Lok Sabha Passes Insurance Bill Raising FDI Limit to 100% on February 16

The Lok Sabha on December 16 passed the Sabko Bima Sabko Raksha (Amendment of Insurance Laws) Bill, 2025, introducing major reforms to India’s insurance framework. The Bill amends the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the IRDAI Act, 1999.

Key changes include raising the foreign direct investment (FDI) limit in insurance companies from 74% to 100% and reducing the Net Owned Funds requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore. The legislation aims to attract capital, improve technology adoption, and expand insurance penetration across the country.

Key Provisions of the Amendment

The Bill increases the FDI cap in Indian insurance companies to 100%, up from the previous 74%, to encourage foreign investment and technology transfer. It also reduces the Net Owned Funds requirement for foreign reinsurers to ₹1,000 crore, down from ₹5,000 crore, making entry easier for global players.

The IRDAI will gain enhanced enforcement powers, including the ability to disgorge wrongful gains made by insurers or intermediaries. Additionally, the Life Insurance Corporation (LIC) will have greater operational freedom, allowing it to set up new zonal offices without prior government approval.

Historical Context and Industry Growth

The Insurance Act, introduced in 1938, has undergone 12 amendments reflecting the sector’s evolution. In 1950, agents’ commission was reduced, and in 1999, foreign players were allowed with an FDI cap of 26%. The LIC Act has seen eight amendments, including granting explicit powers to the central government in 1981 over the working conditions of LIC employees and agents.

In 2014–15, India had 53 insurers; this number has grown to 74 today. Insurance penetration has increased from 3.3% in 2014–15 to between 3.75% and 8%, while insurance density rose from US$55 to US$97 during the same period.

Impact On Regulatory Oversight and Market Expansion

The amendment strengthens IRDAI’s role by granting it broader enforcement authority to ensure compliance and transparency. LIC’s operational flexibility is expected to accelerate expansion and improve administrative efficiency.

By easing compliance requirements and increasing foreign participation, the government aims to deepen insurance penetration and enhance social protection. These measures are positioned to make India’s insurance sector more competitive and investor-friendly.

Read More: IRDAI Strengthens Safeguards for Motor Insurance Policyholders’ Interests.

Conclusion

The Sabko Bima Sabko Raksha Bill marks a significant milestone in India’s insurance reforms, targeting higher foreign investment and improved regulatory oversight. By raising the FDI limit to 100% and reducing capital requirements for foreign reinsurers, the legislation seeks to attract global players and modernise the sector.

Enhanced powers for IRDAI and operational freedom for LIC are expected to streamline processes and boost efficiency. These changes underline the government’s commitment to expanding insurance coverage and strengthening financial security for citizens.

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