The bill, originally slated for the recently concluded budget session, was delayed as the finance ministry sought to add provisions on 100% foreign direct investment (FDI) and ease of operational considerations for foreign investors, requiring fresh vetting by the law ministry before being sent for cabinet and legislative approval.
“The government could have considered an ordinance for immediate implementation, but since several provisions required time for regulatory and industry readiness, finalizing the bill with full details before seeking Parliamentary approval was preferred,” the first person mentioned above said, requesting anonymity.
“With the finance ministry clearing the bill, cabinet approval could come soon,” the person mentioned above added.
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The second person said the bill focuses on ensuring clarity and preparedness, adding, “A well-rounded bill, backed by full regulatory alignment, was seen as the more prudent path.”
The Insurance Laws (Amendment) Bill will revise three key pieces of legislation—the Insurance Act, the Life Insurance Corporation (LIC) Act and the Insurance Regulatory and Development Authority (Irda) Act—paving the way for greater autonomy for the insurance regulator and LIC for appointments, office setup and staffing.
The comprehensive legislative structure will also eliminate the need for future amendments to the LIC Act and related laws to enable composite licensing.
The bill proposes key reforms, including a composite insurance licence, simplified entry norms, streamlined investment rules and more regulatory powers to set licensing fees.
The introduction of composite licences and approval for 100% FDI will be a shift for the insurance sector, which will allow a single insurer to offer both life and non-life products—currently permitted only through separate entities.
Composite insurers are already allowed in Singapore, Malaysia and the UK.
A spokesperson for the finance ministry didn’t respond to an emailed query.
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According to experts, the proposed Insurance Laws (Amendment) Bill will deepen market penetration in underserved rural and semiurban areas, making insurance more accessible while encouraging insurers to develop tailored, affordable products, while also enhancing risk management capacity, accelerating tech adoption and expanding the customer base, leading to a strong foundation for long-term sectoral growth.
“Beyond financial boosts, the changes also signal a strategic shift, encouraging a dynamic ecosystem where new entrants and established players alike can thrive,” said Shruti Ladwa, partner and insurance leader, EY India.
“While these reforms are a significant step toward achieving ‘Insurance for All by 2047,’ their success hinges on robust implementation and consumer-centric policies. Thoughtful execution will be key to balancing growth with stability,” she added.
Interestingly, the draft bill empowers the regulator Irda to set relaxed licensing and capital requirements for smaller insurers or single-product entities, replacing the fixed capital clause with a more flexible, consultative framework.
It also introduces a differential licensing regime to support micro-insurers in serving low-income and rural populations and paves the way for captive insurers—allowing conglomerates to establish in-house insurers to manage group-level risks.
The amendments introduce simplified investment norms, lower net-owned fund requirements for foreign reinsurers, a differential solvency margin, parity with banks on share-transfer approvals, and the removal of caps on commission payment.
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The reform measures, which include raising the FDI limit to 100%, signal a liberal investment climate, but investors will judge it by the sector’s long-term returns over a decade or more, said C.R. Vijayan, former secretary general of the General Insurance Council.
“Long-term returns entail higher risk for investors, especially given the potential impact of a change in government and its implications on investment policies,” he added.
The financial services secretary, M. Nagaraju, recently said that the new insurance laws would attract global investors, foster competition, enhance product quality, improve customer service and lower premiums—bringing India on par with economies like Canada, Brazil, Australia and China—ultimately boosting insurance penetration and reducing the protection gap.
“More players in the market would enhance competition and result in better products, improved customer service and more affordable premiums. It would ultimately improve insurance penetration and density, reducing the protection gap,” he said.
The bill also proposes composite licences with a higher capital threshold of ₹150 crore while retaining existing capital norms for insurance and reinsurance at ₹100 crore and ₹200 crore, respectively.
It enables insurance agents to sell products from multiple companies, simplifies operating conditions for foreign reinsurers by slashing the net-owned fund requirement from ₹5,000 crore to ₹1,000 crore, and empowers the regulator to allow micro and niche insurers to enter underserved markets with a minimum capital of ₹50 crore on a case-by-case basis.
Other key amendments include introducing differential solvency margins, removing caps on commission payments, and bringing insurers on par with banks for share-transfer approvals.
Since opening the sector to private players in 2000—with FDI limits gradually raised from 26% to 74%—Indian insurance has seen robust growth.
Between 2014 and January 2024, while insurers rose from 53 to 70, insurance penetration grew from 3.9% to 4%, and insurance density nearly doubled from $52 to $92.
