Bharatiya Janata Party (BJP) Rajya Sabha MP Ajeet Madhavrao Gopchade has urged Prime Minister Narendra Modi to introduce a statutory protection mechanism for individual insurance policyholders in case a life insurance company becomes financially distressed, insolvent or bankrupt. According to reports from Mint, Gopchade submitted a letter dated September 25, 2026, proposing the establishment of a dedicated policyholders' protection framework with separate arrangements for life and long-term insurance as well as general insurance. In his letter to the PM, Gopchade emphasized that for millions of families, a life insurance policy represents more than just a financial product but long-term savings, family protection and retirement security. The MP argued that ensuring continuity of cover and safeguarding legitimate policyholder benefits in the event of insurer failure deserves careful consideration, given the critical role insurance plays in family financial planning.
According to the letter cited by Mint, Gopchade referenced insurance-sector mechanisms adopted in countries including the UK, US, Canada, Australia and Hong Kong. He suggested that the Department of Financial Services examine these international frameworks and assess whether elements could be adapted to India's regulatory and insurance-market requirements. The MP noted that several major insurance markets have established dedicated arrangements known as Policyholders' Protection Schemes, Insurance Guarantee Schemes or Guaranty Associations. As reported by Mint, Gopchade has identified the United States, United Kingdom, Singapore, Australia and Canada among jurisdictions with such arrangements, with common features including insurer-funded mechanisms, defined coverage, differentiated treatment of long-term and general insurance, and arrangements for the continuation or transfer of long-term policies. He has called for the government to consider examining the feasibility of a comprehensive policyholders' protection and insurer resolution framework for India.
As reported by Mint, Gopchade has proposed creating a mechanism that would help ensure continuity of life insurance policies by allowing viable portfolios to be transferred to another insurer in a timely manner. Where such transfer is not feasible, he proposed an orderly run-off arrangement backed by appropriate resolution and liquidity mechanisms. According to the latest reports, Gopchade's suggestions include establishing a statutory policyholders' protection scheme/fund with separate arrangements for life/long-term and general insurance, funded through an appropriate industry levy. The MP also called for measures to ensure that viable life insurance portfolios can be transferred to another insurer when required, while providing for an orderly run-off mechanism in cases where transfer is not possible. He has specifically requested that the Department of Financial Services, in consultation with the IRDAI and other relevant stakeholders, undertake a detailed country-wise and legislative study of policyholder protection mechanisms in the United States, United Kingdom, Singapore, Australia, Canada and Hong Kong, and examine their suitability for India.
According to Mint reports, Gopchade has called for strengthening the legal framework governing insurer insolvency, including provisions for early intervention, clearly defined policyholder protection and compensation, and appropriate recovery mechanisms. The BJP MP suggested reviewing the Insurance Act, 1938, along with related insolvency provisions, to assess whether the existing legal framework provides adequate safeguards in the event of an insurer's financial failure. As reported by Mint, Gopchade's letter specifically sought information regarding the steps taken to safeguard policyholders' investments if a life insurance company faces bankruptcy, whether the government had assessed international regulatory practices, the supervisory role of the Insurance Regulatory and Development Authority (IRDAI) and the regulatory directions and corrective measures issued to life insurance companies during the preceding three years. The proposed framework would provide policyholders with an additional layer of protection while creating a structured process for dealing with financially distressed insurers.
