One of the major changes brought about by the Bill is the IRDAI’s power to limit the commission given to the agent, thereby disbursing unlawful profits from the insurer or insurance intermediaries.
The bill amends three existing laws: Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the Insurance Regulatory and Development Authority Act, 1999.
Replying to the debate on the bill in Parliament, Finance Minister Nirmala Sitharaman said the aim of bringing in FDI is not to demolish the public sector but to ensure more choice and efficiency for the common people.
She said the government has in fact taken several steps to strengthen PSU insurance companies, even injecting ₹17,450 crore into three non-life companies.
“We are now looking for greater penetration, better regulatory oversight, easier compliance and more foreign direct investment,” Sitharaman said.
Significantly, while the bill increases foreign direct investment in the insurance sector to 100 percent, the top management of the insurance company – chairman, managing director or CEO – must be an Indian citizen. It also paves the way for the merger of a non-insurance company with an insurance company.
The minister said that the FDI limit in the insurance sector has been gradually increased – from 26 percent to 49 percent in 2015, 74 percent in 2021 and now proposed to 100 percent.
“These have given a bigger boost to the insurance sector. The number of insurers has increased from 53 in 2014 to 74 now,” Sitharaman said. She said insurance penetration has improved from 3.3 percent in 2014-15 to 3.8 percent now and insurance density, or the average insurance premium paid per person in a year, has increased from $55 in 2014 to $97 now.
Protecting policyholders
A key provision of the bill gives the Insurance Regulatory and Development Authority Act (IRDAI) the power to limit the commission. “The Authority may, in the interests of policyholders, specify in regulations the limits of any commission, fee or remuneration in whatever form payable to an insurance agent or an insurance intermediary,” the bill prescribes.
Further, there is another provision which gives IRDAI the power to direct an insurer or insurance intermediary, who has made profit or averted loss by indulging in a transaction or activity in violation of the laws, to spend an amount equal to the wrongful profit made or loss averted by such violation.
The bill will ensure data privacy during data collection by insurers and insurance companies. Data must be collected in accordance with the provisions of the Personal Data Protection Act (DPDP)..
GST rate reduction
Sitharaman said the GST Municipal Secretariat is monitoring complaints regarding the reduced GST benefit that is not being passed on to policyholders. As of September 22, individual life insurance and health insurance are exempt from VAT.
Key points of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill.
100% foreign direct investment is allowed
In addition to life insurance, general insurance, health insurance, reinsurance and other insurance activities must also be registered.
Mergers between non-insurers and insurance companies are permitted.
Establishment of an Education and Protection Fund for Insurers, financed by fines imposed on insurers
The commission for insurance agents can be capped
LIC will have more autonomy to open more zonal offices and branches
Provide a term of five years for the Chairman and other full-time members of IRDA, or until they attain 65 years of age, whichever is earlier
Published on December 16, 2025
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