NEW DELHI: The Lok Sabha on Tuesday passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, paving the way for allowing up to 100% foreign direct investment (FDI) in the insurance sector.
The Bill, introduced with the objective of boosting capital inflows, improving insurance penetration and enhancing ease of doing business, also empowers the insurance regulator to disgorge unlawful gains made by insurers and insurance intermediaries.
Addressing the Lok Sabha, Finance Minister Nirmala Sitharaman said the legislation aims to increase competition in the insurance market, enabling consumers to access a wider range of products at more affordable premium rates. “When competition comes into the market, the rate automatically comes down. Monopoly doesn’t give us that advantage. The more the competition, the better the rates,” she said.
The Finance Minister underlined the need for further capital infusion into the sector, stating that permitting 100% FDI would help India benefit from better technology, world-class risk assessment models and globally competitive insurance products. “The proposed removal of the upper cap on FDI in the insurance sector will be a significant enabler in meeting these objectives,” she added.
Dispelling concerns that foreign players could dominate the sector, Sitharaman noted that despite the earlier FDI cap of 74%, only four insurance companies currently have foreign investment at that level. Of the 40 insurers with any FDI, 10 have foreign investment of less than 26%, 23 have FDI between 26% and 49%, and three have FDI between 49% and 74%, she said.
While seeking to create a level playing field for both domestic and foreign insurers and intermediaries, the Bill also strengthens the regulator’s enforcement powers. Sitharaman said the amendments would empower the regulator to order disgorgement of wrongful gains. “When insurance companies make wrongful profits, those gains will be disgorged by the regulator,” she said.
The amendments also rationalise penalties for regulatory violations. Earlier, only insurers could be penalised, with a maximum fine of ₹1 crore. Under the proposed changes, the penalty has been increased to ₹10 crore, and both insurers and insurance intermediaries can be fined for violations.
However, the government has adopted a more lenient approach regarding cancellation of intermediary licences. Instead of outright cancellation, licences may be suspended in cases of regulatory violations. This, the Finance Minister said, would provide intermediaries with an opportunity to streamline operations, improve transparency and rectify shortcomings within a defined timeframe.