IRDAI Panel Recommends Ban on Mergers Between Insurance and Non-Insurance Companies to Protect Policyholders.
Banking & Finance
On July 17, 2025, the IRDAI (Insurance Regulatory and Development Authority of India) recommended a ban on mergers between insurance and non-insurance companies to safeguard policyholders. The panel was chaired by Dinesh Kumar Khara, Chairman of State Bank of India (SBI).
- In February 2025, IRDAI constituted a seven-member expert committee to assess and propose amendments to the Insurance Act, 1938. This initiative aimed to evaluate regulatory gaps and ensure policyholder protection amidst sectoral changes.
- The panel submitted its confidential report during the 132nd IRDAI meeting held in Hyderabad, Telangana. The discussion revolved around major regulatory safeguards and potential structural risks in allowing cross-sector mergers.
- The panel warned that mergers between insurers and non-insurers could introduce moral hazards. These include potential misuse of funds, conflicts of interest, and compromised protection mechanisms for policyholders in mixed business models.
Main Point :- (i) According to the panel, allowing such mergers could jeopardize sectoral integrity by enabling unfair advantages or insider leverage. This could undermine regulatory checks and affect long-term trust in the insurance ecosystem.
(ii) To address possible violations, IRDAI formed adjudicatory panels composed of its whole-time members. These panels are empowered to investigate and penalize insurance companies and intermediaries breaching norms, ensuring regulatory enforcement remains strong.
(iii) To ensure long-term sectoral stability, the IRDAI is also exploring regulatory firewalls that restrict financial cross-ownership between insurers and non-insurers. This aims to prevent systemic risks, improve solvency monitoring, and safeguard policyholder interests from unrelated business risks and governance failures.
About IRDAI
Chairperson: Debasish Panda
Headquarters: Hyderabad
____________________________
