The Indian insurance sector is poised for a major transformation with the government set to introduce the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 in the upcoming winter session of Parliament. This landmark legislation aims to attract significant investments, modernise the regulatory framework, and expand insurance coverage across the country.
Key Provisions: FDI, Niche Licences, and Regulatory Power
The Bill introduces several groundbreaking changes. Primarily, it seeks to enable 100% Foreign Direct Investment (FDI) in the insurance sector, a move expected to bring in substantial capital. Furthermore, it empowers the Insurance Regulatory and Development Authority of India (IRDAI) to issue sector-specific licences. This will allow new insurers to operate in single or niche lines of business like cyber, property, or marine insurance.
The legislation does not explicitly clarify if composite licences for both life and non-life insurance under one entity will be permitted. However, it states that the government can notify other classes of business in consultation with IRDAI. The Bill amends three key acts: the Insurance Act, 1938, the LIC Act, 1956, and the IRDA Act, 1999.
From Statute to Regulation: A New Framework
A fundamental shift proposed is the move from detailed statutory prescriptions to a regulation-driven framework. This means IRDAI will set many operational norms through regulations rather than waiting for Parliament-approved amendments.
Under this new approach, critical parameters will be moved out of the Act and placed under regulatory control. These include:
- Minimum capital requirements
- Solvency margins
- Investment norms
This flexibility allows IRDAI to prescribe different capital requirements for different categories of insurers. It also replaces fixed statutory investment mandates with conditions specified through regulations.
Strengthening IRDAI and Easing Business
The regulator's financial autonomy is set to increase. The Bill proposes that IRDAI can retain 25% of its annual surplus in a reserve fund to meet its expenses. A new Policyholders' Education and Protection Fund will be created, funded by penalties imposed on insurers.
Other significant changes include:
The Bill removes commission and remuneration caps for agents and intermediaries from the statute, giving IRDAI the authority to set these limits. Licensing requirements for surveyors and loss assessors will be eased, with oversight shifting to a regulatory framework. The definition of 'insurance intermediary' is expanded to include entities like insurance repositories.
For the Life Insurance Corporation of India (LIC), the amendments allow it to establish zonal offices without prior central government approval and permit its overseas branches to maintain funds independently.
The overarching goal of these comprehensive amendments is to widen capital access, modernise regulation, and ultimately expand insurance coverage for millions of Indians, marking a new chapter for the sector.
