Insurance Bill Clears, FDI Cap Raised To 100%

The Lok Sabha on Tuesday passed the Sabka Bima Sabki Raksha Bill, 2025, paving the way for 100 per cent foreign direct investment in the insurance sector. Union Finance Minister Nirmala Sitharaman said the move would allow global insurance companies to bring capital directly into India without depending on domestic partners.

Explaining the rationale, Sitharaman said the existing 74 percent FDI limit had become a hurdle for foreign insurers, as finding Indian partners for the remaining equity was a complex and time-consuming process. Allowing full foreign ownership would improve insurance accessibility while keeping companies fully accountable to Indian laws and regulations.

The minister stressed that India continues to have low insurance coverage. To boost penetration, the government has already removed the 18 per cent GST on individual health and life insurance premiums. The new bill, she said, focuses on wider coverage, ease of compliance and stronger regulatory oversight.

Among the key reforms highlighted was the creation of a policyholders’ education and protection fund to spread awareness and ensure timely settlement of claims. The bill also strengthens regulatory supervision to ensure transparent conduct by insurers. A one-time registration system for insurance intermediaries has been introduced to ensure uninterrupted services and reduce regulatory delays.

The legislation is expected to attract foreign capital while bringing global best practices, advanced risk assessment methods and innovative insurance products. It also standardises regulation-making through mandatory public consultation and allows suspension of intermediary licences instead of outright cancellation, giving firms time to correct violations.

Other provisions include allowing mergers between insurance and non-insurance companies, empowering the regulator to recover wrongful gains, increasing the approval threshold for share transfers from 1 percent to 5 percent, and reducing the net-owned fund requirement for foreign reinsurance branches. The bill also grants greater operational autonomy to the Life Insurance Corporation of India.

Penalties for violations have been rationalised, with the maximum fine raised to ₹10 crore, including for insurance intermediaries, to strengthen compliance.

The Opposition, however, criticised the bill, warning that complete foreign ownership could shift key decision-making outside India. The government countered that the reforms would deepen insurance penetration and strengthen consumer protection under the supervision of the Insurance Regulatory and Development Authority of India.