The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, introduced in the Lok Sabha on 16 December, represents the most significant reform of India’s insurance sector in decades.
The bill seeks to amends three core laws—the Insurance Act, 1938; the LIC Act, 1956; and the IRDAI Act, 1999—to liberalise foreign investment, strengthen regulation, introduce new intermediaries, and accelerate insurance penetration in line with the government’s goal of ‘insurance for all by 2047’.
It also aims to enhance protection for policyholders, which should boost consumer confidence and help build a more resilient insurance ecosystem. At a high level, the legislation represents a decisive shift towards a liberalised, globally aligned and regulator-driven insurance market.
Mint takes a closer look at the reasons for the overhaul, the specific changes it will bring, and which issues will remain unresolved.
Why did the government amend three separate insurance laws through a single bill?
The government chose a single, consolidated amendment to ensure regulatory consistency across India’s fragmented insurance framework. The three laws govern private insurers, Life Insurance Corporation (LIC) and the regulator Irdai, and piecemeal changes could have created regulatory gaps. The approach reflects the government’s goal of modernising the entire insurance ecosystem at once, rather than reforming individual institutions separately.
Stella Joseph, partner at Economic Laws Practice, said the bill seeks to amend all three laws to “bring in significant reforms for the insurance sector”, particularly to enable foreign investment, improve governance, and strengthen the regulator.
What are the key features of the Sabka Bima Sabki Raksha Bill, 2025?
The bill introduces several structural changes:
- Raises foreign direct investment (FDI) limit to 100% to bring in more capital for expansion.
- Gives Irdai disgorgement powers to recover wrongful gains made by insurers or intermediaries, as Sebi does. It also gives Irdai the power to cap agent commissions through regulations and tighten oversight on payouts and disclosures.
- Requires all insurers and intermediaries to clearly use terms such as "insurance" or "assurance" in their names to prevent mis-selling and enhance clarity, ensuring consumers can easily identify regulated entities.
- Introduces managing general agents (MGAs) as intermediaries. MGAs specialize in niche and non-standard risks (e.g., cyber, flood insurance), helping to create tailored products and reach underserved markets that large insurers might ignore.
- Increases penalties for non-compliance by insurers and intermediaries. Maximum penalty raised from ₹1 crore to ₹10 crore.
- Permits mergers between insurance and non-insurance businesses.
- Creates a policyholders’ education and protection fund.
- Raises the threshold for Irdai approval of equity transfers from 1% to 5%, easing business operations.
- Mandates a formal standard operating procedure for making regulations and clear penalty criteria to improve transparency, predictability, and consistency.
- Reduces the net owned funds (NOF) requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore.
- Allows LIC to set up new zonal offices without prior government approval and permits the restructuring of its overseas operations in line with host-country laws, strengthening LIC’s global footprint.
According to Sidharrth Shankar, partner at JSA Advocates & Solicitors, the bill “delegates Irdai with extensive powers to form regulations for policyholder protection”, including on commissions, amalgamations and penalties.
How does the bill change foreign investment rules in insurance?
The most headline-grabbing reform is the complete liberalisation of foreign ownership, allowing 100% FDI in insurance companies, from 74% at present.
Shankar said the sector was now “fully liberalised for insurance companies”, with conditions around foreign investment proposed to be simplified and eased.
Joseph added that these reforms were expected to attract “long-term capital and international know-how”, significantly altering ownership and governance structures, while supporting the government’s ambition of expanding insurance coverage nationwide.
The reforms will allow global insurance companies to inject substantial capital into their Indian entities without waiting for domestic partners to make matching contributions under a joint-venture setup. They will also help to bring better technologies, world-class risk assessment models, and best-in-class insurance products to India’s insurance market, finance minister Nirmala Sitharaman said during a debate on the bill in the Lok Sabha on Tuesday.
How will the bill help develop India’s insurance market?
The reforms in the bill aim to address low insurance penetration, limited product innovation, and capital constraints. Key growth enablers include:
- Easier entry of global insurers and capital
- Greater product innovation through MGAs
- Improved distribution reach
- Stronger policyholder protection
Together, these measures are expected to make insurance more accessible, affordable and competitive. According to Shankar, the bill “provides for a robust regulatory environment while enabling ease of doing business for investors and aligns with global standards at the same time guarding the interest of the policyholders”.
How does the bill expand the role of intermediaries?
A major structural shift is the formal introduction of managing general agents (MGAs) as a recognised class of insurance intermediaries.
Until now, intermediaries were largely restricted to distribution. The new framework allows MGAs to undertake underwriting and distribution, aligning India with developed insurance markets. Sidharrth Shankar said the reforms “enable underwriting and distribution capabilities with MGAs, which was previously limited for intermediaries to only distribute insurance products”. This is expected to drive innovation, niche products and operational efficiency across the sector.
The bill also provides for one-time registration of intermediaries, doing away with licence renewals every three years.
What issues does the bill leave unresolved?
Despite its sweeping scope, the bill defers or dilutes some long-discussed reforms.
Shivangi Sharma Talwar, partner at JSA Advocates & Solicitors, said while the bill permits mergers of insurance and non-insurance businesses, ending a decade-long debate, it lacks clarity on “the business to be transferred” since insurers are otherwise restricted from undertaking non-insurance activities.
She also noted that composite licensing and value-added services remained outside the bill, though both the union government and Irdai have been empowered to notify new classes of insurance business without amending the law.
The bill is also silent on lowering the minimum capital requirement for new entrants (it’s ₹100 crore for insurers and ₹200 crore for reinsurers at present). These high entry barriers will continue to deter small, niche, regional, and specialised insurers. The bill is also silent on allowing large corporations to set up captive insurance companies. Joseph said these omissions hinted at regulatory caution despite the liberalising reforms.