Lok Sabha Clears Insurance Amendment Bill 2025: What Changes And How It Impacts You

Insurance Amendment Bill 2025: The Sabko Bima Sabko Raksha (Amendment of Insurance Laws) Bill, 2025, seeking to raise FDI limit in insurance sector from 74 per cent to 100 per cent, was passed in Lok Sabha

on Tuesday.

It is set to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the Insurance Regulatory and Development Authority Act, 1999.

The bill is set to raise the FDI cap from 74 per cent to 100 per cent in Indian Insurance companies, although with a proposal to have one of the top officials – Chairman, Managing Director, or CEO – as an Indian citizen to retain certain domestic control.

The bill aims to grant the insurance regulator IRDAI new powers to recover wrongful gains, similar to SEBI’s enforcement toolkit.

It also allows LIC to set up new zonal offices without prior government approval, enabling faster expansion and administrative efficiency.

As per the latest data, India’s insurance penetration -or percentage of total premium against GDP- dropped to 3.7% in 2023-24 from 4% in 2022-23. It fell to 2.8% from 3% life insurance and remained steady at 1% in non-life insurance.

What Could Be Changes

Policies Expected to Become Cheaper and More Options

Allowing 100% FDI will allow foreign insurance companies to operate in India with full ownership. This will bring new players into the market and increase competition for existing companies. Increased competition can directly benefit customers, as companies will offer policies with lower premiums and better features. With more options in health, life, and general insurance, customers will be able to choose a policy that best suits their needs.

Benefits of Better Service and New Products

Increased foreign investment will provide insurance companies with more capital. This will enable them to improve digital platforms, claim settlement systems, and customer service. The claim process is expected to become faster and more transparent. Furthermore, new types of insurance plans based on international experience may also enter the Indian market, such as customized health cover and long-term retirement products.

Impact on Public Sector Insurance Companies

The Finance Minister clarified that strengthening public sector insurance companies is also a priority for the government. Since 2014, several steps have been taken to improve their financial health. 100% FDI will increase competition between private and foreign companies, forcing government companies to improve their services. This is likely to improve the quality of the entire sector, ultimately benefiting consumers.

What could change for the common man?

Passage of this bill could make insurance easier and more affordable for the common man. Better premium rates, faster claim settlements, and more options are all beneficial to consumers. However, regulation and oversight will play a crucial role in ensuring consumer protection. Overall, 100% FDI will inject new energy into the insurance sector, and the common man could see positive long-term impacts.