The Sabka Bima Sabki Raksha Insurance Bill: The 2047 Vision in action

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– Vinita Nair and Saloni Khant | corplaw@vinodkothari.com

– Updated on February 12, 2025

Being the 10th largest[1] in the world, the Indian Insurance market grows at 10-15% annually but insurance penetration is only at 3.7% of the GDP[2] as against the global average of 7.3%. With a view to boost growth in the sector and implement the vision of ‘”Insurance for All by 2047’, amendments in the existing insurance laws were placed before the public for consultation in November, 2024. Following the due process of legislation, the draft bill underwent several changes, was passed by both the houses of the parliament, assented to by the president and finally notified in the Official Gazette as the Sabka Bima Sabki Raksha (Amendment Of Insurance Laws) Act, 2025 (“Amendment Act”) on December 21, 2025. The Amendment Act, that amends the Insurance Act, 1938, Life Insurance Corporation Act, 1956 and Insurance Regulatory and Development Authority Act, 1999, introduces fundamental reforms by liberalising foreign investments and reducing capital requirements but at the same time, strengthens regulatory oversight on the market participants with additional measures to protect the interest of the policyholders.

The Amendment Act became effective from February 5, 2026. The amendment relating to prohibition on common MD and officers among insurance companies, banking companies and investment companies (Section 32A of the Insurance Act), has not been made effective, in view of industry representation made to IRDA, refer the discussion below.

Amendments in the Insurance Act, 1938

  • Sectoral cap foreign investment increased from 74% to 100%
    • Up to 100% foreign investments (FDI and FPI) allowed in Indian Insurance Companies [Section 3AA]. Consequential amendments in FEMA (NDI) Rules, 2019 are pending to be notified.
    • The cap for Insurance intermediaries continues to be 100% under the automatic route. [Para F.8.2 under Schedule I of the FEMA (NDI) Rules, 2019]
    • The cap for LIC continues to be 20% under the automatic route. [Para F.8.1A under Schedule I of the FEMA (NDI) Rules, 2019]
    • DPIIT Press Note amending the FDI Policy[3] has been issued on February 9, 2026 which will take effect from the date of FEMA notification. The press note amends certain conditions for foreign investment in insurance companies and insurance intermediaries, as summarised below in line with the amendment made in Insurance Rules:
      • These entities are no longer required to have the majority of their directors and KMPs as resident Indian citizens. At least one among the Chairperson, MD & CEO shall be resident Indian citizens.
      • No prior permission of IRDAI needed by an insurance intermediary for repatriating dividend.
      • No prohibition on insurance intermediary for making payments to the foreign group or promoter or subsidiary or interconnected or associate entities.
  • Prohibition on common MD and officers extended to all directors of all insurers in same class – not yet effective
    • A Director or officer of an insurer shall not be a Director or officer of any other insurer carrying on the same class of insurance business or of a Banking company or of an investment company.
      • Previously, applicable only to life insurers in respect of MD [Section 32A]
      • Restriction is not applicable to a director nominated by the Central Govt. 
      • The amendment raises concerns on continuity particularly in case of insurers promoted by banks where there are common directors appointed as nominee directors or independent directors on the boards of insurers.
      • Pursuant to strong representations made by insurers, this amendment has not been made effective yet.
  • Reduction in NOF requirements for foreign re-insurers

From Rs. 5000cr to Rs. 1000cr to encourage more foreign re-insurers to open branches in India [Section 6]

  • Ease in eligibility requirements for Insurance co-operative societies

Omission of requirements of minimum paid-up capital of Rs. 100 crores and ceiling of 26% direct or indirect holding by foreign body corporates. [Section 2(8A)]

  • Relaxation in threshold for share transfers requiring IRDAI approval

With a view to facilitate EODB by reducing compliance burden, the threshold for seeking approval of IRDAI  for transfer of shares increased from 1% to 5% of paid-up equity of the insurer. [Section 6A(4)(b)(iii)]

  • Every insurer to make investments in specified manner against the total value of liabilities

Every insurer to have invested assets of value to the extent of its liabilities. Previously, limited to life insurance business to meet the liabilities arising out of life insurance policies [Sec 27].

  • Allocation of investment in various securities in the following manner:
Class of insurance businessas a % of invested assets
Investment in Government securitiesInvestment in Government securities and other approved securitiesApproved investments as specified in regulations
Life25%At least 25%balance
Other than Life20%At least 10%balance
  • Other conditions:
    • Such investments should be free of any encumbrance, charge, hypothecation or lien.
      • Exemption provided to repo or a reverse repo transaction or a Government securities lending transaction permitting greater flexibility

Investments in private limited previously barred, now permitted. Limit on investment in a company or other body corporate which is owned or controlled by the promoters – upto 5% of invested assets by value.

Actionable: Insurers to amend investment strategy and re-invest accordingly.

  • Actuary to investigate all insurers

Investigation by actuary to apply to all insurers to bring all insurers and re-insurers under the same reporting framework. Previously, applicable to only life insurers.

  • Eligibility criteria, experience, powers and functions of Actuary to be specified by way of regulations [Section 12A]
  • Requirement of furnishing abstract of the report of actuary by insurer to IRDAI omitted. [Section 13]
  • Actionable:
    • May require review of an existing appointed actuary, if any, and appointment of a new actuary based on the eligibility and other requirements as may be prescribed in the regulations, for both life and non-life insurers
    • Non-life insurers to also cause an investigation to be undertaken by such actuary on a financial year basis
  • Concurrent KYC reporting and stricter confidentiality requirements

With a view to maintain complete records, their accuracy, security and confidentiality, KYC details including PAN of the policyholder along with the policy details and records of claims to be shared on concurrent basis with the IRDAI. KYC details to be preserved confidentially with detailed norms to be specified through regulations.

Consequential amendment to empower IRDAI to collect, manage, share and protect such information, while ensuring policyholder consent, confidentiality, and efficient regulation of the insurance sector. [Section 14A to 14E of IRDA Act, 1999]

Actionable: Insurers to ensure concurrent reporting to IRDAI, and ensure adequate systems in place to facilitate the same.

  • IRDAI empowered to decide limits on commission

IRDAI to specify the limit and manner of commission payable to all insurance agents and intermediaries and related disclosures. Limits of Expenses Of Management now applicable to all insurers.

Section 2 (10B) provides a list of insurance intermediaries and includes ‘Managing General Agents’ and ‘Insurance Repositories’ as Insurance Intermediaries

  • MGAs are appointed for marketing, underwriting, issuing policies, collecting premiums, appointing and supervising other agents, paying claims, and negotiating reinsurance. (See our article on MGAs – Not a Broker, Not an Insurer: Welcome to the world of MGAs)
  • Insurance Repositories provide policyholders a facility to keep insurance policies in electronic form and to undertake changes, modifications and revisions in the insurance policy with speed and accuracy.        

Section 105BA inserted to provide penal provisions if any person acts as insurance intermediary without registration.

  • Increased powers over insurance intermediaries

IRDAI empowered to issue directions to insurance intermediaries and insurers in public interest or to secure its proper management including search and seizure, disgorgement of wrongful gain made or loss averted. Previously, limited to insurers. [Section 34]

Section 40D amended to provide grounds for suspension and cancellation of insurance intermediary, inter alia includes default in complying with/ contravention of Companies Act, 2013, FEMA Act, PMLA Act.

  • Power to exempt applicability of provisions on IFSCs

Central Government empowered to apply or exempt applicability of provisions of Insurance Act even to insurer or insurer intermediary in IFSC set up in SEZ. Previously, power limited to SEZ. [Section 2CA]

  • Mandatory social obligations for all insurers

Obligation to undertake certain % of insurance business in rural, social, informal or unorganised sectors, economically vulnerable, backwards sectors to be extended to all insurers.

  • Previously applicable only on life and general insurers [Section 32B and 32C]

Actionable: Insurers to consider such obligations in their sales strategy.

  • Scope of IRDAI expanded to consider scheme of arrangement of non-insurance business

IRDAI is empowered to approve merger, amalgamation of insurance business with non-insurance business of any company.

  • Previously, not expressly permitted and limited to transfer or amalgamation with insurance business of any other insurer. This had resulted in an interpretational issue on the permissibility and scope of IRDA approval. For e.g. in case of IRDAI v. Shriram General Insurance Company Limited[4] [Section 35]

Actionable: No immediate actionable, the same facilitates schemes of arrangement for insurers seeking to enter into schemes of arrangement in relation to non-insurance business with IRDAI approval.

  • Increase in maximum Penalty from 1 crore to 10 crore

For contravention of Insurance Act or IRDA Act by insurer or insurance intermediary. Per day penalty to remain at existing level of Rs. 1 lakh. [Section 102]

  • Other Changes
    • Introduction of definitions like Insurance Business, Class of Insurance Business, Premium, Principal Officer for ease of reference and simplification of existing definitions like insurer including updated references to other laws. [Section 2]
    •  Elaboration of the definition of health insurance to indicate specifics included in case of personal accident and travel insurance cover. [Section 2(6C)]

Amendments in the IRDA Act, 1999

  • Introduction of Policyholders Education and Protection Fund [PEPF]
    • To be established and administered by the IRDAI, this Fund will primarily constitute the grants and donations given by the IRDAI, Central or State Government and companies and the monies collected as penalties. [Section 16A]

[1] Source: https://www.ibef.org/news/india-is-set-to-become-one-of-the-fastest-growing-insurance-markets-economic-survey.

[2] Source: https://economictimes.indiatimes.com/industry/banking/finance/insure/life-insurance-penetration-remained-unchanged-in-2025-at-about-half-of-global-average-irdai-health-premium/articleshow/126259232.cms?from=md r

[3] Consolidated FDI Policy, 2020

[4] Company Appeal (AT) No.278/2024 before NCLAT, Chennaiai

Our other resources:

  1. IRDAI is a step closer to the vision of Insurance for All by 2047
  2. IRDAI does comprehensive liberalisation of insurance regulations
  3. IRDAI notifies CG Regulations, 2024
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