The Indian government took a major step towards overhauling the country's insurance landscape on Tuesday by introducing the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 in Parliament. Already approved by the Union Cabinet, this proposed legislation seeks to fundamentally transform the sector with the ambitious target of achieving universal insurance protection for all citizens by the year 2047.
Key Reforms Proposed in the Insurance Amendment Bill
The Bill proposes sweeping changes to three foundational acts: the Insurance Act of 1938, the LIC Act of 1956, and the IRDA Act of 1999. Its core objectives are to modernise the industry, widen access to capital, and significantly enhance safeguards for policyholders.
A landmark change is the proposal to raise the limit for Foreign Direct Investment (FDI) in the insurance sector from the current 74% to 100%. This move, initially announced by Finance Minister Nirmala Sitharaman in the Budget speech, comes with a key safeguard: at least one of the top positions—Chairman, Managing Director, or CEO—must be held by an Indian citizen. The sector has already attracted substantial foreign investment, totalling Rs 82,000 crore through FDI so far.
Other significant features include:
- Introducing sector-specific licences for niche areas like cyber, property, or marine insurance.
- Permitting mergers between insurance and non-insurance companies.
- Shifting from a rigid, statute-based system to a flexible, regulation-driven framework. This empowers the Insurance Regulatory and Development Authority (IRDA) to set norms for capital, solvency, and investments through regulations.
- Allowing LIC to establish zonal offices without prior central government approval and manage funds for overseas branches.
- Establishing a Policyholders’ Education and Protection Fund, financed by penalties levied on insurers.
- Expanding the definition of insurance intermediaries to include entities like insurance repositories.
Empowering IRDA and Easing Business Operations
The Bill significantly enhances the regulatory powers of IRDA. The regulator will now have the authority to set commission and remuneration caps for agents and oversee surveyors and loss assessors under a new regulatory framework. Furthermore, the tenure for the IRDA chairperson and whole-time members is proposed to be fixed at five years or until the age of 65, whichever comes first.
These changes are designed to streamline operations, reduce bureaucratic hurdles, and create a more dynamic market environment. The shift towards a principle-based regulation is expected to bring greater transparency and allow the sector to adapt more quickly to evolving market conditions.
Impact and the Road to Universal Coverage
The overarching goal of the Sabka Bima Sabki Raksha Bill is to make insurance coverage easier to access for every Indian. By liberalising FDI, the government aims to attract significant new capital, spur growth, and create more opportunities for insurers and intermediaries across the nation.
The creation of a dedicated policyholder protection fund and the expanded scope for intermediaries are direct measures aimed at building consumer trust and safety. By setting the visionary target of universal protection by 2047, the Bill aligns the insurance sector's growth with the nation's long-term developmental aspirations. If passed, this legislation could mark the beginning of a new, more inclusive era for insurance in India.
