The Finance Minister introduced the Insurance Amendment Bill in the Lok Sabha. From 100% FDI to mergers, find out what's special about the bill..
Insurance Amendment Bill 2025: The year 2025 could prove to be a major turning point for the insurance sector. The central government has taken a significant step towards modernizing outdated insurance laws. Last Friday, the Union Cabinet approved the ‘Insurance for All, Protection for All (Insurance Laws Amendment) Bill, 2025,’ and on Tuesday, Finance Minister Nirmala Sitharaman introduced it in the Lok Sabha. The government claims that this bill will expand the scope of insurance, attract investment, and provide better protection for customers' interests. Here's what's special about this bill:
100% FDI Approved in the Insurance Sector
The biggest and most talked-about provision of this bill is the permission for 100 percent Foreign Direct Investment (FDI) in the insurance sector. Currently, the FDI limit in insurance companies is 74 percent. If this limit is increased to 100 percent, it will make it easier for foreign insurance companies to enter India directly. Experts believe that this could increase pressure on domestic insurance companies, especially health insurance companies. However, the government will also consider the role of Indians on the board and in management.
Merger of Insurance Company with Non-Insurance Company Possible
The bill also includes a provision allowing an insurance company to merge with a non-insurance company. This change is considered particularly positive for Max Financial Services. This could pave the way for the merger of Max Life Insurance with Max Financial.
Strengthening LIC and IRDAI
To strengthen the interests of policyholders, the government is preparing to make the regulator IRDAI more powerful. The proposed bill gives IRDAI, like SEBI, the power to recover illegally earned profits from insurance companies that violate regulations. This will curb arbitrary practices in the insurance sector and strengthen customer confidence.
The bill also brings relief for the country's largest insurance company, LIC. The government wants to give LIC more autonomy so that it can make its own operational decisions. Under the new changes, the LIC board itself will decide where to open branches, how many people to recruit, and prioritize customer convenience. The government believes this will make LIC's operations faster and more efficient.
What benefits will ordinary people receive?
The permission for 100% foreign investment in the insurance sector can directly benefit ordinary customers in several ways. The entry of new insurance companies will increase competition in the market, which will impact premium rates, potentially making insurance more affordable.
Along with this, the claim settlement process is expected to become faster and more transparent. Foreign investment will provide companies with more capital, enabling them to expand insurance services to villages and smaller towns.
Furthermore, companies will be able to launch better and more innovative insurance plans tailored to customer needs. The government's clear objective is to bring every citizen of the country under insurance coverage by 2047, and these changes are considered a major step in that direction.
What is not included in the bill?
The bill does not include a provision for composite insurance licenses. This license would have allowed a company to sell life, general, and health insurance simultaneously.
The bill also does not include open architecture. Under open architecture, insurance agents would have the freedom to sell products from more than one company.
Additionally, the bill does not include approval to reduce the net worth requirement for smaller insurance companies.
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