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New Insurance Bill: The government has introduced a new insurance bill in the House, in which there is a provision to change mainly three acts. The most important is to increase FDI from 74 to 100 percent and provide relaxation in administrative rules.
New Delhi. The government has introduced a new insurance bill in the winter session of Parliament. It is being known as Insurance Laws (Amendment) Bill, 2025 and three acts have been included in this bill in a new way. In this act, changes have been made in the Insurance Act 1938, Life Insurance Corporation (LIC) Act 1956 and IRDAI Act 1999. At present, the bill has been presented in the House for discussion and now speculations have started regarding its benefits and effects.
In the new insurance bill, maximum emphasis is being given on increasing investment and working capital in the sector. This is the reason why the government has now approved 100 percent foreign direct investment (FDI) in the insurance sector. This means that now foreign insurance companies will be able to start business directly in India. This will increase competition in the sector and insurance products may become cheaper. Recently, the government has reduced GST on insurance from 18 percent to zero. Now with 100 percent FDI, the entire sector is expected to benefit.
Government’s big target in insurance sector
The government has not only made the new insurance bill keeping investment in mind, but its aim is also to increase the reach of insurance products in the country. Through this bill, efforts will be made to modernize the insurance sector, increase competition and achieve the goal of Insurance for All by the year 2047. Currently, the penetration of insurance products in India is only 3.7 percent, whereas at the global level the average is less than 7 percent. Such provisions have been made in the bill, which will further increase the reach of insurance products.
What changes regarding FDI?
- Currently, only 74 percent foreign investment is allowed in the Indian insurance sector, but in the new bill it has been recommended to increase it to 100 percent. With this, leading insurance companies from all over the world will be able to start insurance companies with their ownership in India.
- Efforts are being made to give composite licenses to companies, which means that they will not need to obtain separate licenses for general insurance and health insurance. Both jobs will be done with one license.
- With the issuance of composite license in the new bill, companies will be able to issue life, health and motor insurance in a single product.
Company will start with less money
In the new insurance bill, the government has also reduced the figure of capital required to start a new company. Now an insurance company can be started with a minimum of Rs 100 crore. However, to start a reinsurance company, a minimum capital of Rs 200 crore will be required. This rule will be for Indian company. If any Indian company wants to enter the insurance sector, then it will have to meet this capital requirement.
Higher limit for foreign companies
If a foreign company wants to open a reinsurance company in India, it will have to maintain a fund of Rs 500 crore, which earlier was Rs 5,000 crore. This means that the government has directly reduced this capital requirement by 90 percent. These companies will be allowed to appoint license brokers and agents on a permanent basis instead of registering every three years, but will have to comply with the annual fees and rules.
The agent also benefits a lot
After the implementation of the new insurance bill, not only the companies and the common man will benefit, but the agents will also benefit from it. Under the new rule, agents will be able to sell insurance products of more than one company. With the changes in LIC Act, LIC Board will get more autonomy. This will improve the governance of the company and digital innovation and diversity in products will be visible in the sector.
Who will get how much benefit?
- First of all, let us talk about the common man, who will have more options and will be able to get insurance products at cheaper and lower premiums. Due to increased competition, claim settlement will also be faster and the penetration of insurance products in small towns and rural areas can reach 3.7 to 7 percent.
- At the corporate level, new players will enter the market and it is estimated that more than 1,000 insurance companies may enter this sector. The sector can also get investment of 20 billion dollars i.e. about Rs 1.70 lakh crore.
- Companies will hire more agents, which can increase product sales by 20 percent. However, this will increase pressure on small insurance companies and may even lead to their merger. If this bill is passed, its effect will be visible from the year 2026.
