The government plans to introduce the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 in the Lok Sabha on Wednesday, a move aimed at accelerating insurance penetration and advancing the goal of “insurance for all” by 2047. The proposed legislation, already cleared by the Union Cabinet, seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
What the Bill changes and what it doesn’t
At the centre of the reform is a proposal to raise the foreign direct investment limit in insurance companies from 74% to 100%. HDFC Securities, however, said the increase is likely to have a limited impact on competitive intensity in the sector. While full foreign ownership would be permitted, the Bill requires that one of the top roles—Chairman, Managing Director or Chief Executive Officer—must be held by an Indian citizen.The brokerage flagged that the Bill does not address composite licensing, leaving intact the current separation between life and non-life insurance businesses. It also noted that the Insurance Regulatory and Development Authority of India will continue to regulate commissions and disclosures, a change that is expected to have “limited near-term impact” on distributors such as Policybazaar, as well as banks and non-banking financial companies.
Reinsurance, mergers and market share shifts
One of the more consequential proposals, according to HDFC Securities, is the sharp reduction in the net owned fund requirement for foreign reinsurance branches to Rs 10 billion from Rs 250 billion. The brokerage said this could boost reinsurance capacity in India and lower costs across the industry, while potentially affecting the domestic reinsurance market share of GIC Re, currently estimated at 30–35%.
The Bill also allows mergers between insurance and non-insurance entities, opening the door to structural changes within the sector. HDFC Securities pointed to the possibility of a reverse merger of Axis Max Life with Max Financial Services under the new framework.In addition, the proposed legislation seeks to improve ease of doing business, enhance transparency in regulatory processes and strengthen oversight. It provides for changes in the tenure of leadership at regulatory bodies, allowing a five-year term or up to the age of 65, whichever is earlier, and proposes the creation of a Policyholders’ Education and Protection Fund.
Stocks to watch
Against this backdrop, HDFC Securities reiterated its bullish stance on select names. Its top picks include SBI Life Insurance (BUY), ICICI Lombard General Insurance (BUY), Niva Bupa Health Insurance (BUY) and Policybazaar (BUY).
Finance Minister Nirmala Sitharaman had earlier outlined the reforms in her Budget speech, describing them as part of a new wave of financial sector liberalisation. The insurance sector has already attracted about Rs 82,000 crore in foreign direct investment, and amendments to the LIC Act would further empower the Life Insurance Corporation’s board to take key operational decisions, including branch expansion and recruitment.
For investors, HDFC Securities said, the proposed overhaul marks an incremental but meaningful shift—one that reshapes the operating landscape without upending the competitive order, while favouring well-positioned incumbents.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)