India’s insurance awareness problem & IRDAI’s 800Cr solution
It’s not an unknown fact that India’s insurance sector has a trust and awareness problem. IRDAI’s own Annual Report for FY2024-25, released in December 2025, describes mis-selling as a “significant concern” and flagged that grievances categorised under unfair business practices rose to 26,667 in FY25, from 23,335 in FY24 (a 14% increase) representing 22.14% of total complaints against life insurers.
Meanwhile, Insurance Samadhan’s Q2 2025 Trends Report found that insurance complaints jumped 45% between the first and second quarters of 2025, with the value of contested claims surging from ₹83.5 crore to ₹119.5 crore. Health insurance dominated at 68% of complaints, with endowment policies the most frequently mis-sold product.
And then there is the single most striking number of all: ₹29,305 crore in unclaimed insurance money (maturity proceeds, death benefits, and surrender values) that policyholders or their families are entitled to but have been unable to access, sitting on the books of Indian insurers at the start of FY2025.
These three issues of mis-selling, disputed claims, and unclaimed funds are the reason IRDAI has been building an ambitious policyholder protection framework.
Policyholder-first reform so far…
The reforms accelerated sharply from 2023 onwards. The centrepiece has been the Bima Trinity, three linked initiatives under IRDAI’s “Insurance for All by 2047” mission:
- Bima Sugam is a unified digital marketplace where every Indian will be able to compare, buy, renew, and claim insurance across all categories on one platform. Every policyholder receives a Bima Pehchaan ID, a unique digital insurance identity linked to Aadhaar/PAN. All insurers are required to list their products and make policy services, including claims and grievance redressal, available through the platform.
- Bima Vistaar is a comprehensive single product covering life, accident, health, and property, designed for underserved and rural markets, reducing the need for multiple separate policies.
- Bima Vahak is a women-centric field force operating at the Gram Sabha level, trained to bring insurance awareness and sales to the doorstep of households in rural India.
Supporting all of this, IRDAI’s Protection of Policyholders’ Interests Regulations, 2024 consolidated 30-day free-look periods, mandatory nominee collection, electronic policy issuance, and structured grievance redressal into a single binding framework.
The Policyholder Education & Protection Fund (PEPF)
Consequent to the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, IRDAI has constituted the Policyholders’ Education and Protection Fund (PEPF) with an initial corpus of ₹800 crore.
IRDAI draws direct inspiration from peer financial regulators: RBI has its Depositor Education and Awareness Fund, SEBI has its Investor Protection and Education Fund, and PFRDA has the Subscriber Education and Protection Fund. Insurance, uniquely among major financial sectors, lacked such a mechanism and that absence meant policyholder education was dependent on discretionary spending without any coordinated structure.
What will the fund do? The investment income generated from the ₹800 crore corpus (not the principal) will be deployed for:
- Insurance literacy programmes in regional languages, including outreach campaigns, workshops, and media initiatives, designed to help policyholders understand what they have bought, how to renew it, and how to claim
- Grievance redressal infrastructure, including support for the Insurance Ombudsman network, digital complaint platforms, and simplified filing processes for rural and senior citizen policyholders
- Technology-enabled policyholder services, including multilingual helplines, WhatsApp/SMS alerts during floods, cyclones, and other natural disasters, and mobile application alerts
- Unclaimed funds tracing infrastructure, including a centralised portal and integration with national identity registries to help nominees and beneficiaries locate and recover the ₹29,305 crore that is sitting uncollected
The fund will be governed by a Fund Management Committee comprising IRDAI officials, insurance industry representatives, ombudsman framework members, and independent experts from consumer advocacy, financial inclusion, and insurance academia.
Around the world
Do other countries have such initiatives? Sort of.
In the United Kingdom, the Financial Services Compensation Scheme (FSCS) protects policyholders if an insurer fails, covering 100% of compulsory insurance claims with no upper limit, and 90% of other claims. The FSCS is separate from education funds and operates as a last-resort compensation scheme funded by financial sector levies.
In Japan, two dedicated policyholder protection corporations exist: the Life Insurance Policyholders Protection Corporation and the Non-Life Insurance Policyholder Protection Corporation. In the event of an insurer’s failure, they can facilitate the transfer of insurance contracts to another insurer, or if no relief insurer can be found, set up a subsidiary to accept those contracts directly. Both corporations are funded by industry levies, with provision for government support in extreme cases.
Korea, Taiwan, Malaysia, and most EU countries operate comparable mechanisms.
India’s PEPF is unlike these and is closer to the education and investor-awareness fund model (like SEBI’s IPEF) than to the insolvency-backstop model of the FSCS or LIPPC.
How the fund will help YOU, the Policyholder
The fund will not directly pay your disputed claim. That is still the insurer’s and the ombudsman’s job. What it will do is build the infrastructure to make every step of the policyholder journey, buying, understanding, renewing, claiming, and if necessary, complaining, more supported, more accessible, and better resourced than it has ever been in India.
Meanwhile and always, you can still reach out to insurancepe for help on anything insurance.
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