New Delhi: The Finance Minister today tabled the Insurance Amendment Bill 2025, a landmark proposal aimed at revolutionizing India's insurance sector, in Parliament. The bill, officially titled "Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025," seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. The primary highlight of the bill is the proposal to raise the Foreign Direct Investment (FDI) limit in insurance companies from the current 74% to 100%.

The move to allow 100% FDI is expected to attract substantial long-term foreign capital, enhance insurance penetration, promote technology transfer, and support the government's vision of "Insurance for All by 2047". It is anticipated that this will lead to greater competition, product innovation, customer-centric services, and the adoption of global best practices in underwriting, risk management, and digital claims.

Alongside the FDI increase, the bill includes several key provisions aimed at modernizing the insurance landscape. These include:

• Strengthening the IRDAI: The bill grants the Insurance Regulatory and Development Authority of India (IRDAI) greater power, including the authority to direct insurers and intermediaries to disgorge amounts equivalent to wrongful gains or losses averted through contravention. It also empowers IRDAI to cap agent commissions.
• Policyholder Protection: The bill mandates the creation of a Policyholders' Education and Protection Fund (PEPF), which will be funded through grants, donations, and penalties imposed by the IRDAI. This fund will be used to promote awareness and safeguard the interests of policyholders.
• Streamlined Regulations: The bill simplifies the registration process for insurance intermediaries and raises the threshold for equity transfer approvals, promoting ease of doing business.
• Enhanced Transparency: The bill mandates transparent rule-making and penalty frameworks, ensuring greater accountability and fairness in the regulatory process.
• Mergers and Acquisitions: The bill also paves the way for mergers between insurance and non-insurance companies.
• Terms of office: The bill provides for a five-year term or until they attain the age of 65 years for the Chairperson and other whole-time members.

The decision to increase the FDI limit has been largely welcomed by the insurance industry. Industry leaders believe that this will provide a significant boost to the sector, attracting much-needed investment and fostering innovation. Tapan Singhel, chief executive officer of Bajaj General Insurance, estimated the possibility of bringing in investment worth Rs 10 lakh crore.

However, some industry demands, such as the introduction of composite licenses allowing insurers to offer life, general, and health insurance under a single entity, have been excluded or diluted. This has led to mixed reactions from some stakeholders. The government felt that Indian insurance companies are not yet equipped to have a composite licence regime.

The bill is currently listed for approval in the ongoing winter session of Parliament. To qualify for 100% FDI, among an insurance company's chair, managing director or chief executive, one of them would have to be an Indian resident. If passed, the Insurance Amendment Bill 2025 is expected to reshape India's insurance sector, driving growth, enhancing policyholder protection, and promoting greater financial inclusion.