The Sabka Bima Sabki Raksha (Amendment) Bill, 2025 was introduced in the Lok Sabha on 16th December 2025 and passed by the Lok Sabha on the same day, and by the Rajya Sabha on 17th. It introduces comprehensive amendments to three principal statutes that constitute the foundational pillars of India’s insurance regulation: the Insurance Act, 1938; the Life Insurance Corporation (LIC) Act, 1956; and the Insurance Regulatory and Development Authority (IRDA) Act, 1999.
1. Amendments About Investment
1.1. Increased Foreign Direct Investment (FDI) Limit
Clause 3 of the Bill amends Section 2 of the Insurance Act, 1938, by omitting the explanation that previously capped the aggregate holdings of foreign investors at 74% of an Indian insurer’s paid-up equity capital, paving the way for up to 100% foreign ownership, subject to rules and conditions prescribed by the government.
1.2. Naming Requirements and Restrictions on Re-Insurance Business
The Bill introduces a new requirement under Section 2C mandating insurers to use specific words such as insurance, assurance, or re-insurance, or their derivatives, as part of their registered name. This provision is intended to eliminate ambiguity for consumers regarding an entity’s regulated status and the nature of its business. Whereas the Bill mandates that a company or body incorporated under the law of any country outside India shall be permitted to carry on only re-insurance business.
1.3. Net-Owned Fund Requirement
Section 6 of the Insurance Act is amended to reduce the minimum Net Owned Fund requirement for foreign reinsurers establishing branches in India from the existing ₹5,000 Crore to ₹1,000 Crore, which may encourage global participation.
1.4. Share Transfers
To improve the ease of doing business, the Bill amends Section 6A of the Insurance Act. Previously, any transfer of shares exceeding 1% of the paid-up equity capital required prior approval from the Authority. The amendment raises this threshold, requiring approval only if the nominal value of shares intended to be transferred exceeds 5% of the paid-up equity capital.
1.5. Investment in Private Companies
The Bill omits Section 27A of the Insurance Act. Under the old Section 27A(4), insurers were statutorily prohibited from investing any part of their controlled funds or assets in the shares or debentures of any private limited company. With the omission of Section 27A, the new Section 27 empowers the Authority (IRDAI) to specify by regulations the time, manner, and other conditions of investment of assets. Under the newly substituted Section 27(3), an insurer may invest in a company or body corporate owned or controlled by its promoters, but this is subject to a strict cap. Such investments must not exceed 5% of the insurer’s assets.
2. IRDAI Empowerment
The Bill omits the prescriptive Sections 27A, 27B, 27C, and 27D, empowering the IRDAI to specify detailed limitations, conditions, and restrictions on investments through regulations. Similarly, the Bill transfers the authority to regulate intermediary compensation to the regulator; Clause 36 amends Section 40 by inserting sub-section (2A), which empowers the Authority to specify, via regulations, the limits on commissions, remuneration, or rewards payable to insurance agents and intermediaries in the interest of policyholders.
3. Redefined key terminologies and Scope
3.1. Insurer
A significant amendment involves the substitution of clause (9) of Section 2 of Insurance Act, which redefines ‘insurer’ with direct simplicity as a person who carries on insurance business. This revision is a strategic move to future-proof the Act; by shifting from a rigid, enumerated definition to a purely functional one based on activity, the legislation becomes adaptable to new and emerging business models without requiring constant legislative updates.
3.2. Insurance Business
The Bill introduces the definition of Insurance Business. Although value-added services have not been expressly covered, the definition provides flexibility by empowering the Central Government, in consultation with the IRDAI, to notify additional types of contracts beyond traditional insurance contracts that insurers may undertake.
3.3. Class of Insurance Business
Clause 3 of the Bill inserts Section 2(5A) in the Insurance Act and term ‘class of insurance business’ covers four classes including life, general, health, re-insurance and such class of business as notified by Central government in consultation with authority.
3.4. Insurance Intermediary
Complementing this, the Bill substitutes clause (10B) to introduce a new, more inclusive definition for insurance intermediary. By updating these core terminologies, the amendments effectively broaden the functional scope of the Insurance Act, ensuring that its regulatory provisions apply more comprehensively to all entities participating in the insurance market.
3.5. Transfer or Amalgamation of Business to Non-Insurance Company
Clause 33 of the Bill amends Section 35 of the Insurance Act and mandates that the insurance business of an insurer or a non-insurance business shall be transferred or amalgamated only if they follow Section 35 of the Act.
3.6. No Risk without Advance Payment
The Bill amends Section 64VB of the Insurance Act and recognises online mode of premium payment to insurers. In such cases the insurer may assume the risk once the payment is credited to the bank account. Whereas if the payment is made by cheque or money order then the insurer may assume the risk once the cheque is posted or money order is booked.
4. Enhancement of Policyholder Protection
The Bill strengthens the consumer protection framework through new mandates on data privacy, financial education, and fair penalties.
The legislation introduces stringent new requirements for data management and privacy. As per Clause 14, which inserts a new Section 14A into the Insurance Act, insurers and other regulated entities are now mandated to process Know Your Customer (KYC) information and maintain accurate records of policies and claims. The Bill prohibits the disclosure of a policyholder’s personal information to any third party without the express consent of the customer, except where required by law or for actuarial purposes.
A significant institutional development is the establishment of the Policyholders’ Education and Protection Fund. Clause 96 of the Bill inserts Section 16A into the IRDA Act, mandating the creation of this dedicated fund. It will be credited with grants from the government and the Authority, as well as sums realised from penalties levied by the IRDAI.
5. Penalties
The penalty for non-compliance under Section 102 (furnishing documents, solvency margin, treaty compliance) has been revised to up to ₹1 lakh per day, subject to a maximum of ₹10 crore from ₹1 crore. New Section 105E introduces a legal principle of proportionality. The Authority must now consider specific factors before imposing penalties, such as the nature of default, disproportionate gain, loss to policyholders, and repetitive nature of the default.
6. The Shift to Perpetual Registration
The Bill removes the three-year tenure for intermediary registration through the insertion of a new sub-section (4A) into Section 42D of the Insurance Act. It states that a registration made under this section shall remain in force subject to payment of such annual fee until such registration is suspended or cancelled by the Authority. This replaces the old Section 42D(3), which stated that a license shall remain in force for a period of three years only from the date of issue and required renewal thereafter.
Despite the mandate for perpetual registration in sub-section (4A), the Bill contains procedural requirements for renewal applications in the immediately preceding sub-section, creating a legal contradiction.
7. Grant of Greater Autonomy to the Life Insurance Corporation of India (LIC)
The Bill amends the Life Insurance Corporation Act, 1956, to grant LIC more flexibility in its domestic and international operations by amending Section 18 of the LIC Act to remove the requirement for prior approval from the Central Government before establishing new Zonal Offices.
To facilitate better management of its international business, Clause 82 of the Bill substitutes Section 28 of the LIC Act, allowing LIC to manage its funds and surpluses for branches operating outside India in accordance with the local laws of those specific countries. This amendment is critical for ensuring compliance with foreign regulations, optimising the management of overseas assets, and strengthening LIC’s competitiveness on the global stage.
8. Mandates for Increased Transparency in Rule-Making
8.1. Public Consultation
The Bill introduces new legal requirements for public consultation in the regulatory process and brings stability to the Authority’s leadership. The Bill amends Section 26 of the IRDA Act, mandating the IRDAI to engage in public consultation before notifying regulations. The Authority is now required to publish draft regulations for public comment and also publish a general statement detailing its response to the feedback received.
8.2. Prohibition on Common Directors
The Bill substitutes Section 32A of the Insurance Act and specify that all insurers are restricted from appointing a director, officer, or individual if the same person is holding the position of director or officer in any banking company, any investment company or in another insurance company in same class of business.
8.3. Tenure of Chairperson and Whole-time Members
To ensure leadership stability and consistent regulatory oversight, Clause 89 of the Bill amends Section 5 of the IRDA Act, unifying the term for both the Chairperson and the whole-time members, setting it at five years or until the age of sixty-five, whichever is earlier
9. Conclusion
The Sabka Bima Sabki Raksha (Amendment) Bill, 2025, represents a landmark shift in India’s insurance landscape by modernising the statutory frameworks governing the industry. By amending three primary Acts, the legislation facilitates 100% foreign ownership and lowers capital requirements for global reinsurers to foster a more competitive market. The IRDAI is granted expanded powers to implement principle-based regulations, specifically regarding investment strategies and intermediary compensation. Furthermore, the Bill introduces perpetual registration for intermediaries and streamlines operational autonomy for LIC. Consumer interests are significantly strengthened through stringent data privacy mandates and the creation of a dedicated Policyholders’ Education and Protection Fund. Ultimately, these reforms aim to future-proof the sector by adopting functional definitions and encouraging digital transparency in premium payments.
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