In a landmark move aimed at transforming India’s insurance landscape, the Parliament on Wednesday passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, allowing 100% Foreign Direct Investment (FDI) in the insurance sector, up from the existing cap of 74%.
The bill was approved by both houses cleared earlier by the Lok Sabha and subsequently by the Rajya Sabha during the Winter Session of Parliament. This legislative reform is being seen as one of the most significant steps in liberalising India’s financial services sector.
Government’s Rationale and Expected Impact
Finance Minister Nirmala Sitharaman, who introduced the bill, emphasised that raising the FDI limit to 100% would attract substantial capital inflows, bring in global underwriting expertise and advanced technology, and sharpen competition across the industry. She highlighted that greater foreign participation is expected to improve insurance penetration, lower premium costs, and make policies more accessible to ordinary citizens.
The government has set an ambitious long-term goal of achieving near-universal insurance coverage by 2047, and this policy shift is aimed at accelerating that journey.
Under the amended framework, key laws such as the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999 will also be updated to support the liberalised regime.
New Provisions Under the Bill
Beyond raising the FDI cap, the bill introduces several noteworthy changes:
Policyholder Protection: Establishment of a Policyholders’ Education and Protection Fund aimed at safeguarding consumer interests.
Regulatory Enhancements: Increased penalties for non-compliance by insurers and intermediaries to deter lapses, with fines rising from ₹1 crore to ₹10 crore.
Ease of Doing Business: Simplified registration and compliance processes for intermediaries like agents and brokers to strengthen insurance distribution networks.
Merger Provisions: Companies not traditionally in the insurance business can merge with insurers if the combined entity focuses on insurance.
Reactions From Industry and Opposition
The bill has elicited mixed reactions:
Supporters argue the reforms will broaden India’s insurance market, attract marquee global players, and drive innovation in product offerings. They also point out that public sector insurers can benefit from fresh capital and expertise.
However, opposition voices have raised concerns about increased foreign control in a sector closely tied to social security and financial stability. Some critics warned that unrestricted foreign ownership might undermine domestic firms like LIC (Life Insurance Corporation of India) and adversely affect policyholder trust.
What the Future Holds
With India’s insurance penetration still significantly below that of many advanced economies, policymakers believe this reform could be a catalyst for accelerated growth and wider coverage across urban and rural areas alike. The government also views this as a step toward making India a more attractive destination for global investors.
As the provisions take effect, stakeholders will be closely watching how foreign players enter the market and how domestic insurers adapt to heightened competition and a changing regulatory environment.
