Parliament on Wednesday passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025-a major reform that throws India’s insurance sector open to 100% foreign direct investment and considerably expands the powers of the insurance regulator.
A day after it passed in the Lok Sabha, the Bill cleared the Rajya Sabha amid sustained opposition demands that it be referred to a parliamentary committee for detailed scrutiny. Several opposition members also objected to the Bill’s bilingual title, which uses both Hindi and English.
Introduced by Finance Minister Nirmala Sitharaman, the law has been framed by the Centre as ‘structural reform’ to increase insurance penetration, facilitate claim settlements, and take the country toward universal insurance coverage by 2047.
What the Bill changes
The Act amends three foundational laws that governed the sector: namely, the Insurance Act, 1938, the LIC Act, 1956, and the IRDA Act, 1999-arguably one of the most significant insurance reforms since liberalisation.
The most consequential transition is the decision to raise the FDI cap in insurance companies from 74% to 100%, thus allowing full foreign ownership. In a bid to retain a semblance of domestic control, the Bill insists that at least one key executive-like chairperson, managing director, or CEO-must be an Indian citizen.
Key provisions explained
The Bill introduces sectoral insurance licences, allowing companies to function in only selective areas, such as cyber insurance, marine insurance, or property insurance. The government can notify the other categories with consultations with IRDAI.
It also enables mergers between insurance and non-insurance ventures that could result in the consolidation of more massive financial conglomerates.
A major structural change is the shift from detailed statutory provisions to a regulation-based framework. Essential operational requirements or conditions on capital, investment, and solvency margins are going to be prescribed by IRDAI through regulations, and not by Parliament itself through an enactment.
The regulator will also be empowered to cap commissions and remuneration of insurance agents; the move is targeted at checking mis-selling.
For this purpose, the Bill establishes a Policyholders’ Education and Protection Fund, which is funded by penalties levied on insurers.
The definition of insurance intermediaries has been extended to include insurance repositories, while licensing norms for surveyors and loss assessors have been relaxed, substituting inflexible statutory control with regulatory oversight.
As regards the public sector, the law provides for more functional autonomy to the Life Insurance Corporation of India by empowering it to establish zonal offices without prior approval of the central government and even permits its foreign branches to keep funds abroad.
The Bill also fixes five years tenure or an upper age limit of 65 years for the chairperson and whole-time members of IRDAI.
Justification by the Government
Replying to the debate, Sitharaman said higher FDI in insurance was envisaged as early as 1999, when the sector was first opened to private participation. She argued that the reforms would improve claim settlement, particularly in health insurance, and expand coverage in rural and social sectors, which insurers are mandated to serve.
The finance minister said penalties collected under the new framework would be utilized for improving policyholder education and awareness. The government said that insurance already attracted about ₹ 82,000 crore of foreign investment, and further liberalisation will attract capital, technology and global best practices.
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Opposition concerns
The Opposition parties strongly opposed the Bill, cautioning that it promotes capital over accountability. A number of MPs said any move to allow 100 percent foreign ownership could undermine national insurers, including LIC, and also lead to key decisions on premium rates and overall strategy being taken by foreign boards.
Others pointed out the increased regulatory powers of IRDAI and warned that just removing the statutory safeguards by replacing them with regulations could create a statutory vacuum and even carry the risk of regulatory capture.
The said Bill was, however, passed by voice vote notwithstanding these objections and repeated demands for further scrutiny.
Why it matters
The Sabka Bima Sabki Raksha Act, 2025 reflects a clear policy preference: greater liberalisation supported by more rigorous regulation. Its proponents argue that it is indispensable for the growth of insurance penetration in India, while opponents believe that it may lead to loss of public interest. Its actual power would depend on how IRDAI deploys its new powers and whether an expanded investment base translates into affordable, accessible insurance for millions still outside the safety net.
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