The consequences of this lack of awareness are significant. At the beginning of FY2025, insurers were holding more than ₹9,305 crore in unclaimed amounts, including maturity proceeds, death claims and surrender values.  

In a move aimed at enhancing policyholder service, the consultation paper proposes the creation of a centralized policyholder alert framework. Such a system would enable timely communication with policyholders affected by common events such as floods, cyclones or storms. 

Hyderabad: Acting under the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (SBSR Act), the IRDAI has launched the Policyholders’ Education and Protection Fund, with an initial corpus of ₹800 crore, to address the issue of lack of awareness among insurance policy holders.  

According to the regulator, a large number of policyholders still do not fully understand the insurance products they purchase. Many are unaware of policy coverage, premium payment obligations, claim procedures, renewal requirements or grievance redressal mechanisms. Insurance is often perceived as a tax-saving or investment instrument rather than a risk protection tool, limiting its effectiveness as a financial safety net. 

The consequences of this lack of awareness are significant. At the beginning of FY2025, insurers were holding more than ₹9,305 crore in unclaimed amounts, including maturity proceeds, death claims and surrender values. In many cases, policyholders or their nominees were either unaware of these benefits or unable to access them

The regulator has now released a consultation paper proposing the governance, funding and utilisation framework for the fund. The proposed structure draws from similar investor and consumer protection funds operating in other segments of India’s financial sector.

One of the primary objectives of the PEPF is to support large-scale insurance literacy and awareness programmes across the country. The fund may finance the development of educational material in regional languages, integration of insurance concepts into school and college curricula, training of community-level insurance facilitators and targeted media campaigns designed for different demographic groups.

The fund is also expected to strengthen policyholder protection and grievance redressal mechanisms.

The IRDAI has proposed using the fund to develop or upgrade complaint management platforms, making it easier for policyholders to register and track grievances. Support may also be extended to the Insurance Ombudsman system to improve accessibility and effectiveness.

In a move aimed at enhancing policyholder service, the consultation paper proposes the creation of a centralized policyholder alert framework. Such a system would enable timely communication with policyholders affected by common events such as floods, cyclones or storms. Alerts could be delivered through SMS, email, WhatsApp, mobile applications and Interactive Voice Response Systems (IVRS), helping customers take prompt action regarding claims and policy benefits.

The proposed framework also envisages funding the development of online portals, training modules, workshops, seminars and other educational resources to improve insurance literacy and consumer engagement.

IRDAI has proposed that expenditure under the PEPF be financed through the investment income generated from the corpus fund. The utilisation of these proceeds has been classified into five broad categories: education, awareness and inclusion; grievance and legal support; infrastructure for recovery of unclaimed insurance benefits; technology-based policyholder services; and other policyholder-focused initiatives approved by the Authority.