Draft Legislation On Insurance Aims Transparency, Increasing FDI: Nirmala Sitharaman
Earlier in the day, the finance minister also introduced the bill in the Lok Sabha
New Delhi: Signaling a transformative shift for India's insurance sector, Union finance minister Nirmala Sitharaman on Tuesday said that the insurance reforms brought in through a bill in Parliament will grant greater access to insurance for the people, have better regulatory oversight and ensure ease of compliance. "The draft legislation was aimed at bringing transparency, ease of compliance mandates and increasing foreign direct investment (FDI) in the sector," Sitharaman also said while replying a debate on Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, adding that the bill to raise FDI in the insurance sector to 100 per cent, with a view to providing insurance to all by 2047.
Later, the bill was passed by the House through voice vote. During her reply, she highlighted the benefits of ease of doing business measures that have been considered in the bill. "Monopoly doesn't give us that advantage, and therefore, the more the competition, the better the rates. Another priority which our government has given is to strengthen the public sector insurance companies. Since 2014, we have been doing a lot of things to improve their financial health," the minister said.
Earlier in the day, the finance minister also introduced the bill in the Lok Sabha. This ambitious legislation amends three foundational laws -- the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the Insurance Regulatory and Development Authority Act, 1999. At its core lies a bold proposal to elevate the foreign direct investment (FDI) limit in insurance companies from 74 per cent to 100 percent, enabling full foreign ownership.
For the common man, Sitharaman said that the livelihood of insurance agents will be protected. “Irdai being empowered to disgorge wrongful gains made by insurers and distribute them to affected insurance policyholders. There is a need to spread awareness about insurance among people. “Insurance bill seeks to reduce net owned fund requirement for re-insurance firms to Rs 1,000 crore from Rs 5,000 crore," she said.
On penalty for instance miss-selling, she said the government keeps asking to penalise the wrong doers in the insurance sector.“We are asking regulators to rationalise the penalty. The company will have to keep Insurance or assurance in their company name,” she said, adding that the GST council secretariat is monitoring complaints regarding GST cut benefit not being passed on to policyholders.
As per the bill, it also paves the way for the merger of a non-insurance company with an insurance firm. The bill received the Union Cabinet's nod on Friday. On consolidation of state-owned insurance firms, Sitharaman also said that the government has taken steps to strengthen PSU insurance firms and infused Rs 17,450 crore in 3 non-life firms. "Besides, ee are also providing LIC the autonomy to spread their businesses and open up zonal offices across the country," she said.
The bill further aims to accelerate the growth and development of the insurance sector and ensure better protection of policyholders, as per the statement of objects and reasons. "The bill provides for the establishment of the policyholders' education and protection funds to protect policyholders' interests. It 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," she said.
With regard to the term of office of the chairperson and other whole-time members, the bill, however, provides for a five-year term or until they attain the age of 65 years, whichever is earlier.
At present, the upper age limit for whole-time members is 62 years, while for the Chairman it is 65 years.
