In a significant move to overhaul the country's insurance landscape, the Lok Sabha on Tuesday passed the Sabko Bima Sabko Raksha (Amendment of Insurance Laws) Bill, 2025. This legislation aims to reform the sector by amending three key acts: the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the IRDAI Act of 1999. The bill is seen as a crucial step toward achieving the Insurance Regulatory and Development Authority of India's (IRDAI) vision of 'Insurance for All by 2047'.
Bridging the Insurance Gap: A Market Poised for Growth
While India has made progress in insurance metrics over the last decade, it remains a profoundly underserved market. The number of insurers has grown from 54 in the 2014-15 fiscal year to 74 at present. Insurance density, which measures the average premium paid per person annually, has risen from $55 to $97. Similarly, insurance penetration (premiums as a percentage of GDP) has increased from 3.3% to 3.7%.
Despite this growth, the challenges are stark. India's insurance density is a mere 10.6% of the global average, heavily reliant on life insurance. Furthermore, a majority of the world's top 25 insurance companies do not have operations in the country, highlighting a significant opportunity gap.
Key Provisions: FDI Liberalisation and Regulatory Muscle
The new bill introduces several transformative changes designed to attract capital and deepen market reach.
The most prominent feature is the increase in the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74% to 100%. This move is expected to draw substantial foreign capital, facilitate the transfer of advanced technology and expertise, and ultimately expand the reach of insurance and social protection schemes.
To further encourage market participation, the bill also offers incentives for foreign reinsurers by slashing the 'net owned funds' requirement from Rs 5,000 crore to Rs 1,000 crore. This easing of norms is likely to attract smaller and newer players, fostering greater competition and potentially improving customer service and product innovation.
Empowering the Regulator: A Double-Edged Sword?
Alongside liberalisation, the bill significantly bolsters the powers of the IRDAI, bringing them closer in line with those of market regulators like SEBI. Key new authorities include the power to disgorge wrongful gains made by insurers or intermediaries.
While these enhanced punitive powers are welcomed as necessary for consumer protection and market integrity, a critical challenge emerges. The central question for policymakers and industry stakeholders will be to ensure that the regulator's expanded mandate does not inadvertently stifle the very growth and innovation the bill seeks to promote. Striking the right balance between robust oversight and a facilitative environment will be paramount.
The passage of the Sabko Bima Sabko Raksha Bill marks a pivotal moment for India's insurance sector. By opening doors to foreign investment and strengthening regulatory frameworks, it lays a new foundation. The ultimate success, however, will hinge on its implementation—ensuring that increased oversight does not lead to over-regulation, thereby enabling the sector to finally bridge the massive protection gap and move decisively toward 'Insurance for All'.
