Insurance Laws Bill 2025 proposes composite licence, lower entry barriers and 100% FDI
New Delhi: Listed for introduction in the Winter Session of Parliament starting next Monday, the Insurance Laws (Amendment) Bill 2025 aims to make the sector more robust to further support the country’s fast-paced economic growth while aligning with the government’s long-term vision of “Insurance for All by 2047.”
The proposed Bill provides for functional flexibility by introducing a composite licence that allows insurers to offer both life and general insurance products under one roof – instead of seeking separate licence for each vertical, said an official.
In case an insurer enters more than one class of insurance business, the regulatory authority IRDA would specify a paid-up equity capital equal to or higher than the sum of the paid-up equity capital required for each class of insurance business, he added.
Further, a new provision is being introduced to permit the merger between an insurance company and a non-insurance company. The official said that foreign direct investment in insurance companies would be raised to 100 per cent from the present 74 per cent “with a caveat that the body corporate, either by itself or through its subsidiaries or nominees, shall not hold more than 26 per cent”.
For foreign reinsurers, the net owned fund requirement would be reduced to Rs 1,000 crores from Rs 5,000 crores to facilitate the entry of more insurers and reinsurers and help increase the insurance penetration and density.
In India, insurance penetration has risen from 2.7 per cent to 3.7 per cent, whereas insurance density has grown from $11.5 to $95 between 2001 to 2024. As against this, the global average stood at 7 per cent and $889, respectively, in 2024.
In order to fulfil the prime minister’s vision to insure every citizen of the country, the amendment empowers the IRDA to allow minimum entry capital of Rs 50 crores on a case-to-case basis for those insurance companies which cater to the underserved or unserved segments.
The official said that the Bill recommends allowing insurers to offer value added services, incidental to insurance business, to promote the business and provide better service to policyholders.
These services could include conducting and transacting guarantees and indemnities, managing and selling any property acquired through claims, granting pensions and allowances, or any other business which the government notifies subsequently.
The Bill recommends permitting insurance agents to represent multiple insurers simultaneously to increase the choice of insurance products for customers. In order to promote ease of doing business, one-time registration for insurance intermediaries has also been proposed.
The proposed bill amends the Insurance Act of 1938, the Life Insurance Corporation Act of 1956 and the Insurance Regulatory and Development Authority (IRDA) Act of 1999.
