Answer

Introduction

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 proposes major reforms to India’s insurance framework by amending the Insurance Act, 1938, IRDAI Act, 1999, and LIC Act, 1956. It seeks to enhance insurance penetration, attract global capital, and strengthen regulatory oversight.

Body

Key Provisions of the Bill

• 100% FDI Limit: Allows complete foreign ownership in insurance companies to attract long-term capital, advanced technology, and global best practices.
  Eg: Cabinet approval for raising FDI from 74% to 100%.
• Stronger IRDAI Powers: Enhances IRDAI’s regulatory authority to approve products, enforce compliance, protect policyholders, and ensure sectoral stability.
• LIC Autonomy: Grants LIC greater operational flexibility in expansion, investments, and governance without frequent government approvals.
• Ease of Doing Business: Simplifies licensing, mergers, and exits to improve efficiency and reduce regulatory delays for insurers.

Impact on Insurance Penetration

• Capital Expansion: Higher foreign investment can increase insurer capacity, enabling expansion into underserved rural and semi-urban regions.
  Eg: FDI liberalisation with “Insurance for All by 2047” (IRDAI Vision 2047).
• Product Innovation: Global participation promotes innovative, affordable, and customized insurance products suited to diverse Indian needs.
  Eg: Entry of global insurers bringing digital and micro-insurance products.
• Improved Trust: Stronger regulation and faster grievance redressal can enhance consumer confidence and voluntary insurance adoption.
• Market Competition: Increased competition can lower premiums and improve service quality, encouraging wider insurance adoption.
  Eg: Competitive pricing benefits due to new foreign entrants.

Challenges Remaining Unaddressed

• Composite Licensing Gap: The Bill does not allow single licences for life and general insurance, limiting operational efficiency.
• Rural Awareness Deficit: Insurance illiteracy and mistrust in rural areas remain unaddressed despite regulatory reforms. Low penetration in rural India despite reforms.
• High Entry Barriers: Capital and compliance requirements may still deter small, regional, or niche insurance startups.
  Eg: Concerns over persistent capital adequacy norms.

Measures to Overcome Challenges

• Composite Licences: Introducing unified licences would reduce costs, enhance efficiency, and allow insurers to offer bundled products.
• Financial Literacy Drives: Targeted awareness campaigns can improve understanding of insurance benefits among rural and informal-sector populations.
• Digital Distribution: Leveraging insurtech platforms can reduce costs, improve outreach, and enhance claims settlement efficiency.

Conclusion

The Bill marks a decisive shift toward liberalisation and regulatory strengthening of India’s insurance sector. However, achieving inclusive insurance growth requires complementary reforms such as composite licensing, rural outreach, and financial literacy initiatives to translate structural changes into meaningful last-mile insurance access.

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