Parliament has passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, marking one of the biggest reforms in India’s insurance sector in decades. The law aims to open up the sector to more foreign investment, improve regulation, and make insurance more accessible, even as some long-discussed changes have been left out.
The most important change is the decision to allow 100 percent foreign direct investment (FDI) in insurance companies, up from the current limit of 74 percent. This move signals the government’s intent to bring in more capital, technology, and global best practices into a sector that still has low insurance penetration compared with other major economies.
India’s insurance market has grown steadily, but large sections of the population remain under-insured or uninsured. Many insurers also face capital constraints, limiting their ability to expand into smaller towns and rural areas. The new law seeks to address these gaps by encouraging greater competition and investment, while strengthening the role of the regulator.
With the FDI cap raised to 100 percent, foreign insurers can now fully own Indian insurance companies, subject to conditions set by the government and the Insurance Regulatory and Development Authority of India (IRDAI).
Alongside this, the government has proposed easing several rules for insurers with foreign investment. These include removing the requirement that a majority of directors be resident Indians, doing away with mandatory independent director thresholds, and relaxing certain solvency-linked dividend restrictions.
The bill expands the definition of “insurance business”, allowing the government and IRDAI to notify new types of insurance-related activities in the future without changing the law again.
It also permits the merger or transfer of insurance and non-insurance businesses into an insurance company, subject to regulatory approval. This is a departure from current rules, which allow mergers only between similar insurers.
The law gives greater authority to IRDAI, especially over insurance intermediaries such as agents and brokers. Intermediaries will get perpetual registration, though IRDAI can suspend or cancel it when needed.
IRDAI will also have clearer powers to regulate commissions and remuneration, and, in specific cases, frame or amend regulations quickly in the public interest.
The bill lowers the capital requirement for foreign reinsurance branches, aligns record-keeping rules for policyholder data, and tightens rules on directors holding positions across competing insurers or financial firms.
Despite its wide scope, the law does not introduce composite licensing, which would have allowed insurers to sell both life and non-life products. It also retains limits on agents representing multiple insurers and drops earlier proposals aimed at supporting smaller or specialised insurers.
Overall, the new law pushes India’s insurance sector towards greater openness and modernisation, but stops short of a complete overhaul.
