither India’s Life Insurance Council nor its General Insurance Council had published a formal response to the consultation paper as of this writing; both are expected to submit feedback before the comment period closes.
