India's insurance sector is poised for its most significant transformation in decades. The government has introduced the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 in the Lok Sabha on 16 December 2025. This landmark legislation aims to overhaul the regulatory landscape, attract global capital, and accelerate the nation's journey towards 'insurance for all by 2047'.
What Does the Insurance Reform Bill 2025 Propose?
The bill consolidates amendments to three core laws: the Insurance Act, 1938; the LIC Act, 1956; and the IRDAI Act, 1999. This unified approach prevents regulatory gaps and modernizes the entire ecosystem in one go. According to Stella Joseph, partner at Economic Laws Practice, the bill brings "significant reforms" focused on foreign investment, governance, and regulatory strength.
The key structural changes are far-reaching. The most prominent is the liberalisation of foreign direct investment (FDI) to 100%, up from the current 74% cap. Finance Minister Nirmala Sitharaman stated this will allow global insurers to inject capital directly into Indian units, bringing advanced technology and risk models.
The bill also empowers the regulator, IRDAI, with new teeth. It grants disgorgement powers to recover wrongful gains, similar to SEBI, and the authority to cap agent commissions. To protect consumers, all regulated entities must clearly use terms like "insurance" in their names to prevent mis-selling.
New Intermediaries and Enhanced Market Development
A major innovation is the formal introduction of Managing General Agents (MGAs) as a new class of intermediary. Sidharrth Shankar, partner at JSA Advocates & Solicitors, notes that MGAs can now handle underwriting and distribution for niche risks like cyber or flood insurance, moving beyond mere distribution. This aligns India with global markets and spurs product innovation for underserved segments.
Other growth enablers include a one-time registration for intermediaries, eliminating renewals every three years, and easing operations by raising the threshold for IRDAI approval on equity transfers from 1% to 5%. The bill also creates a policyholders’ education and protection fund and increases maximum penalties for non-compliance from ₹1 crore to a hefty ₹10 crore.
For the national insurer, LIC, the bill provides operational freedom to set up new zonal offices without prior government approval and restructure overseas operations.
Issues Left Unresolved and the Road Ahead
Despite its sweeping scope, the bill defers some anticipated reforms. Shivangi Sharma Talwar, partner at JSA Advocates & Solicitors, points out a lack of clarity on the transfer of non-insurance business during mergers. The legislation is silent on composite licensing and does not lower the high minimum capital requirement of ₹100 crore for insurers, which may deter niche players.
As Stella Joseph observes, these omissions suggest a note of regulatory caution amidst the liberalisation. However, the overall thrust of the bill is clear: to build a more robust, accessible, and globally competitive insurance market in India, backed by stronger consumer safeguards.
