The Lok Sabha has passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, marking a significant step in reshaping India’s insurance sector. The legislation seeks to modernise decades-old insurance laws to expand coverage, strengthen regulation, and make insurance more accessible, even as it sparks debate over foreign investment and the future role of public sector insurers.
What the Bill Seeks to Change
The Bill amends three key legislations governing India’s insurance ecosystem:
- Insurance Act, 1938
- Life Insurance Corporation Act, 1956
- Insurance Regulatory and Development Authority Act, 1999
Its stated objective is to accelerate growth in the insurance sector while ensuring better protection for policyholders. It also aims to simplify compliance requirements for insurers and intermediaries, bring greater transparency in regulation-making, and strengthen regulatory oversight by the Insurance Regulatory and Development Authority of India (IRDAI).
Why the Government Brought This Bill
India’s insurance penetration and density have historically remained low compared to global averages. The government argues that a more flexible and investor-friendly regulatory framework is necessary to expand coverage, introduce innovative products, and improve service delivery.
According to the Finance Minister, insurance density, penetration, and overall coverage have shown significant growth over the last 11 years, aided by policy reforms and welfare-focused insurance schemes. The Bill is positioned as the next step in deepening this expansion.
Key Features Highlighted in Parliament
While moving and replying to the Bill, the Finance Minister emphasised several aspects:
- Improved ease of doing business for insurance companies and intermediaries
- Greater transparency in regulation-making
- Strengthened regulatory mechanisms to protect policyholders
- Provision for uninterrupted services by insurance intermediaries
The Bill also aligns with recent policy decisions such as raising FDI limits in the insurance sector to attract capital and expertise, which the government argues will lead to better products and services for consumers.
Link with Welfare-Oriented Insurance Schemes
The government linked the Bill to its broader social security framework. Flagship schemes highlighted include:
- Pradhan Mantri Jeevan Jyoti Bima Yojana
- Pradhan Mantri Suraksha Bima Yojana
- Pradhan Mantri Jan Arogya Yojana
- Pradhan Mantri Fasal Bima Yojana
These schemes are designed to provide low-cost insurance to economically vulnerable sections, with subsidised premiums to ensure affordability. The government maintains that public sector insurers continue to play a central role in implementing these programmes.
Public Sector Insurers and Fiscal Support
Addressing concerns over public sector insurance companies, the Finance Minister stated that more than ₹17,000 crore has been infused into these entities to improve their financial health and competitiveness. The government’s position is that reforms and capital infusion are meant to strengthen, not weaken, public sector insurers so they can meet the country’s insurance needs effectively.
GST Relief and Regulatory Monitoring
A notable policy development referenced during the debate was the decision taken at the 56th GST Council meeting to waive GST on life and health insurance premiums. The GST Council Secretariat has been tasked with monitoring complaints to ensure that the benefits of this tax relief are passed on to policyholders, reflecting an emphasis on consumer protection.
Debate and Opposition Concerns
The Bill triggered sharp political debate, particularly over the provision allowing up to 100 per cent foreign direct investment in the insurance sector. Opposition members argued that this could pave the way for excessive privatisation.
Concerns were also raised about weakening the public sector’s role, with critics pointing to the resilience of public sector banks and insurers during the 2008 global financial crisis as evidence of their systemic importance. Demands were made to either withdraw the Bill or refer it to a parliamentary standing committee for closer scrutiny.
Supporters’ Arguments in Favour of the Bill
Supporters of the legislation highlighted the expansion of insurance coverage in recent years and credited policy reforms for improved penetration. They argued that liberalisation, including higher FDI limits, has historically contributed to growth in the sector and that reforms build on earlier economic changes initiated in the 1990s.
Why This Bill Matters
The passage of the Sabka Bima Sabki Raksha Bill reflects a broader policy shift towards balancing social security goals with market-driven expansion. It raises fundamental questions about the role of foreign capital, regulatory capacity, and the future balance between public and private players in a sector critical to household financial security.
What to Note for Prelims?
- The Bill amends the Insurance Act, 1938; LIC Act, 1956; and IRDA Act, 1999.
- IRDAI is the regulator for the insurance sector.
- GST on life and health insurance premiums has been waived.
- FDI limits in insurance have been increased.
What to Note for Mains?
- Challenges of low insurance penetration in India.
- Debate over FDI versus public sector dominance in insurance.
- Role of insurance in social security and financial inclusion.
- Regulatory reforms and consumer protection in financial sectors.
