New Insurance Bill 2025: The government has brought a new law, did the common man get what he was waiting for or not?

New Insurance Bill 2025 Explained: The Union Cabinet on Friday approved the "Sabka Bima, Sabki Raksha (Insurance Laws Amendment) Bill, 2025." 

The bill, to be introduced in the winter session of Parliament, aims to modernize India's outdated insurance laws. The government claims it will expand the scope of insurance and better protect consumer interests. 

However, experts are divided on this new draft. While major decisions like fully opening the doors to foreign investment (FDI) have been taken, a key demand like a "composite license" has been put on hold, leaving both the industry and the general consumer somewhat disappointed.

Doors wide open for foreign companies

The most significant and most discussed aspect of this bill is the increase in the foreign direct investment (FDI) limit in insurance companies from 74% to 100%. 

This decision is a major step towards making the Indian insurance market fully global. This simply means that foreign insurance companies will now be able to operate in India without an Indian partner.

This has profound implications for the average policyholder. When foreign companies come to India with 100% ownership, they will bring with them significant capital and new technology. 

This will increase competition in the market, which can directly benefit customers. You may see better risk management, faster claim settlement, and new types of insurance products. 

Industry experts believe that this will not only increase insurance access but will also improve service quality through the introduction of global best practices.

LIC and IRDAI get new 'superpower'

To protect the interests of policyholders, the regulator, IRDAI, is being strengthened. Following the example of SEBI, IRDAI will now have the authority to recover ill-gotten gains from companies violating regulations. 

Furthermore, a one-time registration system is proposed, eliminating the hassle of repeatedly renewing registrations for insurance agents and intermediaries, which will expedite the process.

This bill also brings relief to the country's largest insurance company, LIC. Now, LIC will no longer have to wait for government approval to open new zonal offices. 

It will be granted greater freedom in its operations, enabling it to compete fiercely with private companies and make faster decisions. Furthermore, LIC will be allowed to adapt its operations abroad to local laws.

The big change that was expected, was reversed.

Despite its positive aspects, the bill has some shortcomings that have disappointed the industry. The biggest disappointment is the lack of a "composite license." 

Currently, separate companies sell life insurance and general insurance. The industry has long demanded that a single company be allowed to sell both types of insurance.

If a composite license were approved, a single company could offer a combined package of life, health, and car insurance. This would save customers from having to run around multiple locations and make policy management easier. 

However, the government has excluded this provision from the current bill, meaning you will still have to go to different companies for life and general insurance.

Furthermore, the capital requirement for new insurance companies (₹100 crore) has not been reduced, making it difficult for new players, both small and regional, to enter the market. 

Experts believe that while this bill is revolutionary in terms of investment, it may prove to be an unfulfilled opportunity for some key improvements related to consumer convenience.

What will be the benefit to common consumers?

1. The world's big insurance companies will be able to invest more in the insurance sector in India.
2. With the entry of global insurance companies in the insurance market, competition in the insurance sector will increase and the premiums of insurance policies can become competitive and affordable.
3. Insurance policies are expected to become more affordable, making it possible for common people to purchase policies at easier terms and prices.
4. New insurance products of global standard will be available.
5. Increasing competition may lead to better customer services related to insurance policies.
6. Insurance claim applications will be able to be paid effectively.
7. With increasing foreign investment, new employment opportunities will increase in the entire insurance sector and economic growth will get a boost.