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Context

The Lok Sabha passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 to reform the insurance framework.

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Key Highlights of the Bill

It seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999, to align with the goal of 'Insurance for All by 2047'.

Foreign Direct Investment (FDI) and Capital Infusion

The FDI cap in Indian insurance companies has been raised from 74% to 100%, to attract substantial long-term capital, global technology, and managerial expertise.
The goal is to boost sector competitiveness, enable innovation, and provide capital for insurers to expand into under-penetrated rural and semi-urban markets.
To attract more global reinsurers and boost domestic underwriting capacity, the minimum Net Owned Fund (NOF) for foreign reinsurance branches has been cut from ₹5,000 crore to ₹1,000 crore.

Regulatory Framework and Ease of Doing Business

The amendments aim to create a more efficient and business-friendly regulatory environment under the oversight of the Insurance Regulatory and Development Authority of India (IRDAI).

Key Procedural Changes

Provision	Previous Rule	Updated Rule (Post-Amendment)	Impact
Approval for Share Transfer	Prior IRDAI approval was required for any transfer of shares exceeding 1% of the paid-up equity capital.	The threshold has been increased to 5% of the paid-up equity capital.	Reduces regulatory burden and facilitates smoother corporate transactions and investments.
Minimum Paid-up Capital	A mandatory minimum paid-up share capital of ₹100 crore was required for life, general, and health insurance businesses.	The mandatory requirement has been removed for insurance co-operative societies to encourage community-based insurance models. However, the ₹100 crore norm remains for new insurers.	Promotes financial inclusion and the growth of niche players in specific regions or communities.

Operations in SEZs and IFSCs

The Central Government's power to modify or exempt provisions of the Insurance Act for insurers in Special Economic Zones (SEZs) has been extended to entities operating in International Financial Services Centres (IFSCs), such as GIFT City.

The IFSCs now offer a flexible, competitive regulatory environment for insurance and reinsurance, comparable to global financial hubs. The International Financial Services Centres Authority (IFSCA) regulates these zones.

Expanded Powers for IRDAI

Superseding Boards: IRDAI is empowered to supersede the Board of Directors of an insurer if its conduct is found to be prejudicial to the interests of policyholders.
Regulation of Intermediaries: IRDAI now regulates the remuneration, commissions, and rewards of insurance agents and intermediaries to ensure transparency and fairness.
Expanded Definitions: The regulatory scope for 'insurance intermediary' has expanded to include entities such as managing general agents and insurance repositories.
Disgorgement Powers:IRDAI has been granted powers to disgorge wrongful gains from insurers or intermediaries, strengthening its enforcement capabilities.

Policyholders' Education and Protection Fund

A dedicated Policyholders’ Education and Protection Fund will be constituted and administered by IRDAI.
Funding Sources: The fund will be financed through government grants, penalties collected by IRDAI, and other specified sources.
Objective: It funds education, protects policyholders' interests, and increases insurance awareness and trust.

Source: INDIANEXPRESS

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PRACTICE QUESTION

Q. "The Sabka Bima, Sabki Raksha Bill 2025 is a definitive step toward achieving 'Insurance for All by 2047'." Critically analyze. 150 words

Frequently Asked Questions (FAQs)

The bill's most significant change is increasing the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74% to 100%, allowing for complete foreign ownership.

It was necessary to address India's chronically low insurance penetration (3.7% vs. global 7%), infuse much-needed long-term capital into the capital-intensive insurance business, and align India's policies with global best practices.

Consumers can expect increased competition, leading to better-priced products, improved service quality, and innovative insurance solutions. The influx of capital may also lead to the expansion of insurance services into underserved rural and semi-urban areas.