The Lok Sabha on Tuesday passed the Sabko Bima Sabko Raksha (Amendment of Insurance Laws) Bill, 2025, that seeks to reform India’s insurance framework through changes in the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the IRDAI Act, 1999.
The amendment will increase the FDI limit in Indian insurance companies from 74% to 100% to attract investment, facilitate technology transfer, increase insurance penetration and social protection.
The requirement of Net Owned Funds for foreign reinsurers will also be reduced from Rs 5,000 crore to Rs 1,000 crore.
To scale up the regulatory framework, the IRDAI will get higher enforcement powers, including the authority to disgorge wrongful gains made by insurers or intermediaries. The Bill gives LIC greater operational freedom, empowering it to set up new zonal offices without requiring prior government approvals, enabling faster expansion, improved administrative efficiency, and better regional oversight.
Even as Opposition members criticised facilitating foreign companies in a sector where citizens pour their savings, Union Finance Minister Nirmala Sitharaman, replying to the debate, said, “When competition increases, rates go down. The more the competition, the better the rate.”
Underlining that the Insurance Act has seen 12 amendments since it was introduced in 1938, she said these were reflective of the progress the country was making. “In 1950, agents’ commission was reduced. In 1999, foreign players were allowed with an FDI cap of 26%. The LIC Act has had eight amendments. In 1981, explicit power was given to the central government over working conditions of LIC, its employees and agents,” she said.
“In 2014-15, there were 53 insurers. Now they are 74. Insurance penetration has gone up to 3.75-8% now, from 3.3% in 2014-15. Insurance density–average insurance paid per person in a year–was US dollars 55 in 2014-15; now it is US dollars 97,” Sitharaman said. “The FDI limit in insurance companies has reached 74%. For insurance intermediaries, now it is 100%. Now is the time when we are looking at greater penetration. There will be better regulatory oversight.”
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She said the Bill is aimed at greater transparency, and many compliance-related issues were being eased out.
Earlier, Congress MP Manickam Tagore said insurance is about who bears risk in our society. He said if it is pushed away from the state, it would be harmful. “This is driven by an ideology that the state should retreat,” he said. SP’s Utkarsh Verma ‘Madhur’ said the increase in FDI in insurance was dangerous, adding that “American and European companies would capture the insurance sector without any Indian partner”. He asserted that it would force the LIC to compete with foreign corporate giants.
TMC’s Satabdi Roy pointed out that while insurance penetration was 3.7% in India, it was much lower than the global average of 7%.
DMK’s DM Kathir Anand said the Bill would weaken LIC and put people’s savings in the hands of foreign companies.
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