Sabka Bima, Sabki Raksha Bill, 2025

The Lok Sabha has passed the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, which proposes to raise the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%.
The reform is positioned as a key step towards deepening insurance coverage and achieving the vision of “Insurance for All by 2047.”

Overview of the Bill

The Bill enables 100% foreign ownership in insurance companies, strengthens the regulatory authority of the Insurance Regulatory and Development Authority of India (IRDAI), liberalises the reinsurance sector, and aims to accelerate insurance penetration across India.
While it promises to attract global capital, technology, and innovation, concerns persist regarding foreign dominance, rural exclusion, and safeguarding policyholder interests.

Key Provisions of the Sabka Bima, Sabki Raksha Bill, 2025

1. 100% FDI in Insurance

The Bill raises the foreign direct investment limit in insurance companies from 74% to 100%, allowing full foreign ownership.
This is intended to attract long-term capital, advanced technologies, and global best practices into India’s insurance ecosystem.

2. Amendments to Insurance Laws

The Bill amends multiple legislations, including the Insurance Act, 1938, LIC Act, 1956, and IRDA Act, 1999, to modernise the regulatory framework and align it with current sectoral requirements.

3. Liberalisation of Reinsurance

The Net Owned Fund (NOF) requirement for Foreign Reinsurance Branches is reduced from ?5,000 crore to ?1,000 crore.
This move aims to deepen the reinsurance market and position India as a regional reinsurance hub.

4. Policyholders’ Education and Protection Fund

A dedicated Policyholders’ Education and Protection Fund will be established to promote insurance awareness and safeguard consumer interests.
The Bill mandates that policyholder data be collected and protected in accordance with the Digital Personal Data Protection (DPDP) Act, 2023.

5. Enhanced Powers of IRDAI

The Bill significantly strengthens IRDAI’s enforcement powers, enabling it to investigate violations, curb illegal commissions and rebates, and ensure strict compliance by insurers and intermediaries.
The IRDAI Chairperson is empowered to order searches, inspections, and seizures where records are concealed or tampered with.
IRDAI may also deploy officers to scrutinise returns, disclosures, and statements submitted by insurers, improving regulatory oversight.

6. Greater Autonomy for LIC

The Life Insurance Corporation of India (LIC) is granted greater operational autonomy, including the freedom to open new zonal offices without prior government approval, facilitating faster expansion and improved regional management.

7. Simplified Compliance Regime

The Bill simplifies procedural and compliance requirements to improve ease of doing business, while retaining safeguards for consumer protection.

Limitations and Concerns

Critics argue that allowing 100% foreign ownership could place citizens’ long-term savings under foreign control, raising concerns over national financial sovereignty.
There are fears that foreign insurers may prioritise urban and high-profit markets, neglecting rural and social sector obligations.
A trust deficit also exists, as insurance relies heavily on public confidence in state-backed institutions.
The reform is seen as a shift in the state’s role from direct social risk protection toward a model of shared responsibility.

Government Initiatives to Promote Insurance Penetration

• Pradhan Mantri Jan Arogya Yojana (PM-JAY): Provides health insurance cover of ?5 lakh per family per year for secondary and tertiary care to vulnerable households.

• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): A life insurance scheme covering death due to any cause for individuals aged 18–50 years.

• Pradhan Mantri Suraksha Bima Yojana (PMSBY): Offers accident insurance coverage for death or disability due to accidents.

• JAM Trinity (Jan Dhan–Aadhaar–Mobile): Facilitates easy enrolment, premium payments, and direct benefit transfers, expanding insurance access.

Current Status of the Indian Insurance Sector

Market Size and Global Standing

India is currently the 10th largest insurance market globally and the 2nd largest among emerging markets, with a global market share of about 1.9%.
According to Swiss Re, India is projected to become the 6th largest insurance market by 2032.

Penetration and Density

Insurance penetration increased from 3.4% in FY16 to 4.0% in FY23.
General insurance density rose from USD 9 in 2019 to USD 25 in FY23.
The number of insurers increased from 53 in 2014–15 to 74 in 2024–25, while total premiums nearly tripled during this period.

Life and Non-Life Insurance Segments

India is the 5th largest life insurance market globally, growing at 32–34% annually.
LIC remains the dominant player with around 60% market share, though private insurers are expanding.
In non-life insurance, India ranks 4th in Asia and 14th globally.

Key Challenges in the Insurance Sector

India continues to face low general insurance penetration, particularly in rural areas and among informal workers, MSMEs, and gig workers.
Insurance products are often complex and poorly aligned with the needs of low-income households and emerging risks such as climate change, cyber threats, and pandemics.
Mis-selling, delayed claim settlements, and opaque policy terms have weakened public trust.
Limited awareness leads many people to view insurance as an expense rather than a risk-management tool.

Measures Needed to Strengthen India’s Insurance Sector

Technology should be leveraged through RegTech and SupTech tools, AI-based underwriting, fraud detection, and integration with India Stack for faster onboarding and claim settlement.
Product innovation must focus on climate risks, cyber security, health pandemics, and on-demand insurance models.
Insurance penetration should be deepened through micro-insurance, parametric insurance, and last-mile delivery via Self-Help Groups, PACS, CSCs, and post offices.
Strong regulatory oversight is essential to balance investor interests with policyholder protection.

Conclusion

Allowing 100% FDI in the insurance sector represents a bold and mature reform in India’s financial landscape.
While it addresses capital and expertise constraints, its long-term success will depend on robust regulation, inclusive growth, and the effective protection of Indian policyholders under the vision of “Insurance for All by 2047.”