What Is The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill? Know Benefits And Objectives

India’s insurance industry has needed a 100% FDI inflow for a long time, and the wait is finally over. The Lok Sabha has finally passed the Insurance Amendment Bill, which has raised the FDI inflow limit from 74% in 2021 to 100% in 2025.

But what was the reason for this bill, and what does it aim to achieve? Let’s understand all of these in detail.

What Is The Insurance Amendment Bill?

The Insurance Amendment Bill, better known as the Sabka Bima Sabki Raksha (Amendment of Insurance Laws, 2025), is a bill that has raised the FDI limit from 74% to 100% in the insurance industry of India. The bill has reformed the three acts of insurance. These are the:

• The Insurance Act, 1938
• The Life Insurance Corporation Act, 1956
• The Insurance Regulatory and Development Authority Act, 1999 Moreover, this bill has lowered the limit for seeking prior regulatory approval for transferring share capital from 1% to 5%. Moreover, the requirement for net owned funds for all foreign reinsurance branches had been reduced from ₹5000 crore to ₹1000 crore. Let’s inquire about the main objectives of the bill.

Objectives of the Insurance Amendment Bill

The major objectives of the Insurance Amendment Bill are:

• To increase foreign investment in the Indian insurance sector
• To spread insurance awareness and maintain transparency between policyholders and the insurer
• Increase employment opportunities in the insurance sector and build more robust channels of operation
• Provide more power to the policyholder by protecting their general interest, and also safeguard their data
• Make insurance more affordable for the policyholders
• Develop a healthy competition and offer more opportunities to perform business in the insurance sector

Also read what is bullet repayment of gold loans and their major benefits.

What Challenges Does The Insurance Amendment Bill Aims To Resolve?

The Indian insurance industry suffers from three major challenges that need immediate resolution. These are:

1. Lower FDI Inflow in the Indian Insurance Industry

The FDI limit for Indian insurers was capped at 74%, which essentially implies that any foreign entity would not have complete ownership and hence reduced investment. If we consider nations such as the United States of America, in 2024, the FDI inflow in the insurance industry was $599.4 billion. On the other hand, because of the previous limitation of 74%, FDI in the Indian insurance industry was only $9,347 million. The new bill has enhanced the limit of 74% to 100%, which is a great initiative to improve the investment margin in India.

2. Lower Scaling Of Operations

Another challenge was for the insurers to expand and scale their operations because of poor foreign investment. A significant portion of the United States insurance sector has had major investing nations such as Japan, the United Kingdom, Canada, and so on. The Indian insurance industry was limited, the reason being the low injection of foreign investment and lower capability for expansion. This challenge is expected to be resolved by the Insurance Amendment Bill, which has raised the limit to 100%, facilitating a major influx of investment from foreign nations.

3. Lower Joint Ventures Opportunities

The insurance industry of India has been behind multiple nations in terms of market penetration. For example, Taiwan recorded the highest growth in insurance, where 8.32 million insurance policies were sold alone in 2024, which implies a high penetration rate. Due to India’s lower insurance penetration and low awareness, the growth rate of both life and non-life insurance is quite poor. The reformation through the Insurance Amendment Bill is promising enough, as it will encourage more channels of foreign investment to flow in.

Also read how family floater health insurance works and what are its eligibility and benefits.

How The Insurance Amendment Bill Steps In To Resolve These Challenges?

The Insurance Amendment Bill is a new step towards reforming the existing insurance laws. Some of the ways by which it aims to resolve the challenges are:

Limit of Transferring Share Capital Raised

For insurers, the limit of seeking prior regulatory approval for the transfer of share capital has been raised from 1% to 5%. This is a major step as it has eased the transfer of share capital, and it offers an advantageous position for both the policyholder and the insurer.

• Reduced Compliance Burden and Faster Transactions: Insurers can execute smaller share transfers more quickly without regulatory delays, which facilitates more ownership changes or equity infusions. This reduces the time taken to execute various administrative processes and also limits the costs.
• Easier Access to Investment: The share capital limit imposes a strict restriction on the amount of foreign investment. Raising this threshold makes it simpler to attract strategic investors and maintain operational agility in a competitive market.

Net Owned Fund Requirement Reduced For Foreign Reinsurance Branches

The Net Owned Fund requirement of Foreign Reinsurance Branches has been reduced from ₹5,000 Crore to ₹1,000 Crore. If studied carefully, this is a promising step that ensures that foreign investment is maximized in the Indian insurance sector.

Lower Entry Barriers for Foreign Reinsurers

The reduced capital requirement makes it more feasible for international reinsurers to establish branches or operate a joint venture in alliance with Indian insurers. This not only facilitates enhancing the options for reinsurers, but also benefits in generating employment.

Better Risk Management

Primary insurers can access more competitive reinsurance options, potentially lowering their reinsurance premiums, as now more foreign reinsurers will be entering the market. This also improves their ability to underwrite larger or more complex risks.

Granting More Power To IRDAI

The reform bill allows more power to IRDAI, as now IRDAI can autonomously set the requirements for capital, decide on solvency margins, and undertake investment decisions. The bill has also granted IRDAI the liberty to set the commission and remuneration caps for all insurance agents and similar functioning entities.

Also read what is incurred claim ratio and how you can calculate it.

Conclusion

The Insurance Amendment Bill has now allowed a 100% FDI, which was 74% earlier in 2021. This was a step to improve capital inflow into the sector and accelerate the pace of growth of the Indian insurance industry. Essentially, the bill aims to facilitate the insurers by allowing wider resources and quick-paced growth, while providing more transparency to the policyholders. Now that India has allowed complete ownership to foreign insurers and provided more liberty to reinsurers, the pace of innovation and capital abundance will naturally increase.