The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 was introduced in the Lok Sabha on Tuesday, proposing wide-ranging changes to India’s insurance laws. According to experts, the Bill aims to attract foreign capital, modernise regulation and support the government’s long-term goal of “Insurance for All by 2047”.

Foreign ownership to rise to 100%

The most significant change in the Bill is the proposal to raise the foreign direct investment (FDI) limit in insurance companies from 74% to 100%. According to Stella Joseph, partner at Economic Laws Practice, this move opens the sector fully to global investors and could bring long-term capital and international expertise into India. For insurers, both Indian and foreign, this marks a major shift in ownership and governance norms.

The Bill also removes the mandatory requirement for foreign insurers to partner with a domestic company. According to Shailaja Lall, partner at Shardul Amarchand Mangaldas, this lowers entry barriers and may encourage new foreign players, even though many may still rely on Indian partners for distribution.

Stronger role for the regulator

The Bill seeks to strengthen the Insurance Regulatory and Development Authority of India (IRDAI). According to experts, IRDAI will gain broader powers to investigate insurers and intermediaries, including search-and-seizure powers and the authority to issue directions, such as the disgorgement of gains.

“The IRDAI’s powers have been expanded to include wider investigative, search and seizure powers extended to intermediaries, the power to issue directions (including disgorgement) and broader triggers for search and seizure. Further actuarial investigations are not required for all insurers, not just life insurers,” said Lall.

Penalty limits are also being raised sharply. The maximum penalty will increase from ₹1 crore to ₹10 crore, although the Bill sets out clear factors for determining the final amount, including the seriousness of the violation, its duration, and any loss incurred by policyholders.

Insurance awareness program

As the bill proposes to strengthen IRDAI, it provides for a Policyholders’ Education and Protection Fund and permits mergers between insurers and non‑insurance firms. This is aimed at enhancing insurance awareness and safeguarding policyholder interests. Its emphasis on digital public infrastructure, supported by strong data privacy and cybersecurity safeguards, is both timely and critical. Overall, the Bill is expected to widen insurance coverage, bring more citizens under the insurance safety net, and spur sectoral growth while strengthening policyholder protection," said Dr Tapan Singhel, MD & CEO Bajaj General Insurance, Chairman General Insurance Council.

More flexibility, but with caution

The Bill clarifies the definition of “insurance business” and allows the government, in consultation with IRDAI, to notify additional types of contracts that insurers may undertake. However, according to experts, it remains unclear whether this flexibility extends beyond core insurance activities to non-insurance services.

Some earlier reform ideas appear to have been deferred. The Bill also introduces a framework to potentially allow future introduction of composite licences. The eventual impact will turn on precise rule-making, alignment with FEMA/FDI policy, and calibrated prudential standards to balance innovation, capital inflows, and policyholder protection.

Joseph said, “Notably, certain earlier suggestions like composite licensing and significantly lower capital floors appears to have been deferred or diluted, underscoring regulatory caution.”

Changes to investments and governance

A notable shift is the proposal to allow insurers to invest in private companies, ending a long-standing blanket ban. According to Shailaja Lall, “The Bill seeks to extend the restrictions on common directors to now apply to all insurers (life, general, health) for directors/officers also holding roles in a competing insurer in the same class, a bank, or an investment company. This may have potential alignment issues with SEBI LODR requirements for independent directors on material subsidiaries and also Section 48A of the Insurance Act.”

Restrictions will now apply across life, general and health insurers, as well as links with banks and investment companies. Experts warn this could create alignment issues with existing corporate governance rules.

Impact on intermediaries

For insurance intermediaries, the Bill introduces several far-reaching changes. Managing general agents (MGAs) are brought within the definition of insurance intermediaries, insurance repositories are formally recognised to support e-policy servicing, and intermediary registrations will be granted in perpetuity.

Investments by insurers in private companies

 “Investments by insurers in private companies, which were earlier prohibited, will now be permitted, ending a blanket prohibition. However, IRDAI will need to ensure policyholder protection and robust prudential controls to ensure that this is not misused,” said Lall.

What happens next

The Bill still needs parliamentary approval and presidential assent. According to experts, much will depend on how supporting rules are drafted, how IRDAI updates its regulations, and how the changes are aligned with India’s foreign exchange and FDI policies. The final outcome, they say, will determine whether the reforms successfully balance innovation, capital inflows and policyholder protection.