Insurance Amendment Bill passed: What the changes mean for policyholders
The Lok Sabha on Tuesday (December 16) passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, with the government stating that allowing up to 100% foreign direct investment (FDI) in insurance could improve competition, capital availability and affordability for policyholders.
Replying to the debate, Finance Minister Nirmala Sitharaman said removing the FDI cap would help attract long-term capital, global technology and risk management practices, leading to more competitive pricing and wider product offerings.
She also pointed to steps taken to strengthen public sector insurers and recent GST relief on individual life and health insurance premiums as measures aimed at improving affordability.
The Bill amends the Insurance Act, 1938, the LIC Act, 1956, and the IRDAI Act, 1999. It raises the FDI limit from 74 per cent to 100 per cent, allows mergers between insurance and non-insurance companies, strengthens regulatory powers, and introduces new policyholder protection mechanisms.
Consumer-facing implications
Legal experts say the legislation creates an enabling framework rather than prescribing all operational details upfront.
Shailaja Lall, Partner at Shardul Amarchand Mangaldas, said the Bill lowers entry barriers for foreign insurers, expands IRDAI’s enforcement powers and modernises intermediary regulation, while leaving several aspects to future rule-making and regulatory alignment.
From a distribution standpoint, the introduction of perpetual registration for insurance intermediaries could reduce administrative friction.
Tijo Joseph, CFO and Chief Compliance Officer at Anand Rathi Insurance Brokers, said the move removes periodic licence renewals, potentially allowing intermediaries to focus more on servicing customers rather than compliance processes.
Insurers said deeper capitalisation could translate into operational improvements.
Manish Dodeja, Chief Operating Officer at Care Health Insurance, said access to global capital and expertise may help insurers enhance digital capabilities and claims systems, which could improve service consistency for policyholders over time.
Consulting firms cautioned that outcomes would depend on execution.
Pallavi Malani, India Leader – Insurance Practice at BCG, said while foreign players may bring technical depth, success in India would hinge on sustainable returns, strong distribution partnerships and a long-term commitment to the market.
From a consumer protection perspective, the Bill also provides for the creation of a Policyholders’ Education and Protection Fund, funded through penalties collected by the regulator.
Mayank Bathwal, CEO of Aditya Birla Health Insurance, said the proposed fund reinforces the importance of informed choice and long-term consumer trust, and could support wider insurance penetration as the sector moves towards the government’s “Insurance for All by 2047” objective.
