Finance Minister Nirmala Sitharaman on Tuesday introduced the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, in the Parliament, seeking to modernise India’s insurance laws by opening the sector to full foreign ownership, strengthening IRDAI’s enforcement powers, improving governance standards, protecting policyholders’ data, and simplifying regulation.
A key proposal is to allow 100% foreign direct investment (FDI) in Indian insurance companies, a significant jump from the existing cap of 74%. The move is aimed at accelerating insurance penetration, improving capital availability and bringing in global expertise and technology into the sector.
Insurance classification proposed by the bill
The Bill clearly classifies insurance into life, general, health and reinsurance, enabling more focused regulation and specialised supervision. It also widens the definition of insurance intermediaries to include managing general agents, insurance repositories, consultants and third-party administrators, bringing a larger ecosystem under the regulatory ambit of the Insurance Regulatory and Development Authority of India (IRDAI).
Regulatory powers of IRDAI are substantially strengthened. The Authority will be able to issue binding directions, order disgorgement of wrongful gains, regulate commissions paid to agents and intermediaries, and supersede the boards of insurers in cases where policyholder interests are at risk. Governance norms are tightened by restricting common directors across insurers operating in the same line of business and by prescribing clearer eligibility and accountability standards for actuaries and key management personnel.
Investment rules simplified
Investment rules for insurers are rationalised, replacing multiple legacy provisions with a simplified framework that sets minimum exposure to government securities while allowing flexibility through regulations. The Bill also introduces a formal framework for data protection, covering KYC processing, confidentiality and secure handling of policyholder information.
Compliance mechanisms are sharpened with higher penalties, including daily fines for violations capped at ₹10 crore, and mandatory public disclosure of enforcement action. In addition, procedures for mergers, amalgamations and transfer of insurance business are streamlined to facilitate consolidation.