What is the new insurance bill?
New Insurance Bill 2025 Explained: The Union Cabinet on Friday approved the ‘Sabka Bima, Sabka Raksha (Insurance Laws Amendment) Bill, 2025′. The purpose of this bill to be presented in the winter session of Parliament is to modernize India’s outdated insurance laws. The government claims that this will increase the scope of insurance and better protect the interests of customers. However, experts’ opinions are divided regarding this new draft. While on one hand major decisions have been taken like completely opening the doors of Foreign Investment (FDI), on the other hand important demands like ‘Composite License’ have been put on the back burner, due to which both the industry and the common customers are a bit disappointed.
All doors open for foreign companies
The biggest and most discussed aspect of this bill is to increase the limit of Foreign Direct Investment (FDI) in insurance companies from 74% to 100%. This decision is a big step towards making the Indian insurance market completely global. This simply means that now foreign insurance companies will be able to run their business in India even without any Indian partner.
Its meaning is quite deep for the common policyholder. When foreign companies come to India with 100% ownership, they will also bring with them huge capital and new technology. This will increase competition in the market, the benefits of which can directly benefit the customers. You may get to see better risk management, fast claim settlement and new types of insurance products. Industry experts believe that this will not only increase the reach of insurance, but will also improve the quality of service with the introduction of global best practices.
LIC and IRDAI get new ‘superpower’
To protect the interests of policyholders, the regulator i.e. IRDAI is being made more powerful than before. On the lines of SEBI, now IRDAI will also have the power to recover ‘wrongfully earned profits’ from companies violating the rules. Besides, it is proposed to introduce a system of ‘one-time registration’ by eliminating the hassle of repeatedly renewing registration for insurance agents and middlemen, which will speed up the work.
This bill has also brought relief news for the country’s largest insurance company LIC. Now LIC will not have to wait for government approval to open new zonal offices. It will be given more freedom in its functioning, so that it can compete toughly with private companies and take decisions faster. Besides, LIC will also get the freedom to adapt its operations in foreign countries as per the laws there.
The big change that was expected was ruined
Despite all the good things, there are some shortcomings in this bill which have disappointed the industry. The biggest disappointment is regarding the non-inclusion of ‘Composite License’. At present, the companies selling life insurance and general insurance are different. The industry had been demanding for a long time that the same company should be allowed to sell both types of insurance.
If the composite license were approved, a single company could offer you a combined package of life, health and car insurance. With this, customers do not have to wander to different places and it becomes easier to manage the policy. But the government has currently kept this system out of the current bill, which means you will still have to go to different companies for life and general insurance.
Apart from this, the capital requirement (Rs 100 crore) for new insurance companies has not been reduced, due to which it will be difficult for small and regional level new players to enter the market. Experts believe that this bill is revolutionary in terms of investment, but it may prove to be an incomplete opportunity in terms of some important reforms related to the convenience of common customers.
What will be the benefit to common consumers?
- The world’s big insurance companies will be able to invest more in the insurance sector in India.
- With the entry of global insurance companies in the insurance market, competition in the insurance sector will increase and insurance policy premiums can become competitive and affordable.
- Insurance policies are expected to become more affordable, it will be possible for common people to buy policies at easy terms and prices.
- New insurance products of global standard will be available.
- Customer services related to insurance policies can improve due to increased competition.
- Insurance claim applications can be paid effectively.
- With the increase in foreign investment, new employment opportunities will increase in the entire insurance sector and economic development will be strengthened.
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