Parliament has recently passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, marking a major reform in India’s insurance sector. The legislation amends the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the Insurance Regulatory and Development Authority Act, 1999 to expand coverage, improve governance and enhance ease of doing business.

A key provision of the Bill allows up to 100 per cent foreign direct investment in insurance companies, opening the sector to greater global participation. The move is expected to support capital augmentation, adoption of advanced technologies and infusion of global best practices, while increasing competition to improve efficiency in insurance products and services for citizens.

To promote ease of doing business, the Bill introduces one-time licensing for intermediaries and provides for suspension of licences instead of immediate cancellation. For insurers, the threshold for prior regulatory approval for transfer of share capital has been increased from one per cent to five per cent. The net owned fund requirement for foreign reinsurance branches has also been reduced from Rs 50 billion to Rs 10 billion. Life Insurance Corporation of India has been granted greater operational autonomy, including the ability to open zonal offices and align overseas operations with local regulations.

Policyholder protection has been strengthened through the creation of a dedicated Policyholders’ Education and Protection Fund to promote insurance awareness. The Bill also mandates that policyholder data be collected and protected in line with the Digital Personal Data Protection Act, 2023.

Regulatory governance is further reinforced by introducing a consultative and standardised process for regulation-making. Insurance Regulatory and Development Authority of India has been empowered to disgorge wrongful gains from insurers and intermediaries, with rationalised penalties and defined criteria for their imposition.

The reforms are expected to expand insurance penetration, strengthen financial resilience and support long-term growth of India’s insurance ecosystem.