New Delhi, Dec 18: Parliament on Wednesday passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, a major reform measure that allows up to 100 per cent foreign direct investment (FDI) in insurance companies, with the government stating that the move will boost capital inflows, improve governance and expand insurance coverage across the country.
The Bill, passed on December 17, amends three key legislations governing the insurance sector—the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
According to the government, higher FDI limits are expected to facilitate capital augmentation, adoption of advanced technologies and global best practices, while increasing competition in the sector. Officials said greater competition would drive efficiency in insurance products and services, ultimately benefiting policyholders and expanding employment opportunities.
The legislation also introduces several measures to improve ease of doing business. For insurance intermediaries, it provides for one-time licensing and allows suspension of licences instead of outright cancellation. For insurers, the threshold for seeking prior regulatory approval for transfer of share capital has been raised from 1 per cent to 5 per cent. In a significant move for reinsurance, the Net Owned Fund requirement for Foreign Reinsurance Branches has been reduced from ₹5,000 crore to ₹1,000 crore.
The Life Insurance Corporation of India (LIC) has been granted greater operational autonomy, including the flexibility to open zonal offices within the country and align its foreign offices with local laws and regulations of host jurisdictions.
To strengthen consumer protection, the Bill provides for the creation of a Policyholders’ Education and Protection Fund, aimed at spreading awareness about insurance among citizens. It also mandates that policyholders’ data be collected and protected in accordance with the Digital Personal Data Protection Act, 2023.
Regulatory oversight is being reinforced through the introduction of standard operating procedures for regulation-making and by making the process consultative. The Insurance Regulatory and Development Authority of India (IRDAI) has been empowered to disgorge wrongful gains from insurers and intermediaries, while penalties have been rationalised with clearly defined factors for their imposition.
The government said the reforms are designed to extend insurance coverage to individuals, households and enterprises, deepen penetration, improve regulatory governance and enhance the overall resilience of the Indian financial system.
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