Proposing 100% FDI and stronger safety measures for policyholders.
In a move set to transform the financial landscape of the country, Finance Minister Nirmala Sitharaman tabled the Insurance Laws (Amendment) Bill 2025 in the Lok Sabha on Tuesday. Titled "Sabka Bima Sabki Raksha," the legislation aims to overhaul the sector with a clear vision: ensuring every citizen is insured by 2047 while making the industry more robust and consumer-friendly.
The Bill proposes sweeping changes to established laws, specifically targeting amendments in the Insurance Act of 1938, the LIC Act of 1956, and the IRDAI Act of 1999.
Opening the Doors to Foreign Investment
Perhaps the most discussed aspect of this new legislation is the government's push to fully liberalize foreign investment. The Bill proposes increasing the Foreign Direct Investment (FDI) cap in Indian insurance firms from the current 74 per cent to a full 100 per cent. By allowing total foreign ownership, the Centre hopes to invite stable, long-term capital into the market, encourage the transfer of advanced technology, and ultimately deepen the reach of social security across states, including expanding insurance coverage in Odisha and other developing regions.
Empowering Policyholders and Regulators
Consumer safety is at the heart of these amendments. The government plans to create a dedicated 'Policyholders' Education and Protection Fund.' This initiative is designed to increase awareness about insurance products and safeguard the rights of the common man.
Furthermore, the Insurance Regulatory and Development Authority of India (IRDAI) is set to receive stronger punitive powers. Under the new rules, the regulator will have the authority to "disgorge" or recover profits made by insurers or intermediaries through illegal or unfair means. This ensures that wrongful gains are taken back, adding a layer of financial accountability.
Digital Growth and Ease of Business
Recognizing the digital shift, the Bill outlines a legal structure for using digital public infrastructure to deliver insurance services. This comes with a mandate to strictly protect policyholder data, balancing innovation with privacy.
For agents and intermediaries, the process of doing business is set to become smoother with the introduction of a one-time registration system, removing the hassle of repeated renewals. Additionally, companies will now have more flexibility in share transfers, as the threshold for seeking regulatory approval is proposed to increase from 1 per cent to 5 per cent of paid-up equity.
Boost for Reinsurance and LIC
The legislation also looks to strengthen the reinsurance market by lowering the Net Owned Fund requirement for foreign reinsurers from Rs 5,000 crore down to Rs 1,000 crore. This drastic reduction is expected to attract more global players to India.
Finally, the state-backed Life Insurance Corporation of India (LIC) will gain significant operational freedom. The Bill proposes granting LIC the autonomy to establish zonal offices and manage its international operations according to local foreign laws, potentially improving LIC services updates and efficiency.
