2026 Insurance Outlook: Insurance reforms, capital rules to take centre stage

The proposed composite licensing regime, expected to progress further in 2026, could significantly alter the structure of India’s insurance market by allowing insurers to offer life, general and health products under a single licence

• India's insurance sector to adopt risk-based capital framework from April 2026
• IRDAI to tighten fraud management, governance, and telephony compliance in 2026
• Composite licensing and ombudsman process reforms expected to progress in 2026

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The Indian insurance sector is headed for another regulatory reset in 2026, as long-pending reforms around capital adequacy, market structure, governance are expected to move from policy intent to execution.

With the Insurance Regulatory and Development Authority of India (IRDAI) preparing to operationalise several structural changes, 2026 is expected to mark a shift from growth-at-any-cost to risk-aligned, capital-efficient expansion.

Here is a list of reforms to watch out for:

Risk-based capital

From April 2026, insurers will begin operating under a risk-based capital (RBC) framework, marking a structural shift in how solvency is assessed in India’s insurance sector. Unlike the current factor-based regime, which applies uniform capital charges, the RBC framework will require insurers to maintain capital in proportion to their actual risk exposure across underwriting, market, credit and operational risks. IRDAI first publicly signalled its intent to shift from the traditional factor-based solvency regime to a risk-based capital model as far back as August 2023, when it issued a circular outlining the development of the Indian RBC framework and initiated the first Quantitative Impact Study (QIS 1) to evaluate its potential impact on insurer capital and solvency. Since then, the regulator carried the transition forward with industry consultations and follow-up studies, including directing insurers to complete QIS 2 by October 2025 to refine the framework ahead of implementation. Most recently, IRDAI cleared the risk-linked capital regime and new accounting norms towards the end of December 2025, formally setting the stage for the RBC rollout starting April 2026.

Fraud management framework

Fraud risk management is expected to come under sharper regulatory scrutiny in 2026, with new IRDAI guidelines mandating a comprehensive fraud management framework across insurers and their distribution partners, a circular by IRDAI said. Under the framework, insurers will be required to establish robust fraud detection and monitoring systems, put in place board-approved fraud risk policies, and conduct periodic training for employees and intermediaries. A key element of the guidelines is mandatory reporting of fraud-related data to the Insurance Information Bureau (IIB), enabling sector-wide analytics and early identification of systemic risks. The regulator, in its circular, has indicated that accountability for fraud prevention will extend beyond insurers to include outsourced service providers, third-party administrators and distribution partners.

Composite licensing

The proposed composite licensing regime, expected to progress further in 2026, could significantly alter the structure of India’s insurance market by allowing insurers to offer life, general and health products under a single licence. The move, which was proposed under the Insurance Amendment Act, 2025, did not find place in the final legislation but is expected to be taken up again in 2026. While the framework is still evolving, earlier Moneycontrol reports indicate that industry participants expect composite licensing to encourage consolidation, attract new entrants with diversified business models and allow established players to cross-sell more efficiently. However, the transition will also require stronger risk segregation and governance mechanisms to prevent cross-subsidisation across business lines.

Stricter corporate governance norms

Corporate governance requirements is expected to tighten further in 2026, with new IRDAI norms mandating prior regulatory approval for the appointment of board chairpersons of insurance companies. Existing chairpersons will be required to comply with the revised norms by March 31, 2026, or upon completion of their current term, whichever is earlier. The move reflects the regulator’s emphasis on strengthening board oversight, independence and accountability, particularly as insurers operate under more complex capital and risk frameworks.

Telephony compliance to curb misuse and mis-selling

By February 15, 2026, all insurers and intermediaries will be required to adopt the ‘1600’ numbering series for official outbound calls, in line with broader BFSI telephony compliance norms, an IRDAI circular said. The measure is aimed at curbing spam, fraudulent calls and mis-selling by ensuring that customers can clearly identify verified calls from regulated financial entities. Insurers will be required to overhaul customer communication systems, align call-centre infrastructure and ensure compliance across agents and outsourced service providers.

Fraud monitoring guidelines

In addition to the broader fraud management framework, specific fraud monitoring guidelines is expected to become effective from April 2026, requiring insurers to adopt continuous surveillance mechanisms rather than post-facto reporting. These guidelines will push insurers to deploy advanced analytics, data-sharing arrangements and early-warning indicators to detect suspicious claims and transactions in real time. The regulator is expected to closely monitor compliance, with penalties for delayed reporting or inadequate controls. The emphasis on proactive monitoring is likely to increase compliance costs in the short term but is expected to reduce claims leakage and improve underwriting discipline over time.

Clarity on ombudsman processes

Consumer grievance redressal is also set to see improvements in 2026, with the regulator expected to provide greater clarity on insurance ombudsman processes and methods. The focus is on streamlining complaint handling, improving coordination between insurers and ombudsman offices, and reducing resolution timelines. Clearer rules around jurisdiction, admissibility and enforcement of awards are expected to improve consistency and transparency in dispute resolution.