Sabka Bima Sabki Raksha Bill to revolutionise insurance sector, unlock foreign investment: gets Parliament nod

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, aimed at modernising India’s insurance regulatory framework, secured Parliament’s approval on Wednesday after also being passed in the Rajya Sabha. The bill had earlier been cleared by the Lok Sabha on Tuesday.

Moved by Union Finance Minister Nirmala Sitharaman, the legislation proposes sweeping amendments to the Insurance Act, 1938, the Life Insurance Corporation (LIC) Act, 1956, and the Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999. Its core objectives include expanding insurance coverage, strengthening regulatory oversight, and promoting sectoral growth.

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A landmark provision raises the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74 per cent to 100 per cent, a strategic reform designed to attract greater foreign capital, enhance competition, accelerate technology adoption, and support the government’s vision of ‘Insurance for All by 2047.’ This move is expected to foster innovation, improve customer-centric services, and align underwriting and claims management with global standards.

The Bill also lowers the Net Owned Funds (NOF) requirement for foreign reinsurers from Rs 5,000 crore to Rs 1,000 crore, encouraging broader participation beyond the public sector General Insurance Corporation (GIC) and boosting reinsurance capacity, competition, and risk diversification.

Further strengthening regulatory powers, the IRDAI is granted disgorgement authority to recover wrongful gains, enhancing enforcement capabilities similar to those of SEBI. To ease compliance, the Bill introduces a one-time registration for insurance intermediaries, raises the threshold for IRDAI approval of equity transfers from 1 per cent to 5 per cent, and mandates formal standard operating procedures (SOPs) to ensure transparency and consistency in regulation-making.

For LIC, the Bill provides greater operational autonomy by allowing it to open new zonal offices without prior government approval and restructure overseas operations in accordance with host-country laws, aiming to modernise governance and boost competitiveness both domestically and internationally.

While the legislation brings transformative reforms, certain industry demands—such as the introduction of a composite license—were excluded or softened, resulting in mixed reactions from stakeholders. Overall, the Bill seeks to balance industry growth, consumer protection, and broader financial sector reforms and is expected to generate substantial debate in upcoming parliamentary sessions.

Finance Minister Sitharaman emphasised that the Bill aims to accelerate growth and development of the insurance sector, enhance policyholder protection, improve ease of doing business for insurers and intermediaries, and promote transparency and stronger regulatory oversight.