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Kolkata: The Union Cabinet has approved the new Insurance Bill, 2025. The Bill could become a milestone in the journey of the sector from infancy to adulthood in the country. It has got a few salient points, one of which is 100% Foreign Direct Investment in this sector, greater power for regulator IRDAI and LIC. But it does not provide for a "composite license", which would have allowed an insurer to offer both life and general insurance simultaneously.
On Dec 13, the Union Cabinet approved the "Sabka Bima, Sabki Raksha (Insurance Laws Amendment) Bill, 2025 and reports say that it will be introduced in the winter session of Parliament. According to the government, this proposed legislation expand the scope of insurance and pave the way for better protection of consumer interests. However, experts are not unanimous on the new draft. One of the reasons is the absence of the Bill on the key demand of "composite license", which allows an insurance company to offer both general insurance and life insurance at the same time.
This is perhaps the headline-grabbing point for the proposed legislation. While the current cap for FDI in insurance is 74%, this Bill pushes it to the full 100%. This decision can help the Indian insurance market align fully with the global markets. It will allow foreign insurance companies to operate in India without any Indian equity partner at all.
What is means at the ground level, is that a foreign insurer can enter the Indian market, or an existing one can raise its stake and infuse significant capital and new technology. This will raise levels on competition in the market and consumers can beenfit directly as a result of the more intense competition. Insurance policies could become more affordable, making it possible for common people to purchase policies at easier terms and prices. Experts say that there could be improved risk management, faster claim settlement (a really very important metric from the customer point of view) and new types of insurance products. Service quaslity can also undergo and upgrade. Moreover, with rising FDI, new employment opportunities could emerge in the entire insurance sector.
The insurance regulator, IRDAI, is being lent more teeth and muscle to protect the interests of policyholders. IRDAI, a la Sebi, will henceforth have the authority to recover ill-gotten gains from companies violating regulations and this is a big step. To improve ease of doing business, a one-time registration system has been proposed in place of the hassle of repeatedly renewing registrations for insurance agents and intermediaries.
This Bill also equips the PSU behemoth LIC towards higher freedom of action. LIC will not have have to wait for government approval to open new zonal offices. It will help the PSU and biggest insurer of the country to compete with the nimble-footed private insurers. LIC will also more easily adapt its operations in foreign land to suit local laws.
One of the key demands of the insurance sectors was the t disappointment is the lack of a "composite license." Currently, no insurer can sell life insurance and general insurance and they have to be sold through separate companies. Contrary to the demands of the sector, the Bill remains silent on the issuance of such composite licenses. A composite license could have allowed the same firm to sell life, health and vehicle insurance, which, in turn, would have given customers relief from running around multiple locations and manage multiple policies.
There was also an expectation that the legislation would pave the way for smaller companies to eneter the insurance market by bringing down the capital requirement for new insurance companies below Rs 100 crore, where it is currently. However, a bigger capital base helps customer faith in an insurance company.
