IRDAI framework ensures strong policyholder safeguards despite 100% FDI in insurance: Experts

India’s insurance regulator has put in place robust safeguards to protect policyholders even as the sector opens up to 100% foreign direct investment (FDI), according to legal and industry experts. 

Speaking to Fortune India, Shailaja Lall, Partner at Shardul Amarchand Mangaldas & Co, said the Insurance Regulatory and Development Authority of India (IRDAI) has established a comprehensive, principle-based framework that ensures strict oversight of insurers irrespective of ownership structure. 

Policyholder protection measures 

Under the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024, insurers must adhere to detailed norms designed to safeguard consumers. These include the use of clear and simple policy language, explicit disclosure of key terms such as warranties and cancellation clauses, and adherence to prescribed practices at the point of sale. 

Insurers are also required to disseminate service-related information widely, define turnaround times for all services, and maintain robust grievance redressal mechanisms. Claims procedures must ensure timely settlement. 

The regulator mandates the constitution of a Policyholder Protection, Grievance Redressal and Claims Monitoring Committee, chaired by an independent director. A multi-tier grievance system is in place, including insurer-level grievance officers, the Bima Bharosa portal, and the Insurance Ombudsman. 

The IRDAI also conducts ongoing supervision through inspections and periodic reporting, and has powers to impose penalties, restrict new business, appoint administrators, or initiate winding-up proceedings in case of serious violations. 

Uniform regulation for all insurers 

Lall noted that there is no distinction in regulatory treatment between Indian-owned insurers and those with foreign ownership. “The IRDAI regulates insurance companies through a comprehensive framework covering registration, prudential norms, governance, product oversight and distribution controls,” she said. 

Key regulations include norms on registration, capital structure, and share transfers, which require stringent “fit and proper” assessments before licensing insurers. 

From a financial perspective, insurers must maintain a solvency ratio of at least 150% of the required margin, failing which corrective action is mandated. Persistent breaches could lead to insolvency proceedings. 

Investment and actuarial regulations require insurers to follow sound financial principles, maintain accurate reporting, and adopt board-approved policies on asset-liability management, risk management and bonus distribution. 

Corporate governance norms mandate qualified boards with independent directors and the formation of key committees such as audit, risk management, investment, and policyholder protection. 

Product regulations ensure that insurance offerings are designed with customer needs in mind, with transparent pricing, clear terms, and appropriate underwriting and claims systems. 

100% FDI reform and safeguards 

The Finance Ministry recently notified 100% FDI in the insurance sector under the automatic route while capping foreign investment in Life Insurance Corporation of India at 20%. The move follows the passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which raised the FDI cap from 74%. 

Welcoming the reform, Amit Chhabra, Chief Business Officer (General Insurance) at Policybazaar, said the decision would enhance technology adoption, product innovation, and long-term capital inflows. 

“With greater foreign participation, we can expect better products, improved affordability, and wider distribution,” he said. 

Chhabra also highlighted built-in safeguards, including the requirement for at least one resident Indian in senior management and the mandate that premiums be deployed within India, ensuring accountability to domestic consumers. 

According to the experts, the combination of liberalised FDI norms and strong regulatory oversight reflects a calibrated approach—opening the sector to global capital while maintaining strict consumer protection. 

The IRDAI’s extensive regulatory architecture, aligned with its vision of “Insurance for All by 2047,” is expected to play a central role in ensuring stability and trust in the evolving insurance landscape.