"IRDAI unveils major reforms to deepen insurance coverage and investor access"
Policy Persistency
rate at which policyholders continue paying premiums without lapsing or surrendering a policy
Asset-Liability Management (ALM)
matching long-duration insurance liabilities against appropriately tenured investment assets
India's insurance sector is regulated by the Insurance Regulatory and Development Authority of India (IRDAI), established under the IRDAI Act, 1999. The sector was liberalised in 2000, when private players were permitted to enter a market previously dominated by public-sector entities — most notably the Life Insurance Corporation of India (LIC), which held a statutory monopoly under the LIC Act, 1956. Since liberalisation, the sector has grown substantially in terms of the number of players and product variety, yet India's insurance penetration — measured as insurance premiums as a percentage of GDP — continues to lag behind global averages and most developed economies.
The structural challenge is twofold. On the supply side, insurers face capital constraints, complex regulatory compliance, and limited distribution reach in rural and semi-urban areas. On the demand side, low financial literacy, distrust stemming from mis-selling, and the perception of insurance as a savings product rather than a risk-cover instrument suppress uptake. Successive IRDAI reform cycles have attempted to address both dimensions, but the latest package is notable for its breadth — spanning capital rules, investment norms, governance, distribution, and consumer protection simultaneously.
The reforms also operationalise the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, a legislative intervention aimed at accelerating insurance penetration by enabling structural changes that IRDAI alone could not implement through subordinate regulation.
The IRDAI reform package amends five sets of regulations governing actuarial functions, finance and investment, registration, capital structure, share transfers, and amalgamations. The overarching objective is to give insurers greater operational and financial flexibility while tightening governance and consumer safeguards.
On the investment side, liberalised investment norms allow insurers more flexibility in managing their asset portfolios and balance sheets. This is significant because life insurers are among India's largest institutional investors — they channel long-term premium collections into government securities, infrastructure bonds, and equities. Relaxing investment constraints could improve returns and enable better asset-liability management (ALM), the process by which insurers match long-duration liabilities (future claims and maturity payouts) against appropriately tenured assets.
On the capital and corporate structure side, simplified rules for share transfers and amalgamations are expected to facilitate consolidation in a fragmented market. …
With reference to 'Pradhan Mantri Fasal Bima Yojana', consider the following statements:
1.Under this scheme, farmers will have to pay a uniform premium of two percent for any crop they cultivate in any season of the year.
2.This scheme covers post-harvest losses arising out of cyclones and unseasonal rains.
Which of the statements given above is/are correct?
With reference to the Insurance Regulatory and Development Authority of India (IRDAI), consider the following statements:
1.IRDAI was established under the IRDAI Act, 1999.
2.The insurance sector in India was opened to private players in 1991 as part of economic liberalisation.
3.The Life Insurance Corporation of India was established under the LIC Act, 1956.
Which of the statements given above is/are correct?
Consider the following statements regarding recent reforms in India's insurance sector:
1.The FDI limit in insurance companies has been raised to 100%.
2.IRDAI has introduced perpetual registration for insurance intermediaries, replacing periodic licence renewals.
3.The Policyholders' Education and Protection Fund (PEPF) was established under the IRDAI Act, 1999.
Which of the statements given above is/are correct?
Assertion (A): Mandatory salesperson tagging on insurance policies is expected to reduce mis-selling in the insurance distribution chain.
Reason (R): When each policy is linked to the authorised salesperson who sold it, individual accountability is established, changing sales incentive structures.
Which of the following is correct?
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