The Union Cabinet has approved the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, paving the way for its introduction in Parliament. 

About the New Insurance Bill

• The bill aims to modernize India’s insurance sector by amending three key laws:
  1. The Insurance Act, 1938 (the principal law governing the sector)
  2. The Life Insurance Corporation (LIC) Act, 1956
  3. The Insurance Regulatory and Development Authority (IRDAI) Act, 1999
• The Bill aims to achieve the national goal of ‘Insurance for All by 2047’ by expanding reach and accessibility
• While the bill introduces significant reforms, it has also left out several long-standing industry demands. 

Key Changes introduced in the New Insurance Bill

• 100% Foreign Direct Investment (FDI): The FDI limit in Indian insurance companies will be raised from 74% to 100%.
• Easier Entry for Foreign Reinsurers: The Net Owned Funds requirement for foreign reinsurers will be reduced from ₹5,000 crore to ₹1,000 crore.
• Enhanced Powers for Insurance Regulator (IRDAI): The bill strengthens the regulatory framework by giving IRDAI more authority:
• • Recovery Power: IRDAI can now recover wrongful gains made by insurers or intermediaries (similar to SEBI’s powers).
  • One-Time Registration: Insurance intermediaries will get a lifetime registration, eliminating the need for periodic renewals.
  • Higher Approval Threshold: IRDAI’s approval for share transfers will be needed only if the transfer exceeds 5% of paid-up capital, up from the current 1%.
  • Better Governance: Introduction of a formal Standard Operating Procedure (SOP) for regulation-making and clearer criteria for penalties.
• Greater Autonomy for LIC: LIC can set up new zonal offices without prior government approval.
• • Global Flexibility: LIC will have the freedom to restructure its overseas operations as per local laws of those countries, making it more agile internationally.

What’s Likely Not in the Bill: Missed Opportunities

• Composite License: A single license allowing an insurer to sell both life and general insurance products.
  • Current Rule: Insurers operate in strict silos—life insurers cannot sell general insurance (like health or motor) and vice-versa.
• Reduced Capital Requirements for New Insurers: Current rule requires a minimum capital of ₹100 crore for insurers and ₹200 crore for reinsurers.
• Captive Insurance: Allowing large corporations to set up their own captive insurance units to insure their internal risks, a common global practice for cost and risk control.
• Distribution of Other Financial Products: Allowing insurers to sell mutual funds, loans, or credit cards.

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