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The Lok Sabha passed the Insurance Amendment Bill 2025 allowing 100% FDI in insurance
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The Bill amends Insurance Act 1938, LIC Act 1956, and IRDA Act 1999 for sector reforms
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One key official in insurance firms must be an Indian citizen despite the FDI hike
The Lok Sabha on Tuesday passed the Insurance Amendment Bill 2025, which permits up to 100% foreign direct investment into the insurance sector.
Presently, the cap on FDI in insurance sector is capped at 74%.
Before voting on the legislation, Finance Minister Nirmala Sitharaman told the Lower House of Parliament that the insurance sector reforms will lead to greater access to insurance for people, more players in the sector and robust regulatory setup.
The legislation, officially named as 'The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025', will amend Insurance Act, 1938, Life Insurance Corporation Act, 1956, and Insurance Regulatory and Development Authority Act, 1999.
"The Bill aims at bringing transparency, easing compliance mandate, and increasing FDI," Sitharaman said, after the legislation was tabled in the Lok Sabha on Tuesday.
Despite allowing a hike in FDI in the insurance sector to 100%, one of the top officials — Chairman, Managing Director, or CEO — must be an Indian citizen.
The Bill further aims to accelerate the growth and development of the insurance sector, and to ensure better protection of policyholders, as per the statement of objects and reasons.
The legislation would also improve the ease of doing business for insurance companies, intermediaries, and other stakeholders, bring transparency to regulation-making, and enhance regulatory oversight over the sector, it said.
Sitharaman said that entities engaged in insurance business must mandatorily use 'insurance' or ‘assurance' in their name and cannot operate insurance business without using 'insurance/assurance' in their name.
The finance minister also underlined that regulatory penalties have been rationalised under proposed law. The maximum penalty has been proposed to be raised to Rs 10 crore, and are extended to intermediaries.
Further, she stated that higher penalties are aimed at acting as deterrents and improving regulatory compliance. She called the measures as "policyholder-friendly reforms" and added that it aims to empower IRDAI to disgorge wrongful gains from insurers and intermediaries.
The bill had received the Union Cabinet's approval on Friday.
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