New Insurance Bill: Major reforms it seeks to bring, Pg16

Key Highlights:

• The Union Cabinet approved the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 to revamp India's insurance framework.
• The Bill proposes to increase the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74% to 100%.
• The Bill reduces the Net Owned Funds (NOF) requirement for foreign reinsurers from Rs 5,000 crore to Rs 1,000 crore.
• IRDAI will receive enhanced enforcement powers, including the authority to recover wrongful gains.
• LIC will be empowered to set up new zonal offices without prior government approvals.

Detailed Insights:

• The Insurance Laws Amendment Bill aims to modernize the insurance sector, broaden insurance coverage, and enhance regulatory oversight.
• Increasing the FDI limit is expected to attract stable investment, facilitate technology transfer, and enhance insurance penetration to achieve 'Insurance for All by 2047'.
• Reducing NOF requirements for foreign reinsurers aims to attract more players, increasing reinsurance capacities in India, which is currently dominated by GIC Re.
• The enhanced powers for IRDAI will strengthen policyholder protection by enabling the recovery of illegally earned profits, similar to the powers of SEBI.
• The Bill introduces a one-time registration system for insurance intermediaries and raises the threshold for requiring IRDAI’s approval for the transfer of paid-up equity capital from 1% to 5%.
• LIC will gain greater operational freedom, enabling faster expansion, improved administrative efficiency, and better regional oversight, along with the ability to restructure overseas operations.
• The Bill does not include provisions for composite licenses, which would have allowed insurers to offer bundled products combining life, health, and general insurance.
• Proposals to lower minimum capital requirements for new insurers and allow individual insurance agents to sell policies of multiple companies are also missing from the Bill.

Key Concepts Involved:

• Foreign Direct Investment (FDI): Investment from a foreign entity into a business in another country.
• Reinsurance: Insurance purchased by insurance companies to reduce their risk.
• Insurance Regulatory and Development Authority of India (IRDAI): Regulatory body for the insurance sector in India.