Insurance Amendment Bill 2025 Passed: Lok Sabha Clears 100% FDI in Insurance Sector, Key Changes Explained

In a major reform aimed at accelerating growth and attracting global capital, the Lok Sabha on December 16, 2025, passed the Insurance Laws (Amendment) Bill, 2025, allowing 100% Foreign Direct Investment (FDI) in India’s insurance sector. The bill, officially titled “Sabka Bima, Sabki Suraksha (Insurance Laws Amendment) Bill, 2025,” was cleared through a voice vote after a detailed discussion and a reply by Finance Minister Nirmala Sitharaman. Amendments proposed by opposition members were rejected.

With this move, the government has raised the FDI cap in the insurance sector from the existing 74% to 100%, marking one of the most significant structural changes in the industry in recent years.

What Does the New Insurance Bill Change?

The most notable provision of the bill is the increase in foreign investment limits, which opens the door for complete foreign ownership in insurance companies operating in India. The government believes this reform will bring fresh capital, advanced technology, better products, and improved services to the sector.

Despite allowing 100% FDI, the bill includes safeguards to ensure Indian oversight. As per the new rules, at least one top executive—Chairperson, Managing Director, or CEO—must be an Indian citizen, even in fully foreign-owned insurance companies.

Government’s Stand in Parliament

Replying to the debate in the Lok Sabha, Finance Minister Nirmala Sitharaman said that insurance laws in India have already undergone 12 amendments, each reflecting the evolving needs of the economy and the sector. She emphasized that the latest changes are aimed at protecting policyholders, farmers, and the general public, while also strengthening the insurance ecosystem.

She also highlighted that public sector insurance companies remain fully protected, dismissing concerns about their future. According to the Finance Minister, the government has spent over ₹17,000 crore to improve the financial health of three public sector general insurance companies, leading to a noticeable turnaround in their performance.

Addressing Opposition Concerns

Several opposition members raised concerns that higher foreign participation could lead to insurance premiums flowing out of India. Rejecting these claims, Sitharaman said that opening the sector would instead ensure better technology, competitive pricing, and improved insurance coverage for consumers.

She also pointed out that government initiatives like Ayushman Bharat, which has benefited nearly 12 crore families, demonstrate the state’s commitment to expanding insurance coverage and social security.

According to the Finance Minister, the new law will also benefit insurance agents, intermediaries, and other stakeholders by creating a more dynamic and competitive market.

More Autonomy for LIC and Regulatory Strengthening

The bill is expected to give greater operational autonomy to the Life Insurance Corporation of India (LIC), helping it compete more effectively in a liberalized market. Sitharaman noted that the draft bill was shared with states and Union Territories, reflecting a consultative approach before finalizing the legislation.

Another major feature of the amendment is the strengthening of the Insurance Regulatory and Development Authority of India (IRDAI). The regulator will be empowered to:

• Recover illegal or unfair gains made by insurance companies

• Redistribute such amounts to affected policyholders

• Enhance regulatory oversight and transparency

Key Highlights of the Insurance Amendment Bill 2025

• FDI limit in the insurance sector increased from 74% to 100%

• Mandatory requirement that one top executive must be an Indian citizen

• Provision allowing merger of non-insurance companies with insurance firms

• Reduction in net owned fund requirement for reinsurance companies from ₹5,000 crore to ₹1,000 crore

• Proposal to establish a Policyholders’ Education and Protection Fund

• Increased ease of doing business for insurers, intermediaries, and stakeholders

• Fixed tenure of five years or up to the age of 65 years for chairpersons and full-time members

• Enhanced transparency and stronger regulatory supervision

Currently, the upper age limit for full-time members is 62 years, while the bill aligns this with the chairperson’s age cap of 65 years.

A Reform Announced in the Budget

It is worth noting that Finance Minister Sitharaman had first announced the proposal to raise insurance FDI to 100% during her Union Budget speech, describing it as part of a new generation of financial sector reforms. The passage of the bill now turns that proposal into law.

What This Means for the Insurance Sector

The passage of the Insurance Amendment Bill, 2025 is expected to boost investment, expand insurance penetration, and improve consumer protection. By combining liberalized investment norms with regulatory safeguards, the government aims to strike a balance between growth and policyholder security.

As India pushes toward universal insurance coverage under the vision of “Sabka Bima, Sabki Suraksha,” this landmark legislation is set to reshape the future of the country’s insurance industry.