Lok Sabha Passes seminal Insurance Bill for 100% FDI, mandates undue gain disgorgement
2 min readIndia’s Lok Sabha approved the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill on Tuesday, introducing extensive reforms to the insurance sector while increasing foreign direct investment limits to 100% from 74%.
The legislation grants IRDAI authority to regulate agent commissions and recover wrongful gains from insurers or intermediaries.
This comprehensive bill modifies three foundational acts: the Insurance Act (1938), Life Insurance Corporation Act (1956), and Insurance Regulatory and Development Authority Act (1999).
Finance Minister Nirmala Sitharaman clarified during parliamentary discussions that raising FDI aims to expand consumer choices and sector efficiency rather than diminish public sector institutions.
The government has reinforced public insurance companies through measures including ₹17,450 crore capital infusion into three non-life insurers, she emphasized.
“Our focus remains on wider insurance coverage, enhanced regulatory frameworks, simplified compliance procedures, and increased foreign investment,” Sitharaman stated.
The amended legislation mandates that insurance company leadership—Chairperson, MD, or CEO—must be Indian citizens despite allowing full foreign ownership. It also enables mergers between insurance and non-insurance entities.
Sitharaman highlighted the progressive FDI increases—from 26% (2015) to 49% (2015), then 74% (2021)—which expanded the industry from 53 insurers in 2014 to 74 currently. Insurance penetration grew from 3.3% to 3.8%, while per capita premium spending rose from $55 to $97 during this period.
Policyholder safeguards
A pivotal amendment authorizes IRDAI to establish commission limits for agents and intermediaries to protect consumer interests.
The bill also equips the regulator to reclaim illegally obtained profits or averted losses from non-compliant entities. Insurers must now adhere to Digital Personal Data Protection Act standards when collecting policyholder information.
GST adjustments
Sitharaman confirmed that the GST Council Secretariat is monitoring insurer compliance following September’s GST exemption for individual life and health insurance policies.
Major legislative highlights
- Full foreign ownership permitted across insurance categories
- Expansion beyond life/general/health insurance to future-notified sectors
- Cross-sector mergers between insurance and non-insurance companies authorized
- New Policyholders’ Education and Protection Fund financed by insurer penalties
- Regulatory caps on agent/internediary commissions
- Increased operational autonomy for LIC’s branch expansions
- Fixed five-year terms for IRDAI leadership (or until age 65)
Published on December 16, 2025
