INTRODUCTION
The Parliament has introduced the new bill ‘THE SABKA BIMA SABKI RAKSHA (AMENDMENT OF INSURANCE LAWS) BILL, 2025’ as Bill no. 195 of 2025 with an aim to transform the operational system of insurance in the country. This bill’s purpose is to make insurance more affordable and provide insurance for all citizens by the year 2047. It not only seeks to modernize the industry but also gives regulators stronger powers to ensure the system remains fair and secure.
This article will explain the key features, amendments, benefits, and challenges of the Sabka Bima Sabki Raksha Bill 2025, helping readers understand how it aims to transform the insurance landscape in India.
PURPOSE/OBJECTIVE
The Sabka Bima Sabki Raksha Bill 2025 aims to make insurance cheaper, easier to buy, and accessible to all in India by amending the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the IRDAI Act 1999, with the ultimate goal of ensuring that every citizen has insurance coverage by 2047.
It aims to achieve certain objectives such as:
- To further promote and expedite the growth and advancement of the insurance sector.
- To strengthen and enhance the protection afforded to policyholders.
- To facilitate greater ease of doing business for insurance companies, intermediaries, and other stakeholders.
- To enhance transparency in the regulatory framework and strengthen regulatory supervision of the sector.
KEY FEATURES:
a) 100% Foreign Investment (FDI): The Sabka Bima Sabki Raksha Bill allows Foreign Direct Investment from 74% to 100% under the automatic route. This means foreign companies can now fully own insurance businesses in India, bringing in more money and global expertise.
b) One License for Everything (Composite License): Previously, a company needed separate licenses for Life Insurance and General Insurance (like car or home insurance). Now, with one Composite License, a single company can offer all types of insurance under one roof.
c) Help for Small Players (Lower Capital): The Sabka Bima Sabki Raksha Bill has lowered the minimum money (capital) required to start an insurance company. This encourages small and regional Micro-insurers to start businesses, especially in rural areas.
d) Bima Sugam (Digital Marketplace): Sabka Bima Sabki Raksha Bill introduces a one-stop digital platform where customers can easily buy policies, renew them, and settle their claims without much paperwork.
e) Establishment of the Policyholders’ Education and Protection Fund [Section 16(a)]: The Fund will be utilized to protect the interests of policyholders and educate them. The funds will be administered by IRDAI.
f) Insurance Regulatory and Development Authority of India (IRDAI)’s Powers: Sabka Bima Sabki Raksha Bill will enhance enforcement powers such as search, seizure, and perform investigations. This strengthens the regulatory powers of IRDAI.
g) Penalties and Enforcement Actions: The Sabka Bima Sabki Raksha Bill proposes an increase in financial penalties to enforce stricter IRDAI compliance. The maximum fine for insurers and intermediaries violating the regulatory framework would rise from Rs 1 crore to Rs 10 crores. Furthermore, a new penalty of up to Rs 1 crore has been introduced to crack down on individuals acting as intermediaries without valid registration.
h) One-Time Registration for Insurance Intermediaries: The Sabka Bima Sabki Raksha Bill proposes to remove the three-year registration renewal requirement for intermediaries, allowing them to continue business subject to periodic fee payment until suspension or cancellation by IRDAI, aligning with the insurer registration framework.
i) More Choices, Lower Costs: By allowing more companies to enter the market, the bill aims to increase competition. This usually leads to cheaper insurance plans and better customer service.
AMENDMENTS
1. The Bill has proposed an amendment to ‘Section 32A’ of the Insurance Act, which proposes to restrict an insurer from having a common director with:
- Another insurer in the same line of business.
- A banking company.
- An investment company.
Earlier, this provision was limited to life insurers having common managing directors with other life insurers in India, banking companies or investment companies.
2. The Bill introduces a new ‘Section 14C’ which allows insurance companies to share a policyholder’s information with third parties, but only after getting clear consent from the policyholder. This is in line with the Digital Personal Data Protection Act, 2023, which requires that personal data can be used or processed only for the specific purpose agreed to by the individual, in this case, the policyholder.
3. The Bill also proposes removing ‘Section 27A’ of the Insurance Act, which currently limits how insurers can invest in shares and debentures of private companies. Removing this restriction would give insurers more freedom to diversify their investments. It could also encourage them to invest in insurtech and related businesses, helping improve customer experience and develop better insurance products.
4. Definitions
The Bill introduces a definition of insurance business which refers to the business of effecting insurance contracts and includes any other form of contract as may be notified by the Central Government in consultation with the Authority from time to time.
‘Insurance contracts’ have also been defined to mean contracts for undertaking to assume risk and compensate persons upon incurrence of liability or loss on account of the occurrence of a contingent event, and being paid the premium against such undertaking.
CHALLENGES
1. Data and Privacy Concern: With complete foreign ownership, concerns intensify over the cross-border transfer of sensitive personal and health data, making rigorous data localization and compliance audits essential.
2. Implementation Gap: As 100% FDI is legally permitted, the actual inflow of foreign investment in a complex market like India will largely depend on how IRDAI frames and implements its detailed regulation.
3. Chance of Predatory Pricing: This means offering extremely low premiums to capture market share which could destabilize domestic players and state-run insurers like LIC who have higher social obligations.
CONCLUSION
The Sabka Bima Sabki Raksha Bill, 2025 is a transformative step aimed at achieving universal insurance coverage by 2047. By modernizing the sector through 100% FDI, composite licensing, and lower capital requirements, the Bill fosters a more competitive and digitally-driven market. While it significantly empowers the IRDAI and prioritizes policyholder protection, its success will depend on managing the structural challenges it creates such as data privacy protections.
REFERENCES
- PRS Legislative Research: Legislative Brief on the Insurance Laws Amendment Bill 2025 (Bill No. 195 of 2025)
- https://prsindia.org/files/bills_acts/bills_parliament/2025/Sabka_Bima_Sabki_Raksha(Amendment_of_Insurance_Laws)Bill,2025.pdf
- Economic Times
- Insurance Act, 1938, Sections 14C, 16A, 27A, 32A
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