Startups in queue for insurance licence face stricter norms

The Insurance Regulatory and Development Authority of India (Irdai) is increasing its scrutiny of venture-funded startups that are aiming to become insurance companies. Companies seeking a licence are required to liquidate any holding company structures and accept investor funding directly in the entity that is submitting the application. Irdai also wants applicants to be backed by a large domestic investor and for the promoter and company founder to have considerable net worth in order to qualify for a licence to manufacture insurance products.

19 companies had applied to Irdai for an insurance manufacturing licence by the end of 2023. However, some startups that applied between 2022 and 2023 have not yet secured approval.

The article also highlights the challenges faced by startups in raising venture money and the regulatory tightening happening across various sectors. The initial optimism post the approval of Acko and Digit has not played out as per industry expectations, with the regulator taking a tough stance on governance and compliance issues.