Insurance law to boost foreign direct investment and give regulator more power – The Times of India

MUMBAI: The insurance sector is expected to see significant investments with the Sabka Bima Sabki Raksha (Amendment to Insurance Laws) Act, 2025, which will be introduced by the government during the winter session of Parliament.The bill aims to allow 100% foreign direct investment in insurance and allows Irdai, the regulator, to issue sector-specific licenses, allowing new insurers to operate in separate or niche sectors such as cyber, property or marine insurance. The bill does not specify whether composite licenses that allow both life and non-life insurance under one entity will be allowed. The amendment states that the government may, in consultation with Irdai, notify such other industries for which permits may be granted.The proposed law amends the Insurance Act, 1938, the LIC Act, 1956 and the IRDA Act, 1999. The amendments are intended to expand access to capital, modernize regulations and expand insurance coverage by shifting supervision from law to regulation.

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It is also proposed to strengthen the financial powers of the supervisor. Under the bill, Irdai is allowed to keep 25% of its annual surplus in a reserve fund to cover its expenses. A policyholder education and protection fund will be established, financed through fines imposed on insurers. The definition of insurance intermediary has been expanded to include entities such as insurance depositories.A key change is the shift from detailed legal requirements to a regulatory-based framework, where Irdai will set various operational standards through regulations rather than through parliament-approved legislation. The changes will remove parameters such as minimum capital requirements, solvency margins and investment standards from the law and place them under supervisory supervision. This allows Irdai to prescribe different capital requirements for different categories of insurers. Fixed legal investment mandates, including mandatory allocations to government bonds and approved investments, will be replaced by investment conditions set out in regulations.The bill also removes commission and remuneration limits for agents and intermediaries from the statute, giving Irdai the authority to set these limits. Licensing requirements for surveyors and damage assessors are proposed to be relaxed, with oversight shifting to a regulatory framework. The bill allows LIC to set up zonal offices without prior approval of the Centre. Overseas LIC branches are allowed to hold funds.