Parliament Passes Bill To Allow 100 PC FDI In Insurance Sector

Parliament on December 17 passed a bill to raise Foreign Direct Investment (FDI) in the insurance sector to 100 per cent from the current 74 per cent, which is expected to increase insurance penetration, lower premiums, and boost job creation.

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, was cleared by the Rajya Sabha with a voice vote, a day after it was passed by the Lok Sabha.

The House also rejected several amendments made by the opposition to the bill, including the one to send the legislation to a parliamentary panel for further scrutiny.

Replying to a debate on the bill, Finance Minister Nirmala Sitharaman said the amendments would allow foreign companies to bring in more capital in the insurance sector.

"Since assuming office in 2014, our govt has introduced significant reforms in the insurance sector, recognising that true national development requires broader coverage for our people, businesses, and agriculture," she said.

Sitharaman informed the House that the opening of the sector has helped in increasing penetration of insurance in the country, and there is "scope for more.”

The increase in the FDI limit to 100 per cent will pave the way for more foreign companies to enter India, as in many cases, they do not find joint venture partners due to various reasons, she said.

The minister also exuded confidence that with more companies, the competition will increase, and premiums should drop.

Allaying concerns of some members on the job front, Sitharaman said that, on the contrary, there will be more employment opportunities after the amendments.

She said the number of employees, agents, and micro agents has grown by almost three times to 88.17 lakh in 2024-25 from 30.14 lakh in 2014-15.

"Overall, the amendments are expected to further strengthen job creation, skill development, and formal employment," she said.

The minister also refuted the opposition's allegations that the government was in haste to pass the bill, saying consultations took place on it for nearly two years.

Sitharaman also addressed the concerns that foreign insurers will repatriate profits. She said the insurance regulator, Irdai, has prescribed that all insurance companies have to maintain a minimum solvency ratio of 1.5, which means the assets should be 1.5 times the liabilities.

Also, the companies have to make provisions for all ‘incurred but not reported’ and ‘incurred but not enough reported' liabilities, she said.

"The profits are calculated only after providing for these liabilities. These norms provide enough safeguards for protecting the interests of policyholders," the minister added.

She informed the House that private sector insurance companies are actively participating in all the Jan Suraksha schemes of the government and in the PM Fasal Bima Yojana (PMFBY). PMFBY is being implemented by 13 private insurers and 5 public sector companies.

Also, more than 15 private insurers are participating in Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY). Private sector insurers have cumulatively enrolled more than 20 crore persons under these two schemes.

Sitharaman also allayed concerns that the amendments would dilute the statutory recognition of the public sector LIC.

"We are actually empowering LIC. LIC continues to enjoy the trust of our citizens and perform well to the expectations," she said.

LIC’s total asset under management (AUM) increased by 6.45 per cent to Rs 54.52 lakh crore in 2024-25. The solvency margin of the insurance behemoth improved to 2.11 from 1.98.

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, would lead to amendments in the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.

It also paves the way for the merger of a non-insurance company with an insurance firm.

The bill also aims to accelerate the growth and development of the insurance sector and ensure better protection of policyholders, as per the statement of objects and reasons.

The bill provides for the establishment of the Policyholders' Education and Protection Fund to protect policyholders' interests.

These amendments will also improve ease of doing business for insurance companies, intermediaries, and other stakeholders, bring transparency to regulation-making, and enhance regulatory oversight in the sector.

With regard to the term of office of the Chairperson and other whole-time members, the bill provides for a five-year term or until they attain the age of 65 years, whichever is earlier, it said.

At present, the upper age limit for whole-time members is 62 years, while for the Chairman it is 65 years.