A CRITICAL STUDY OF INSURANCE SECTOR LIBERALISATION IN INDIA WITH SPECIAL REFERENCE FDI REGIME, IRDAI REGULATORY CAPACITY AND POLICYHOLDER PROTECTION

AUTHOR – PRIYANSHU DIXIT* & DR. EKTA GUPTA**

* STUDENT AT AMITY LAW SCHOOL, AMITY UNIVERSITY NOIDA

** ASSOCIATE PROFESSOR AT AMITY LAW SCHOOL, AMITY UNIVERSITY NOIDA

BEST CITATION – PRIYANSHU DIXIT & DR. EKTA GUPTA, A CRITICAL STUDY OF INSURANCE SECTOR LIBERALISATION IN INDIA WITH SPECIAL REFERENCE FDI REGIME, IRDAI REGULATORY CAPACITY AND POLICYHOLDER PROTECTION, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (8) OF 2026, PG. 659-673, APIS – 3920 – 0001 & ISSN – 2583-2344 DOI – https://doi.org/10.65393/IJLRV6I870

ABSTRACT

India’s successive liberalisation of foreign equity caps in the insurance sector culminating in a proposed ceiling of one hundred percent proceeds from the assumption that ownership restrictions are the principal impediment to sectoral development. The empirical record challenges that assumption with uncomfortable consistency: insurance penetration has stagnated at approximately four percent of GDP, and FDI inflows have persistently fallen short of legislative expectations, across the very period in which liberalisation was most actively pursued. This paper argues that the binding constraint is not the equity ceiling but the structural inadequacy of IRDAI’s regulatory capacity encompassing supervisory reach, enforcement consistency, group level oversight, and institutional independence. Through doctrinal analysis of the governing legal framework, comparative assessment of Singapore, Malaysia, the United Kingdom, and China as models of sequenced liberalisation, and empirical engagement with official data from IRDAI, DPIIT, and UNCTAD, the paper demonstrates that full foreign ownership, in the absence of commensurate regulatory preparedness, exposes policyholders to governance and systemic risks that the existing architecture is ill equipped to manage. Regulatory capacity building is not a consequence of liberalisation to be deferred .it is a precondition upon which the reform’s legitimacy depends.

Keywords: Foreign direct investment, insurance regulation, IRDAI, regulatory capacity, FDI liberalisation, policyholder protection, comparative insurance law