Parliament has cleared the Sabka Bima Sabki Raksha Bill, allowing 100% foreign investment in insurance companies, with the government assuring strong safeguards for policyholders.
Parliament on Wednesday cleared a major amendment to insurance laws, paving the way for 100 per cent foreign direct investment (FDI) in insurance companies, up from the earlier cap of 74 per cent. The Rajya Sabha passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, a day after it was approved by the Lok Sabha.
Replying to the debate, Finance Minister Nirmala Sitharaman said the move is aimed at attracting new insurers, intermediaries and allied service providers, which would expand the insurance ecosystem and lead to net employment generation.
Safeguards for policyholders highlighted
Addressing concerns over policyholder protection, Sitharaman said the Insurance Regulatory and Development Authority of India (IRDAI) has mandated a minimum solvency ratio of 1.5 for all insurance companies, meaning their assets must be at least one-and-a-half times their liabilities.
She added that insurers are also required to make provisions for liabilities classified as "incurred but not reported" and "incurred but not enough reported," and profits can be calculated only after accounting for these obligations. According to the minister, these norms ensure adequate safeguards for policyholders.
LIC performance cited amid reforms
The finance minister said the government continues to strengthen the Life Insurance Corporation of India (LIC), citing its performance in the last financial year. LIC's total assets under management rose by 6.45 per cent to ₹54.52 lakh crore in FY 2024-25, while its solvency margin improved to 2.11 from 1.98. The net value of new business also increased to ₹10,011 crore from ₹9,583 crore a year earlier.
Employment and consultation process
Sitharaman rejected claims that the amendments would hurt employment, stating that a deeper insurance market would benefit agents, brokers and intermediaries through wider outreach and more products.
She also countered opposition allegations that the bill was rushed, noting that consultations began in November 2024 with states and Union Territories. Inputs were also sought from insurers, regulators, industry bodies and the public, with over 13,000 responses received through the department's website.
Wider changes under the bill
The legislation raises the FDI limit in insurance companies to 100 per cent and reduces the net-owned fund requirement for foreign reinsurance companies operating in India from ₹5,000 crore to ₹1,000 crore. It also broadens the definition of intermediaries to include managing general agents and insurance repositories.
The bill amends the Insurance Act, 1938, the LIC Act, 1956, and the IRDAI Act, 1999. Sitharaman said the changes align with the government's long-term goal of achieving "Insurance for All by 2047" and improving ease of doing business.
Under the new framework, all insurance companies and intermediaries will be required to include the word "insurance" in their names for greater customer clarity. The amendments also introduce the provision for suspension of intermediary licences instead of immediate cancellation, allowing time for compliance.
Opposition voices concerns
Several opposition members opposed the bill in the Rajya Sabha, alleging it weakens accountability and prioritises shareholders over policyholders. They argued that insurance should primarily function as a social security mechanism rather than just an investment avenue.
Despite the criticism, the government maintained that the reforms would strengthen regulation, expand coverage, and support the growth of affordable insurance, especially in rural areas.