Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill No. 195 of 2025 was introduced in the Lok Sabha on 16 December 2025 by Union Finance Minister Nirmala Sitharaman on behalf of the Central Government during the Winter Session of Parliament to bring India’s insurance laws in line with the evolving needs of a modern, digital, and rapidly growing economy. The Bill proposes amendments to three key legislations—the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority (IRDAI) Act, 1999.

In this blog, we break down the key changes introduced by the Bill, including 100% foreign investment in insurance, stronger powers for IRDAI, new rules for insurers and intermediaries, data protection and KYC reforms, governance changes, investment norms, penalties, and what all of this means for insurers, intermediaries, and policyholders in India.

What Is the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025?

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, is a major legislative reform designed to modernise India’s insurance sector and align it with current economic, technological, and regulatory needs. Rather than creating a new law, the Bill amends three core legislations: The Insurance Act, 1938, the LIC Act, 1956, and the IRDAI Act, 1999, which together govern insurers, intermediaries, and the regulator.

Key Objectives of the Bill

• Modernise India’s insurance laws to reflect present-day market realities

• Strengthen the powers and role of IRDAI

• Improve governance and compliance standards for insurers and intermediaries

• Enhance protection of policyholder interests and data

• Support long-term growth and stability of the insurance sector

Key Highlights of the Sabka Bima Sabki Raksha Bill 2025

The Bill modernises insurance laws to improve coverage, regulation, and policyholder protection.

• Permits 100% foreign investment in insurance

• Defines clear classes of insurance business

• Expands health insurance to include accident and travel cover

• Strengthens IRDAI’s regulatory and enforcement powers

• Makes intermediary registration mandatory

• Introduces strict data protection and KYC rules

• Tightens investment and solvency norms

• Improves insurer governance and management controls

• Simplifies mergers and business transfers

• Imposes higher penalties for non-compliance

100% Foreign Investment in Insurance: What Has Changed?

One of the most significant reforms under the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, is the decision to allow up to 100% foreign investment in Indian insurance companies. Earlier, foreign ownership in insurers was capped, limiting the extent to which global insurers and investors could participate in India’s insurance market.

Under the amended law, foreign direct investors and foreign portfolio investors together can hold the entire equity of an Indian insurance company, subject to conditions prescribed by the Central Government and the regulator. This change is aimed at strengthening insurers’ capital base, supporting long-term growth, and enabling the sector to meet the rising demand for insurance across life, health, and general segments.

What the FDI Reform Means in Practice

• Foreign investors can now own up to 100% equity in Indian insurance companies

• Applies across life, general, health, and reinsurance businesses

• Ownership liberalisation is subject to regulatory conditions and safeguards

• Intended to attract long-term capital and global best practices

• Expected to improve product innovation, solvency strength, and market competition

Unified Insurance Framework: New Definitions & Classes of Insurance

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill brings much-needed clarity by introducing a unified and modern classification of insurance business. Over the years, fragmented definitions and outdated terminology have led to regulatory overlaps and interpretation issues. The Bill addresses this by clearly defining what constitutes insurance business and its various classes.

Classes of Insurance Business Under the Bill

• Life insurance business

• General insurance business

• Health insurance business

• Reinsurance business

• The Central Government is empowered to notify any new class of insurance business in consultation with IRDAI, allowing the law to adapt to future market developments.

Expanded Scope of Health Insurance

Health insurance is now clearly defined to include:

• Personal accident insurance, covering death, disability, or hospitalisation due to accidents

• Travel insurance, covering medical expenses, accidents, and losses arising during travel

Stronger Powers of IRDAI: A More Active Regulator

The Amendment of Insurance Laws Bill significantly strengthens the role of the Insurance Regulatory and Development Authority of India (IRDAI), positioning it as a more proactive and effective regulator. As the insurance sector grows in size and complexity, the Bill recognises the need for sharper supervisory and enforcement powers to protect policyholders and maintain market stability.

Under the amended framework, IRDAI is no longer limited to advisory or corrective actions. It is empowered to intervene decisively where insurers or insurance intermediaries act against public interest or policyholder rights.

Key Enhancements to IRDAI’s Powers

• Authority to issue binding directions to insurers and insurance intermediaries

• Power to order disgorgement of unlawful gains or losses avoided through violations

• Ability to suspend or cancel registrations of non-compliant insurance intermediaries

• Expanded oversight to ensure proper management and governance of insurers

Transparent & Consultative Regulation

Introduction of consultative committees to advise IRDAI on regulations

• Mandatory public consultation before framing or amending regulations, except in urgent cases

• Requirement to publish responses to public feedback, improving transparency and accountability

Major Reforms for Insurance Intermediaries

The Sabka Bima Sabki Raksha introduces stricter and more clearly defined rules for insurance intermediaries, recognising their critical role in policy distribution and customer interaction. The Bill brings uniformity in how intermediaries are registered, regulated, and penalised, reducing misuse and improving accountability. Insurance intermediaries now fall firmly under IRDAI’s regulatory oversight, with clearer compliance requirements and stronger consequences for violations.

Who Is Covered as an Insurance Intermediary?

• Insurance brokers and reinsurance brokers

• Corporate agents

• Insurance consultants

• Third-party administrators (TPAs)

• Surveyors and loss assessors

• Managing general agents and insurance repositories

Key Changes Introduced

• Mandatory registration with IRDAI before acting as an insurance intermediary

• Annual fees and renewal requirements for continued registration

• Clear prohibition on acting or transacting insurance business without valid registration

• Insurers barred from using unregistered intermediaries

Penalties for Non-Compliance

• Penalties up to ₹10 lakh for unregistered intermediaries

• Penalties up to ₹1 crore for insurers or entities using unregistered intermediaries

• Personal liability for directors, partners, and officers involved in violations

Policyholder Data Protection & KYC Reforms

With insurance increasingly moving to digital platforms, the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill places strong emphasis on protecting policyholder data and strengthening KYC processes. The Bill introduces a clear legal framework governing how insurers and insurance intermediaries collect, process, store, and use customer information. These provisions aim to balance operational efficiency with privacy, ensuring that policyholder data is used responsibly and securely.

Key Data Protection Provisions

• Insurers and intermediaries must maintain accurate, complete, and up-to-date policyholder information

• Mandatory safeguards to protect data against unauthorised access, loss, or misuse

• Strict confidentiality requirements for all KYC and policy-related data

KYC Processing Framework

• IRDAI can prescribe how KYC information is collected and processed

• KYC data processed by regulated entities is deemed legally valid for insurance transactions

• Policyholder data can be used only for authorised purposes under insurance laws

Data Sharing Rules

• Policyholder information may be shared only when:

• Disclosure is required by law

• There is a public duty to disclose

• The policyholder has given explicit consent

Investment & Solvency Reforms to Protect Policyholders

The new Bill brings in important changes to how insurance companies invest the money they collect from policyholders. The main goal is to keep policyholder funds safe and ensure insurers remain financially strong. Since insurers handle large amounts of long-term money, the Bill increases regulatory oversight while still allowing insurers some flexibility in how they invest. Under the revised rules, IRDAI has a stronger role in supervising investment decisions. This allows the regulator to step in whenever necessary to protect policyholder money and ensure that insurers maintain adequate solvency and financial stability.

Key Investment-Related Changes

• Revised investment norms for life and non-life insurers

• Life insurers are required to maintain a higher portion of investments in government and approved securities

• Non-life insurers allowed a more flexible but regulated investment structure

• Limits placed on investments in promoter-controlled entities

Enhanced Role of IRDAI

• Authority to issue asset-specific investment directions

• Power to restrict or mandate certain investments in the interest of policyholders

• Ability to intervene where investments are considered unsafe or unsuitable

Governance, Management & Actuarial Reforms

The Sabka Bima Sabki Raksha introduces stricter rules around how insurance companies are governed and managed, with the aim of improving accountability and reducing conflicts of interest. As insurers grow larger and more complex, the Bill ensures that leadership and decision-making structures remain transparent and well-regulated. The Bill also brings greater clarity and discipline to the role of actuaries, who play a critical part in pricing policies, assessing risk, and maintaining the financial health of insurance companies.

Key Governance & Management Changes

• Prohibits common directors or senior officers across insurers operating in the same class of insurance business

• Allows IRDAI to supersede the board of an insurer if it acts against policyholder interests

• Enables appointment of an administrator to manage an insurer for a specified period

Actuarial Reforms

• Clearly defines the eligibility and experience requirements for actuaries

• Strengthens actuarial reporting and financial investigations

• Empowers IRDAI to regulate the powers and responsibilities of actuaries

Mergers, Amalgamations & Business Transfers Made Easier

Insurance companies may sometimes need to merge, restructure, or transfer their business to stay financially strong or improve efficiency. Earlier, these processes involved complex approvals and long timelines, making it difficult for companies to adapt to changing market conditions.

The new rules make such restructuring simpler and more streamlined, while ensuring that policyholders are not affected. The regulator is given the authority to lay down clear procedures for mergers and business transfers, so that these changes happen smoothly and transparently.

What Has Changed

• Mergers and amalgamations can now follow simpler, clearly defined procedures

• The insurance business can be transferred even in cases involving non-insurance entities

• The regulator can issue detailed guidelines to manage these transactions

• Policyholder interests must be protected throughout the process

Enhanced Penalty Framework & Stronger Enforcement

To ensure better compliance across the insurance sector, the new law introduces a much stronger penalty framework for insurers and insurance intermediaries. The focus is on discouraging violations, improving accountability, and protecting policyholders from misconduct. Regulatory action is no longer limited to warnings or minor fines. Authorities can now impose substantial financial penalties, especially for repeated or serious non-compliance.

Key Penalty-Related Changes

• Penalties of up to ₹1 lakh per day for ongoing violations

• Maximum penalty capped at ₹10 crore

• Separate penalties for unregistered insurance intermediaries

• Higher penalties for insurers that use unregistered intermediaries

Factors Considered Before Imposing Penalties

• Nature and seriousness of the violation

• Impact on policyholders

• Whether the violation is repeated

• Any unfair gain made due to non-compliance

Changes Affecting LIC & Government-Owned Insurers

The new law also updates the rules governing LIC and other government-owned insurance companies to bring them in line with today’s regulatory and corporate standards. Many of the earlier provisions were outdated and no longer reflected how large insurers operate in a modern financial system.

By aligning these entities more closely with existing company laws and regulatory oversight, the changes aim to ensure greater transparency, accountability, and operational clarity, while continuing to safeguard policyholder interests.

Key Changes Introduced

• Updates the LIC Act to align with the Companies Act, 2013

• Clarifies rules around overseas operations and fund management

• Brings government insurers more clearly under regulatory supervision

• Ensures uniform governance standards across public and private insurers

Conclusion

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 marks a significant shift in India’s insurance framework by opening up the sector, strengthening regulation, and prioritising policyholder protection. By combining higher foreign investment with stronger governance and oversight, the Bill lays the foundation for a more resilient, transparent, and inclusive insurance ecosystem.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal, regulatory, financial, or investment advice. The interpretation of provisions is based on the text of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 as introduced in Parliament and is subject to change upon enactment, notification, or issuance of rules and regulations.

Regulatory Disclaimer: Readers are advised to refer to the official Bill text, notifications, and regulations issued by the Government of India and IRDAI, or consult a qualified professional before making decisions based on this information.

Sources:

• Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, Bill No. 195 of 2025, as introduced in Lok Sabha

• The Insurance Act, 1938

• Insurance Regulatory and Development Authority of India Act, 1999

• Life Insurance Corporation Act, 1956

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