Last Friday, the Union Cabinet approved the “Insurance for All, Protection for All (Insurance Laws Amendment) Bill, 2025.” This bill, to be introduced in the winter session of Parliament, aims to modernize India’s outdated insurance laws.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. While major decisions have been made, such as fully opening the doors to foreign investment (FDI), key demands like the ‘composite license’ have been held back.
100% Open to Foreign Companies
The most significant and much-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 fully globalizing the Indian insurance market. This means that foreign insurance companies will now be able to operate in India without an Indian partner.
This will have profound consequences 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 access to insurance but also improve service quality by adopting global best practices.
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LIC and IRDAI get new superpowers
To protect the interests of policyholders, the regulator IRDAI is being strengthened. Following the example of SEBI, IRDAI will now have the power to recover “illegally earned profits” from companies violating regulations. Additionally, it proposes to introduce a “one-time registration” system for insurance agents and intermediaries, eliminating the hassle of repeatedly renewing registrations.
This bill also provides relief to LIC, the country’s largest insurance company. LIC will no longer have to wait for government approval to open new zonal offices. It will be given greater freedom in its operations, allowing it to compete fiercely with private companies and make faster decisions. LIC will also be allowed to adapt its operations abroad to foreign laws.
Composite License
Despite all the positive aspects, the bill has some drawbacks that have disappointed the industry. The biggest disappointment is the absence of a “composite license.” Currently, companies selling life and general insurance are separate. 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 hassles and simplify policy management. However, the government has currently excluded this provision from the current bill, meaning you will have to contact different companies for life and general insurance.
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