Summary of this article
FDI limit raised to 100 per cent insurers in the new Insurance Amendment Bill.
IRDAI gets stronger powers to enforce regulations.
LIC gains operational flexibility and overseas autonomy.
The Union Cabinet on December 12, 2025, gave its assent to the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, paving the way for the introduction of the Bill in Parliament. This Bill seeks to make certain amendments in the Insurance Act, 1938, the LIC Act, 1956, as well as the Insurance Regulatory and Development Authority (Irdai) Act, 1999.
Foreign Direct Investment
One of the important features of the Bill is that it seeks to enhance the foreign direct investment (FDI) ceiling in insurance companies to 100 per cent from the existing 74 per cent. According to the new regulations, foreign investors would be allowed to fully own an insurance company with certain conditions imposed by Irdai. There would be no change in the regulations related to governance and compliance. This would help increase the number of insurers in the market, as a result of which the policyholders would get more products for purchase.
Changes to Reinsurance
The Bill also makes proposals for changes to reinsurance regulations. The Net Owned Funds (NOF) requirement for foreign reinsurers has been lowered from Rs 5,000 crore to Rs 1,000 crore. This is aimed at promoting the entry of foreign reinsurers into the insurance market for large scale and specialised risks. This could enable insurance companies to provide more comprehensive services with respect to claim settlements.
More Powers To Irdai
The new Insurance Amendment Bill intends to enhance the power of Irdai, granting the regulator authority to recover wrongful gains made by insurers or intermediaries. This Bill proposes to enhance the threshold of seeking regulatory consent for transferring shares from 1 per cent to 5 per cent, making it easier to comply with. Additionally, this Bill proposes an official “standard operating procedure” for rule-making, thereby ensuring that regulations on penalties are imposed in a more standardised manner. This could ensure better accountability in the insurance industry indirectly safeguarding policyholders.
Operational Changes for LIC
The proposed amendments would provide more flexibility to the Life Insurance Corporation (LIC) of India. This would enable LIC to open zonal offices without the need for any approvals from the government. This would help LIC to expand quickly and with more efficiency in its administrative matters. Therefore, it would enable LIC to act according to the demands of its various customers. Similarly, LIC would be able to restructure its foreign operations in a manner consistent with foreign regulations. This would provide more flexibility to LIC in the foreign market.
Provisions Not Included
Some of the proposals that were floated in the earlier drafts of the Bill are not included the final Bill. These proposals include composite licensing that enables one company to operate in both the life insurance and non-life insurance markets, reduced minimum capital requirements for new insurers, the ability for agents to distribute products of multiple insurers without any restrictions, other financial products, such as equity or loan products, or setting up a captive insurance company by large businesses.
Implications for Consumers
It does not make any direct provisions with respect to insurance premiums or the time for the settlement of claims. It is likely to indirectly influence the consumer in the wake of enhanced foreign investment inflows, active reinsurance participation, and improvements in regulation.
There would be no change in the current framework governing distribution or existing licensing practices, implying that life, health, and general insurance would become separate products for purchase by consumers. Eventually, there would be improvements in benefits and services for insured individuals.
