100% FDI in insurance to boost capacity, protect policyholders: Irdai chief Ajay Seth

In an interaction with Mint, he outlined the regulator’s approach to balancing sector liberalization with consumer protection, amid proposed reforms such as the Sabka Bima Sabki Raksha Act.

He discussed foreign participation, regulatory safeguards, challenges in health insurance, global risks, and new initiatives such as the Public Insurance Registry and the Bima Sugam platform. Edited excerpts:

In the wake of the proposed Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, which raises the foreign direct investment (FDI) cap in insurance to 100% and eases net-owned fund requirements for foreign reinsurers, what safeguards is Irdai building into its framework to protect policyholders’ interests?

The opening of the sector to 100% FDI, along with an amendment to the insurance rules, will certainly help in positioning our economy as an attractive destination for foreign insurance capital, complementing domestic capital. The regulations provide a level playing field to all insurance companies, irrespective of ownership.

There are adequate safeguards to protect policyholders’ interests through solvency margins. The net premium by all companies is invested in the domestic market, with a sizable part in risk-free securities. The sector is also moving to a higher level of transparency by adopting Indian Accounting Standards (Ind AS) aligned with International Financial Reporting Standards (IFRS). By next year, we should be moving to the risk-based capital framework (RBCF). Both these measures should further augment the capacity to attract capital and safeguard policyholders’ interests.

The reinsurers also have to maintain adequate capital as their business grows, while the entry-level requirement has been moderated. Besides the capital, perhaps even more than that, the participation of well-established insurance companies from mature insurance markets as promoters is expected to add to innovation, better market conduct, efficient management practices, and raise the value proposition for policyholders.

What kind of response has the regulator received so far from global insurers and reinsurers?

The response has been very positive. Recently, a reinsurance company with 50% foreign capital has been registered. Stage Two (R2) approval has been given for a general insurance company. Stage One (R1) go-ahead has been given to another one.

There are several enquiries from foreign insurance companies and private equity funds for meaningful participation in the Indian insurance market. One joint venture foreign partner is in the process of increasing its share to 100%. After years, we have an application for a life insurance company also.

The Act also grants Irdai stronger board-supersession powers and enables easier amalgamations between insurers and non-insurers. How will you balance ease of doing business with maintaining regulatory oversight to prevent systemic risks?

There is no trade-off between ease of doing business and regulatory oversight. The insurance sector needs deregulation in some areas and stronger regulation in others. Again, deregulation does not mean laissez-faire. It entails smart, unobtrusive regulations, often adopting digital means, such as insurers’ IT systems or public data infrastructure. Irdai is also working to nudge the sector towards much higher levels of disclosure to strengthen oversight by policyholders and the general public through their economic decisions when purchasing insurance products. The adoption of Ind AS now and hopefully RBCF from next year are aimed at early identification of systemic risks.

How is Irdai working to implement structural changes to restore trust in health insurance?

In health insurance, there are two types of contracts. A policyholder-insurer contract is a contract of indemnity and a regulated product. Second, between the insurer and hospitals is a commercial, unregulated contract. The problems and complaints arise from information asymmetry and misaligned interests in both contracts. Our aim has been to nudge insurers to offer standard products with optional riders at affordable premiums, with unambiguous sets of inclusions and exclusions. For the second type of contracts, we are facilitating active engagement among insurers and hospitals to develop a code of conduct, objective contract terms, and effective dispute resolution.

Early adoption of the National Health Claims Exchange (NHCX) is an important objective of that engagement. In addition, a health subcommittee of the Insurance Advisory Committee has been formed to promote cost-effective, efficient health insurance. The sub-committee has co-opted experts from the Asian Development Bank and the World Bank to bring in global experience and best practices.

How is Irdai positioning Indian insurers to both adopt global best practices in sustainability and emerging risk management and export Indian innovation (e.g., digital public infrastructure models) to other emerging markets?

The life insurance segment has grown over the past two decades at the same rate as the nominal growth of our economy. The general insurance segment has been growing at about 1.2 times the nominal growth. Considering the large unmet needs, there is ample scope for higher growth and wider coverage.

At the same time, insurance for newer forms of risk or those becoming more prominent, e.g., data centres, cyber risks, trade or marine cargo disruption risks, and climate impact risks, needs greater attention. We also need to move beyond risk management to risk mitigation by adopting global best practices in our economic activities.

The adoption of technology in the insurance sector has largely focused on internal management of insurers’ operations. Now, we are working to establish a public insurance registry that will promote transparency and value for all stakeholders.

One of the most structurally important initiatives Irdai is advancing is the Public Insurance Registry. The PIR is designed as a central registry encompassing the lifecycle of each customer’s insurance journey. Its purpose is to diminish the information asymmetry that currently allows mis-selling to persist. The expected outcomes are concrete: reduced disputes by bringing in transparency in the sales process; enhanced fraud detection; and, over time, better pricing and lower premiums as underwriting data improves.

For Irdai as a regulator, the PIR will be a powerful supervisory tool, allowing us to monitor conduct trends across the distribution ecosystem in ways previously not possible.

The Bima Sugam is the digital insurance marketplace being developed as an open, regulated platform. It will offer standard, comparable products across multiple segments with plain language documentation; a zero-commission direct purchase option at the lowest possible cost to the consumer; free pricing on the platform with no dark patterns or algorithmic steering; a seamless end-to-end journey from purchase to servicing to claims as a one-stop shop; and transparent multi-insurer comparison on standardized parameters.