New Insurance Bill, 2025: Key Provisions, 100% FDI, IRDAI Powers, and What It Means for India

The New Insurance Bill, 2025, officially titled the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, marks a major milestone in India’s financial sector reforms. Approved by the Union Cabinet and set to be introduced in Parliament, the Bill aims to modernise India’s insurance ecosystem, expand coverage, and strengthen regulatory oversight in line with the goal of “Insurance for All by 2047.”

By amending the Insurance Act, 1938, Life Insurance Corporation (LIC) Act, 1956, and the IRDAI Act, 1999, the Bill seeks to attract global capital, improve governance, and enhance consumer protection—while also triggering debate due to some notable omissions.

New Insurance Bill 2025: Latest Update

The Cabinet approval of the Insurance Amendment Bill clears the path for 100% Foreign Direct Investment (FDI) in the insurance sector. Alongside liberalisation, the Bill empowers the Insurance Regulatory and Development Authority of India (IRDAI) with stronger enforcement tools and grants greater operational autonomy to LIC.

While industry stakeholders have welcomed these steps, the absence of reforms such as composite licences and lower capital requirements has led to mixed reactions.

Objectives of the New Insurance Bill, 2025

• Deepen insurance penetration across India

• Attract long-term domestic and foreign investment

• Improve regulatory effectiveness and transparency

• Promote innovation and competition in insurance products

• Strengthen policyholder protection

• Support inclusive growth and financial security

Key Provisions of the New Insurance Bill, 2025

1. 100% FDI in Insurance

• Raises the FDI limit from 74% to 100%

• Aims to attract global insurers and long-term capital

• Expected benefits:

  • Enhanced competition

  • Advanced underwriting and claims technology

  • Customer-centric products

• Aligns with India’s ambition to achieve universal insurance coverage by 2047

2. Liberalisation for Foreign Reinsurers

• Net Owned Funds (NOF) requirement reduced from ₹5,000 crore to ₹1,000 crore

• Encourages foreign reinsurance players beyond public-sector GIC Re

• Likely to improve:

  • Risk diversification

  • Capacity for large and catastrophic risks

  • Pricing efficiency across the insurance market

3. Stronger Powers for IRDAI

The Bill significantly enhances the role of IRDAI:

• Disgorgement powers to recover unlawful gains

• One-time registration for insurance intermediaries

• Higher threshold for IRDAI approval of equity transfers (from 1% to 5%)

• Mandatory Standard Operating Procedures (SOPs) for regulations and penalties

• Improves regulatory predictability, transparency, and investor confidence

4. Greater Operational Autonomy for LIC

• LIC can open new zonal offices without government approval

• Flexibility to restructure overseas operations as per host-country regulations

• Modernises LIC governance and boosts its competitiveness in domestic and global markets

What the New Insurance Bill, 2025 Leaves Out

1. No Composite Licence

• Insurers continue to operate in silos—life and non-life insurance remain separate

• Composite licences could have enabled:

  • Single-window insurance solutions

  • Bundled life, health, and general insurance products

• Its absence is viewed as a missed opportunity to align with global best practices

2. No Reduction in Capital Requirements

• Minimum capital norms remain unchanged:

  • ₹100 crore for insurers

  • ₹200 crore for reinsurers

• High entry barriers discourage:

  • Small and niche insurers

  • Regional and specialised players

• Limits innovation and financial inclusion, especially in underserved areas

3. No Provision for Captive Insurance Companies

• Captive insurers, common globally, allow corporations to insure their own risks

• Benefits include:

  • Better risk management

  • Cost efficiency

  • Greater underwriting control

• The Bill’s silence delays the evolution of India’s corporate risk ecosystem

Why the New Insurance Bill Matters

• Signals India’s commitment to financial sector liberalisation

• Strengthens consumer protection through better regulation

• Encourages global participation in India’s growing insurance market

• Supports economic resilience by spreading risk and improving financial security

Conclusion

The New Insurance Bill, 2025 is a significant step toward transforming India’s insurance landscape. With 100% FDI, stronger IRDAI oversight, and greater LIC autonomy, the Bill lays the foundation for deeper insurance penetration and global integration.

However, the exclusion of composite licences, lower capital norms, and captive insurers highlights a cautious reform approach. As the Bill is debated in Parliament, these gaps are likely to shape discussions on how far and how fast India should liberalise its insurance sector.

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