The Indian Parliament on Wednesday gave its final approval to a landmark insurance bill that opens the doors for full foreign direct investment in the sector. The Sabka Bima Sabki Raksha Bill was passed in the Rajya Sabha, a day after it cleared the Lok Sabha, marking a significant step in the government's plan to overhaul the insurance landscape.
Passage Amidst Opposition Objections
The bill's passage in the Upper House came despite demands from several opposition members to refer it to a Parliamentary committee for detailed scrutiny. Some members also raised objections to the bill's bilingual title, which uses both English and Hindi words. The debate was initiated by Finance Minister Nirmala Sitharaman, who moved the bill for consideration. The legislation, earlier cleared by the Union Cabinet, aims to make insurance coverage more accessible and work towards the goal of universal protection for all Indians by 2047.
Major Transformations in the Insurance Sector
The bill introduces sweeping amendments to three key laws: the Insurance Act of 1938, the LIC Act of 1956, and the IRDA Act of 1999. Its primary objective is to modernize the regulatory framework and attract greater capital.
The most prominent change is the increase in the foreign direct investment (FDI) limit from the current 74% to 100%. However, this comes with a key safeguard: at least one of the top executives—be it the Chairman, Managing Director, or Chief Executive Officer—must be an Indian citizen.
Other critical amendments include:
- Introducing sector-specific licences for niche areas like cyber, property, or marine insurance.
- Allowing mergers between insurance and non-insurance companies.
- Shifting to a regulation-led framework, empowering the Insurance Regulatory and Development Authority of India (IRDA) to set norms for capital, solvency, and investments.
- Empowering IRDA to cap commissions and remuneration for insurance agents.
- Creating a Policyholders’ Education and Protection Fund, funded by penalties on insurers.
- Easing norms for surveyors and loss assessors.
- Allowing the Life Insurance Corporation (LIC) to open zonal offices without central approval and maintain overseas funds.
- Setting a fixed five-year tenure for the IRDA chairperson and members.
Path to a Universal Insurance Cover
Finance Minister Sitharaman had first proposed this comprehensive bill during her Budget speech in February. The insurance sector has already attracted substantial foreign investment, amounting to approximately Rs 82,000 crore. The new reforms are expected to bring in more global players, enhance competition, and ultimately benefit policyholders through innovative products and better services. The government's vision is clear: to build a robust, consumer-friendly insurance ecosystem that supports India's economic ambitions for the next quarter-century.
