Insurance Amendment Bill 2025: What the proposed overhaul could mean for the sector

The government is expected to table the Insurance Laws (Amendment) Bill 2025 during the upcoming Winter Session of Parliament from December 1–19, setting the stage for one of the most significant regulatory overhauls in the sector in more than a decade.

The Bill seeks to amend the Insurance Act, the LIC Act and the IRDAI Act, with changes designed to expand capital access, simplify licensing and improve governance.

The broader goal aligns with the government’s long-term vision of “Insurance for All by 2047.”

Industry experts say the proposed framework could influence how insurers operate, how customers access products and how new players enter the market.

Opening the door to 100% FDI

A key proposal in the Bill is allowing 100% foreign direct investment in insurance companies.

Supporters argue that higher FDI limits can deepen the market’s financial capacity and bring in global expertise.

According to Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), allowing full foreign ownership can introduce “global capital, innovation, technology and specialised underwriting skills,” potentially improving product diversity and risk-based pricing.

He notes that increased competition could ultimately benefit policyholders.

Composite licences: One entry, multiple segments

The Bill also proposes issuing composite licences, which would let insurers operate across life, general and health segments under a single authorisation.

This marks a shift from the current structure that requires separate licences for each vertical.

Bharindwal said such a move can “reduce friction, promote efficiency and enable holistic protection solutions,” especially for individuals and small businesses that currently engage with multiple insurers for different needs.

Lower capital norms to ease market entry

Revised capital requirements are another major component of the reform package. Lower thresholds could make it easier for specialised or digital-first insurers to enter the market, supporting greater innovation in micro-insurance and niche segments.

Industry bodies say the move aligns with the need for more competition in a market where penetration remains modest relative to India’s size and risk exposure.

More autonomy for the LIC board

Proposed amendments to the LIC Act would give the insurer’s Board greater operational independence.

Analysts say additional autonomy could strengthen governance and agility at LIC, which remains a dominant player with systemic significance.

Bharindwal said that enhancing the Board’s independence is a “positive step” that can improve accountability while maintaining LIC’s central role in the Indian insurance ecosystem.

Broking community seeks perpetual licence framework

Within the distribution ecosystem, insurance brokers are also making a case for regulatory reforms that improve ease of doing business.

Their primary demand is a perpetual licence, granted as long as brokers continue to meet fit-and-proper and compliance criteria.

According to Bharindwal, such a system would align with global practice, reduce administrative burden on both the regulator and intermediaries, and support long-term investments in talent and technology.

Brokers argue that streamlining their licensing structure is essential if they are to meaningfully contribute to expanding coverage towards the 2047 universal insurance goal.

A sector preparing for its next phase

If enacted, the Insurance Laws (Amendment) Bill 2025 could remake the sector’s operating landscape—expanding capital flows, widening competition and giving long-standing institutions more operational flexibility.

For an under-penetrated market with rising insurance needs, stakeholders say the upcoming session will be critical in shaping how the industry evolves over the next two decades.Read about our editorial guidelines and ethics policy