Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025

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.

DOWNLOAD PDF