The government is set to table the "Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025" in the Lok Sabha on Monday. The bill is a comprehensive legislative proposal aimed at significantly reforming India's insurance sector.
The Bill proposes amendments to three core pieces of legislation: the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
The proposed amendments are designed to accelerate growth, enhance policyholder protection, and bring greater transparency and ease of business to the industry.
Let us look at the key highlights of the Proposed Amendments
Accelerated growth and foreign investment
The Bill introduces provisions to significantly boost investment and growth in the sector:
100% FDI for Indian Insurers: The aggregate holding of equity shares by foreign investors, including portfolio investors, in an Indian insurance company may be extended up to one hundred per cent (100%) of the paid-up equity capital. This measure is intended to accelerate growth in the insurance sector.
Reduced capital requirement for foreign re-insurers: The net-owned fund requirement for foreign re-insurers is proposed to be reduced to encourage more foreign re-insurers to establish branches in India.
Enhanced policyholder protection and regulator powers
Several changes focus on strengthening the regulatory framework and protecting policyholders' interests:
Policyholders' Education and Protection Fund (PEPF): The Bill mandates the creation of the Policyholders' Education and Protection Fund. This fund will be credited with grants, donations, and sums realized from penalties imposed by the Authority.
Data security and confidentiality: New sections require insurers and regulated entities to ensure the accuracy, completeness, and security of policyholder information, specifically protecting it against loss, unauthorized access, or disclosure.
Authority's power to issue directions: The Insurance Regulatory and Development Authority (Authority) will be empowered to issue directions to both insurers and insurance intermediaries in the public interest or to prevent detrimental practices. Crucially, this power will include directing any person to disgorge an amount equivalent to the wrongful gain made or loss averted by contravention.
Penalties for non-compliance: The penalties for non-compliance with the Acts, Rules, or Regulations have been rationalized, with the maximum penalty increasing to ten crore rupees. New penalties are introduced for those acting as insurance intermediaries without registration.
Defining insurance activities
The Bill updates and streamlines the definitions of various key terms in the Insurance Act, 1938:
"Health insurance business" is redefined to include sickness benefits, payment for medical expenses, personal accident insurance (for death, disablement, or hospitalization from an accident), and travel insurance (for sickness benefits, medical expenses, or losses suffered during travel).
A new comprehensive definition for "insurance business" is inserted, meaning the business of effecting insurance contracts.
Operational and administrative reforms
The legislation also introduces changes to day-to-day operations and governance:
Transparency in Regulation: The Authority must ensure transparency in its regulation-making process by publishing draft regulations for public comment and periodically reviewing them.
Online Premium Payments: The rule stating that a risk can be assumed when a cheque is posted is amended to also cover scenarios where the premium money is received in the insurer's bank account via online mode.
Actuary's role: The Authority is given the power to specify the eligibility criteria and experience for the appointment of an actuary by an insurer, as well as the actuary's powers and functions.
Mergers and amalgamations: The Authority can approve schemes for the transfer or amalgamation of an insurer’s business with a non-insurance company.
The Bill, however, does not have the much-talked about composite insurance licensing provision, which was meant to allow insurers to sell any insurance product – life or non-life – under the same license.