Insurance, Re-insured

On 17 December 2025, the Parliament passed the Sabka Bima Sabki Raksha Bill 2025, which amends the Insurance Act, 1938 (the Act), the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.  

Here is a brief summary of what has changed: 

An insurance intermediary is a person or entity that acts as a bridge between an insurance company and a customer. This category includes agents, brokers, and consultants. The Bill expands this definition to include Managing General Agents (MGAs) and Insurance Repositories. MGAs are specialized, autonomous agents that function autonomously through delegated authority from an insurer. This often includes the power to underwrite and settle claims. Insurance Repositories are entities that store insurance policies in digital format for policyholders. 

MGAs could plug the issue of low penetration in the sector. The USP of MGAs is their intricate knowledge of niche and underserved markets. The autonomy and wider authority given to MGAs means they go far beyond customer acquisition and towards a more holistic channel of financial inclusion. However, the Bill does not define MGAs which could prove tricky – especially on extent of delegation.   

The Bill increases the limit for foreign investment (both direct and portfolio) in Indian insurance companies from 74% to 100%. Global insurance companies can now fully own and control their Indian operations. For foreign investors and private equity firms, this removes the need to partner with a local joint venture. This change is expected to attract high global capital, facilitate the entry of advanced technology and expertise, and accelerate competition in the sector.   

The Bill eases certain capital thresholds to lower entry barriers. The ₹100 crore minimum paid-up capital requirement for insurance co-operative societies has been removed. Additionally, the Net Owned Fund (NOF) requirement for foreign reinsurers has been reduced from ₹5000 crore to ₹1000 crore. This is in line with the larger sentiment of the Bill – improving ease of doing business – and sets up India as an attractive market for global reinsurers.  

Insurers are now required to maintain comprehensive digital records for every policy and claim. These records must include the name and address of the policyholder, their unique identity proof like Aadhaar or PAN, and a full history of all claims. A critical new requirement is that insurers must now share this data with the IRDAI on a concurrent basis i.e., as and when such data is collected, generated or updated. Insurers will have to assess current reporting practices and update infrastructure to achieve compliance.  

An insurer can only register the transfer of its shares only after approval by the IRDAI. The trigger for such approval has been raised from 1% to 5% of the value of the share capital of the insurer. This move points towards improved deal velocity for PE/VC firms by exempting routine minority stake changes from lengthy approval processes.  

Insurers are now prohibited from sharing a customer’s data with third parties unless it is required by law or for a public duty. Most importantly, any other data sharing now requires the express consent of the policyholder. 

A director of an insurance company is now barred from serving as a director for any other insurer (in the same class of insurance business), bank, or investment company. This restriction was previously limited to entities in the life insurance business but it now applies to entities offering any or all insurance classes. 

This provision has raised concerns about board stability, especially for bank-promoted insurers. These companies rely on nominee directors from parent banks for oversight and continuity. A strict interpretation could force many experienced nominees and even independent directors to step down, risking governance disruption. 

The maximum monetary penalty for contravention of the Insurance Act or the IRDAI Act has been increased from 1 crore to 10 crore. The per-day penalty for continuing contraventions has been retained at 1 lakh.

The 2025 Bill marks a fundamental shift from a conservative regulatory regime – insurance is being treated as a scalable, tech-forward financial market. However, this openness is balanced with rigorous accountability – real-time reporting and steep penalties. As the sector absorbs these changes, the next phase of insurance growth will be defined less by regulation itself and more by how businesses respond to it. 

Author Credits: Fintech Team - Aparajita, Astha, Samyukta 

Image Credits: AI-generated.