Important for GS Prelims: ECONOMY
Key Features
- Constituted by: IRDAI
- Legal Basis: Section 16A of the IRDA Act, 1999
- Administered by: IRDAI
- Operational since: 2026
- Nature: Dedicated fund for policyholder education and consumer protection.
Objectives
- Enhance insurance literacy among citizens.
- Protect the interests of policyholders.
- Reduce mis-selling and improve informed decision-making.
- Promote awareness regarding insurance products, claims, renewals, and grievance redressal.
- Support research, outreach, and consumer education initiatives.
Sources of the Fund
As per Section 16A of the IRDA Act, the fund receives:
- Grants and donations from the Central Government, State Governments, IRDAI, companies, and other institutions.
- Penalties collected by IRDAI under the IRDA Act, 1999 and the Insurance Act, 1938.
- Any other amounts specified through regulations.
Utilisation of the Fund
- Policyholder education and awareness campaigns.
- Consumer protection initiatives.
- Capacity-building and financial literacy programmes.
- Research and dissemination of insurance-related information.
- Activities specified under IRDAI regulations for safeguarding policyholders’ interests.
Why was PEPF Introduced?
- Low insurance penetration due to inadequate awareness.
- Rising instances of policy mis-selling and poor consumer understanding.
- Large amounts of unclaimed insurance benefits.
- To create an institutional mechanism similar to:
- Investor Education and Protection Fund (IEPF)
- Depositor Education and Awareness Fund (DEAF)
- Subscriber Education and Protection Fund (SEPF).
Conclusion
- PEPF strengthens consumer protection in India’s insurance sector by promoting insurance awareness, financial literacy, and informed policyholder participation.
| This concept has been elaborately discussed in the following article: IRDAI Unveils Key Insurance Reforms, Greenlights New General Insurer |