Amendments in laws to deepen India's insurance coverage, strengthen regulation: CareEdge

New Delhi [India], December 20 : The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, passed by the Parliament this week, is expected to improve insurance penetration, operational efficiency, and market resilience, advancing insurance for all by 2047, according to CareEdge Ratings.

Among other things, the Bill aims to update regulations for insurers, reinsurers, and intermediaries to better align the sector with India's economic growth, capital markets, and consumer protection goals.

The legislation amends the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the IRDAI Act, 1999, to permit 100 per cent FDI, strengthen IRDAI's authority over insurers and intermediaries, among others.

The bill regulates commissions, establishes a Policyholders' Education and Protection Fund, and improves procedural efficiency through higher thresholds for share transfers.

The Bill supports India's long-term objective of achieving universal insurance coverage by 2047.

Sanjay Agarwal, Senior Director of CareEdge Ratings, said, "The Insurance Laws (Amendment) Bill, 2025, strengthens India's insurance framework by raising the FDI limit to 100 per cent, enhancing IRDAI's powers, easing capital requirements, modernising intermediaries, and reinforcing policyholder protection."

For insurers already operating close to the 74 per cent foreign ownership cap, Sanjay Agarwal said that the enhanced limit provides additional headroom for incremental capital infusion by existing foreign promoters, supporting growth and solvency.

"Collectively, these measures are expected to improve insurance penetration, operational efficiency, and market resilience, advancing insurance for all by 2047," he added. "However, particular areas, such as composite licensing, flexible capital norms, captive insurers, broader product distribution, investment norms, and open agent architecture, remain unaddressed. Overall, it works a fine balance between enabling regulations and overregulations."

Coming to the Bill, one of the key features of the Bill is to allow up to 100 per cent Foreign Direct Investment in Insurance Companies, opening doors to more foreign players to India.

This, according to the government, will help in capital augmentation, adoption of advanced technology and bringing global best practices along with increasing employment opportunities.

Increased competition would drive efficiency in products and services proving beneficial for the citizens.

To protect the interest of Policyholders, a dedicated fund, namely Policyholders' Education and Protection Fund will be set up to spread awareness about insurance. Policyholders' data would now be required to be collected and protected in alignment with Digital Personal Data Protection (DPDP) Act 2023.

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