Nirmala Sitharaman,Finance Minister
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, was cleared by the Rajya Sabha with a voice vote, a day after it was passed by the Lok Sabha
Finance Minister Nirmala Sitharaman cited data saying jobs in the sector have nearly tripled since the FDI limit was raised from 26 per cent to the current 74 per cent.
New Delhi:After being cleared by the Rajya Sabha, the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, stands passed by the Indian Parliament on Wednesday, paving the way to raise FDI in the insurance sector to 100 per cent from the current 74 per cent and expected to increase insurance penetration, lower premiums, and boost job creation.
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, was cleared by the Rajya Sabha with a voice vote, a day after it was passed by the Lok Sabha.
The House also rejected several amendments made by the Opposition to the bill, including the one to send the legislation to a parliamentary panel for further scrutiny.
Replying to a debate on the bill, Finance Minister Nirmala Sitharaman said the amendments would allow foreign companies to bring in more capital in the insurance sector.
Sitharaman informed the House that the opening of the sector has helped in increasing penetration of insurance in the country, and there is “scope for more”.
She said the increase in the FDI limit to 100 per cent will pave the way for more foreign companies to enter India, as in many cases, they do not find joint venture partners due to various reasons.
The minister also exuded confidence that with more companies, the competition will increase, and premiums should drop.
This will help in capital augmentation, adoption of advanced technology and bringing global best practices along with increasing employment opportunities. Increased competition would drive efficiency in products and services proving beneficial for the citizens.
Allaying concerns of some members on the job front, Sitharaman said that, on the contrary, there will be more employment opportunities.
She cited data in support of her assertion, saying jobs in the sector have nearly tripled since the FDI limit was raised from 26 per cent to the current 74 per cent.
The minister also refuted the Opposition’s allegations that the government was in haste to pass the bill, saying consultations took place on it for nearly two years.
The increase in the FDI limit could boost investments and improve insurance penetration in the country, which stood at 3.8% of GDP in 2024, according to research firm Swiss Re Institute.
India’s insurance sector has about 74 firms, including joint venture with foreign players such as Prudential Plc, Sun Life Financial and AIG. Out of these 74 insurance companies, four have foreign investment of 74%, Sitharaman said.
“The higher FDI limit will encourage long-waiting foreign insurers to invest in India – especially those keen to bring deep global capabilities in risk and technology, along with capital,” said Saurabh Mishra, a partner at consultancy firm Kearney.
The legislation titled “Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act of 2025” does not include an earlier draft proposal for a unified or a “composite” license that would have allowed insurers to provide life, general and health insurance under a single entity.
In India, life insurance companies cannot sell products such as health insurance, while general insurers are allowed to only sell products ranging from health to marine insurance.
The unexpected dropping of the composite license may force some of those insurers who had been considering plans to enter other segments of insurance to rethink their plans, said Mishra.
Separately, India will allow merger of an insurance company with a non-insurance firm if the combined entity is in the business of insurance. The bill also enables the creation of a dedicated fund for policyholders’ education and to protect their interests.
Harsh Khemka, Partner, Khaitan & Co, said”The Amendment of Insurance Laws Bill 2025 is a well-considered and strategic set of reforms and not just a headline-driven liberalisation. The Government seems focused on building a sustainable, globally aligned insurance market, rather than treating higher FDI limits as a standalone solution. While some anticipated reforms, such as composite licences and value added services remain for the future, the overall direction is clear and deliberate. Taken together, these changes should have a lasting and positive impact on the sector.”
Limits on Commission
The act now gives legislative powers to the regulator, Insurance Regulatory and Development Authority of India (IRDAI), to set limits on commission paid to insurance agents, rather than relying on executive powers.
It also empowers the regulator to disgorge any wrongful gains made by an insurance company in violation of its rules.
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, would lead to amendments in the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
It also paves the way for the merger of a non-insurance company with an insurance firm.
The bill also aims to accelerate the growth and development of the insurance sector and ensure better protection of policyholders, as per the statement of objects and reasons.
The bill provides for the establishment of the Policyholders’ Education and Protection Fund to protect policyholders’ interests.
The bill also promote Ease of Doing business for intermediaries through the introduction of provision of one-time licensing and the provision of suspension of license rather than straight away cancellation.
For insurers, the limit of seeking prior regulatory approval for transfer of share capital has been raised from 1% to 5%, the Net Owned Fund requirement of Foreign Reinsurance Branches has been reduced from Rs 5,000 Crore to Rs 1,000 Crore.
Life Insurance Corporation LIC has been provided autonomy to open Zonal offices in the country and to align its foreign offices with the laws and regulations of their respective jurisdiction.
To protect the interest of Policyholders, a dedicated fund, namely Policyholders’ Education and Protection Fund will be set up to spread awareness about insurance. Policyholders’ data would now be required to be collected and protected in alignment with DPDP Act 2023.
Regulatory governance is being strengthened by introducing standard operating procedure for regulation making and mandating the process consultative. IRDAI is being given the power to disgorge wrongful gains from insurers and intermediaries. Penalties are being rationalised and factors for imposition of penalties are being introduced.
The reforms are aimed at extending insurance coverage to people, households and enterprises, deepening insurance coverage, providing ease of doing business, improving regulatory oversight and governance. All these measures would lead to strengthening of Indian insurance sector to provide financial resilience to Indian economy.
With inputs from Agencies