Insurance Amendment Bill 2025 Explained: 7 Major Changes That Will Directly Impact Every Policyholder

The Insurance Amendment Bill 2025 has officially received Parliament’s approval, marking one of the most significant reforms in India’s insurance sector in recent years. Passed on December 17, 2025, the bill introduces wide-ranging amendments to three key laws—the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority (IRDAI) Act, 1999.

The primary objective of this landmark legislation is to make the insurance ecosystem stronger, more transparent, and more consumer-friendly. From allowing 100% foreign direct investment (FDI) to stricter data protection norms and improved claim transparency, the bill brings several changes that will directly affect millions of insurance policyholders across the country.

Here is a detailed look at the seven most important provisions of the Insurance Amendment Bill 2025 and what they mean for consumers.

1. 100% FDI Allowed in Insurance Companies

One of the most significant changes introduced by the bill is the decision to allow up to 100% FDI in insurance companies. Earlier, foreign investors were permitted to hold only up to 74% stake in Indian insurers.

Finance Minister Nirmala Sitharaman stated in Parliament that the higher FDI limit will attract global insurers who were previously hesitant due to joint venture constraints. Increased foreign participation is expected to boost competition, bring in long-term capital, and introduce global best practices—benefits that may ultimately translate into better services and potentially lower premiums for customers.

2. More Choices and Better Services for Policyholders

With greater foreign investment and increased competition, policyholders can expect a wider range of insurance products. Experts believe that international insurers will bring innovative policies, advanced risk assessment tools, and improved digital platforms.

Claim settlement processes are also likely to become faster and more efficient as companies adopt global standards and technology-driven systems.

3. Mandatory Accurate Records for Every Policyholder

Under the new law, insurance companies are required to maintain accurate and verified records of every policyholder. This includes details such as name, date of birth, address, email ID (if available), and Aadhaar or PAN details.

Additionally, insurers must maintain complete records of policy transfers, nominations, and assignments, ensuring fewer disputes and smoother claim settlements.

4. Full Responsibility of Customer Data Lies with Insurers

The bill clearly places the responsibility for data accuracy, completeness, and security on insurance companies. Insurers must ensure that policyholder information remains updated and protected from misuse, loss, or unauthorized access.

If any data-related lapse is detected, the insurance company will be held directly accountable, strengthening consumer trust and data safety.

5. Strict Limits on Sharing Personal Information

This provision is considered a major relief for customers. Insurance companies will no longer be allowed to freely share or sell KYC details or personal data to third parties.

The law permits data sharing only in three specific situations:

• When required by law

• When disclosure is necessary in the public interest

• When the policyholder gives explicit consent

This ensures greater control and privacy for customers over their personal information.

6. Greater Transparency in Claim Rejection

The Insurance Amendment Bill 2025 mandates that insurers must maintain detailed records of every claim. If a claim is approved, the approval date must be recorded. If a claim is rejected, insurers must clearly document the reason for rejection along with the date.

This step aims to reduce ambiguity, improve accountability, and help policyholders understand claim decisions more clearly.

7. Push Towards Digital Policies and Electronic Records

The new framework emphasizes digital insurance. Companies are encouraged to issue policies in electronic form and maintain all policy and claim-related records digitally.

This will make it easier for customers to access, track, and manage their policies while reducing paperwork and administrative delays.

Heavy Penalties for Non-Compliance

To ensure strict enforcement, the bill introduces stringent penalties. Insurance companies or intermediaries violating the rules may face fines of up to ₹1 lakh per day, with a maximum penalty of ₹10 crore. Unregistered intermediaries can be fined up to ₹1 crore.

What This Means for You

Overall, the Insurance Amendment Bill 2025 represents a major step toward a more transparent, competitive, and consumer-centric insurance sector. Policyholders can expect better products, improved service quality, stronger data protection, and clearer claim processes in the coming years.

As these reforms take effect, customers—especially in semi-urban and rural areas—may also benefit from expanded insurance coverage and more tailored solutions driven by global expertise and technology.