Insurance Laws Amendment Bill likely to be tabled in Lok Sabha today—Key points inside

The government may introduce a major insurance reform Bill in the Lok Sabha on Monday. The Union Cabinet approved the proposal earlier this month. The Bill is called the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025.

The Bill aims to expand insurance coverage and improve protection for policyholders.

Changes planned in key insurance laws

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The Bill proposes changes to three main laws — the Insurance Act, 1938, the LIC Act, 1956, and the Irdai Act, 1999. The objective is to update the insurance framework and attract more long-term investment into the sector.

FDI limit in insurance may be raised to 100%

One of the key proposals is to raise foreign direct investment in insurance companies to 100 per cent from the current 74 per cent. Foreign investors would be allowed full ownership, subject to conditions set by the Insurance Regulatory and Development Authority of India (Irdai).

The government has said that rules on governance and compliance will remain unchanged.

Reinsurance rules set to be eased

The Bill also proposes changes to reinsurance norms. It plans to reduce the Net Owned Funds requirement for foreign reinsurers to Rs 1,000 crore from Rs 5,000 crore.

This step is expected to encourage global reinsurers to enter India. It could help insurers manage large and specialised risks more effectively.

IRDAI to get more regulatory powers

The proposed law aims to strengthen the powers of Irdai. The regulator would be able to recover wrongful gains made by insurers or intermediaries.

The Bill also proposes to raise the limit for mandatory regulatory approval for share transfers to 5 per cent from 1 per cent. It also introduces a formal process for rule-making and penalties.

More freedom for LIC operations

The amendments are expected to give more operational freedom to the Life Insurance Corporation of India. LIC would be allowed to open zonal offices without prior government approval.

It would also be able to restructure its overseas operations as per local rules. This could help LIC respond faster to market needs.

Proposals not part of the final Bill

Several proposals discussed earlier are not included in the final Bill. These include composite licences for life and non-life insurance, lower capital requirements for new insurers, and wider distribution rights for agents.

What this means for consumers

The Bill does not directly deal with insurance premiums or claim settlement timelines. However, higher foreign investment, better reinsurance support, and stronger regulation could improve services and product choices for consumers over time.