Formed on September 1, 1956, its primary objective was to spread life insurance widely across the country, especially in rural areas, and provide financial security to all insurable individuals at a reasonable cost. Even after the liberalization of the Indian insurance sector in the late 1990s, LIC continues to be the dominant life insurer in the country. LIC boasts a vast network of branches, divisional offices, and agents, ensuring a wide reach across India. It offers a comprehensive suite of life insurance and investment products, including term insurance, endowment plans, unit-linked insurance plans (ULIPs), pension plans, and health insurance. LIC is also a major investor in various sectors of the Indian economy and has built a strong reputation for trust and reliability among the people of India over its many years of operation.
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Government considers ₹5,000 crore capital infusion for three public sector insurance companies as losses resurface.
Vijayan emphasized that strengthening the operational aspects of insurance companies requires more than just increasing capital. Over the past decade, the number of employees in these companies has drastically decreased, from approximately 16,000 to around 7,000 per company. This significant reduction in workforce has likely impacted the efficiency and effectiveness of these organizations.
According to Vijayan, it is essential to not only boost capital but also to augment manpower. The process of listing companies can lead to improved capitalization, which can be achieved through various means such as initial public offerings (IPOs) or private equity investments. Furthermore, mergers can also play a crucial role in strengthening these companies. By combining resources and operations, merging companies can eliminate redundancies, reduce costs, and enhance their overall competitiveness.
The ultimate goal, Vijayan stressed, is to achieve economies of scale, which is a critical factor in the insurance industry. Currently, only the Life Insurance Corporation of India (LIC) enjoys this advantage, which has enabled it to maintain its market dominance. Economies of scale allow companies to reduce costs, improve efficiency, and increase profitability, ultimately leading to better services and products for customers.
In the context of the insurance industry, achieving economies of scale can be particularly challenging due to the high capital requirements and intense competition. However, by focusing on operational strengthening, increasing manpower, and pursuing strategic mergers, insurance companies can position themselves for long-term success. Vijayan’s comments highlight the need for a comprehensive approach to strengthening the insurance industry, one that goes beyond mere capitalization and addresses the critical issue of manpower and scale.
The insurance industry is expected to play a vital role in the country’s economic growth, and it is essential that companies in this sector are equipped to meet the evolving needs of customers. By prioritizing operational strengthening, manpower augmentation, and strategic consolidation, insurance companies can build a strong foundation for future growth and success. As Vijayan noted, this will ultimately benefit not only the companies themselves but also the customers they serve, who will have access to a wider range of products and services.
Key Provisions:
- 100% Foreign Direct Investment (FDI) in insurance intermediaries
- Enhanced powers to the Insurance Regulatory and Development Authority of India (IRDAI)
- Implications for the Indian insurance sector
100% FDI:
- Allows full foreign ownership in insurance intermediaries such as brokers, third-party administrators, and surveyors
- Expected to attract more foreign investment into the sector
IRDAI Powers:
- IRDAI to have more regulatory control over the insurance sector
- Powers to regulate and supervise insurance companies, intermediaries, and other stakeholders
- Ability to impose penalties and take enforcement actions against non-compliant entities
What It Means for India:
- Increased foreign investment in the insurance sector
- Enhanced regulatory framework for the insurance industry
- Potential for increased insurance penetration and density in India
- Improved consumer protection and dispute resolution mechanisms
- Opportunities for growth and development of the Indian insurance market
The New Insurance Bill, 2025, also known as the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, is a significant milestone in India’s financial sector reforms. The Bill aims to modernize India’s insurance ecosystem, expand coverage, and strengthen regulatory oversight. It was approved by the Union Cabinet and is set to be introduced in Parliament. The Bill’s primary objectives are to deepen insurance penetration across India, attract long-term domestic and foreign investment, improve regulatory effectiveness and transparency, promote innovation and competition in insurance products, strengthen policyholder protection, and support inclusive growth and financial security.
The key provisions of the New Insurance Bill, 2025, include allowing 100% Foreign Direct Investment (FDI) in the insurance sector, liberalization for foreign reinsurers, stronger powers for the Insurance Regulatory and Development Authority of India (IRDAI), and greater operational autonomy for the Life Insurance Corporation (LIC). The 100% FDI limit is expected to attract global insurers and long-term capital, aligning with India’s ambition to achieve universal insurance coverage by 2047. The Bill also reduces the Net Owned Funds (NOF) requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore, encouraging foreign reinsurance players beyond public-sector GIC Re.
The Bill significantly enhances the role of IRDAI, granting it disgorgement powers to recover unlawful gains, one-time registration for insurance intermediaries, and a higher threshold for IRDAI approval of equity transfers. Additionally, the Bill provides greater operational autonomy for LIC, allowing it to open new zonal offices without government approval and restructure overseas operations as per host-country regulations. However, the Bill leaves out some notable provisions, including composite licenses, reduction in capital requirements, and provision for captive insurance companies.
The absence of composite licenses means that insurers will continue to operate in silos, with life and non-life insurance remaining separate. The minimum capital norms also remain unchanged, which may limit innovation and financial inclusion, especially in underserved areas. The Bill’s silence on captive insurance companies delays the evolution of India’s corporate risk ecosystem. Despite these exclusions, the New Insurance Bill, 2025, is a significant step toward transforming India’s insurance landscape. It lays the foundation for deeper insurance penetration and global integration, and its provisions are expected to encourage global participation in India’s growing insurance market, supporting economic resilience by spreading risk and improving financial security. As the Bill is debated in Parliament, the gaps in the Bill are likely to shape discussions on how far and how fast India should liberalize its insurance sector.
New Insurance Bill 2025: Key Features Include 100% FDI, Enhanced Protection for Policyholders, and More in Sabka Bima Sabki Raksha Bill
The Indian government has introduced the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, aiming to revolutionize the country’s insurance sector. The bill proposes significant changes to the Insurance Act, 1938, the LIC Act, 1956, and the IRDA Act, 1999, with the goal of achieving universal protection by 2047. Key features of the bill include raising foreign direct investment (FDI) in the insurance sector from 74% to 100%, with the condition that one of the top officials must be an Indian citizen.
The bill also allows for sector-specific licenses, enabling insurers to operate in niche lines such as cyber, property, or marine insurance. Additionally, it permits mergers between non-insurance and insurance companies, and shifts from detailed statutory prescriptions to a regulation-driven framework, giving the Insurance Regulatory and Development Authority of India (IRDA) the authority to set operational norms.
Other notable provisions include establishing a Policyholders’ education and protection fund, expanding the definition of insurance intermediaries, and easing licensing requirements for surveyors and loss assessors. The bill also allows the Life Insurance Corporation (LIC) to establish zonal offices without prior approval from the Centre and enables overseas branches to maintain funds.
The government believes that the bill will accelerate growth, improve policyholder protection, bring transparency to regulations, and attract significant investments, creating more opportunities for insurers and intermediaries across India. The move to raise FDI to 100% is expected to attract more foreign investment, with the sector having already attracted Rs 82,000 crore through FDI. The bill is part of the government’s new-generation financial sector reforms, and its passage is expected to have a significant impact on the Indian insurance sector. Overall, the bill aims to make insurance coverage more accessible and affordable for all, and to establish India as a major player in the global insurance market.
Life Insurance Corporation (LIC) is reportedly considering acquiring a stake in ManipalCigna Health Insurance.
The Life Insurance Corporation of India (LIC) is in talks to acquire a significant stake in ManipalCigna Health Insurance, a joint venture between India-based Manipal Education & Medical Group and US-based Cigna Corporation. The proposed deal would value the health insurer at approximately Rs35bn-37.5bn ($408m-437m) and would mark LIC’s entry into the health insurance space. The stake being considered is between 40-49%, which would give LIC a substantial presence in the health insurance market.
The Manipal Group currently holds a 51% stake in ManipalCigna, while Cigna holds the remaining 49%. If the deal is finalized, it would be a significant move for LIC, which has been looking to expand its presence in the insurance sector. The company’s managing director and CEO, Siddhartha Mohanty, has hinted at a deal announcement by the end of March, but did not disclose the identity of the target company.
The completion of the deal is subject to approvals from LIC’s board and regulatory authorities. Mohanty has indicated that the size of the stake is subject to various factors, including valuations and a board decision, suggesting that LIC may not seek a controlling interest in the health insurer. The deal would be a natural fit for LIC, which has been looking to diversify its portfolio and expand its presence in the insurance sector.
The acquisition discussions have been ongoing, and while no binding agreement has been signed yet, the deal is expected to be finalized soon. The move would be a significant development in the Indian insurance sector, with LIC’s entry into the health insurance space likely to increase competition and drive growth in the market. With its strong brand and extensive distribution network, LIC is well-positioned to make a significant impact in the health insurance sector.
The deal would also be a positive development for ManipalCigna, which would gain access to LIC’s vast resources and expertise. The partnership would enable ManipalCigna to expand its reach and offer a wider range of products and services to its customers. Overall, the proposed deal between LIC and ManipalCigna is a significant development in the Indian insurance sector, and its completion would be a major milestone for both companies.
On October 8, 2025, insurance agents and associations are likely to raise the issue of Goods and Services Tax (GST) with the Insurance Regulatory and Development Authority of India (IRDAI) and the Finance Ministry.
The insurance industry in India is facing a significant issue related to the Goods and Services Tax (GST) and Input Tax Credit (ITC). Private insurers have reduced distributor payouts by 15-18% to offset the loss of ITC, following the GST exemption on life and health insurance premiums. This move is expected to have a significant impact on agents, brokerages, and individual advisors, particularly small and independent operators. The reduction in payouts will directly cut into their working capital, leading to reduced take-home income and morale, especially in smaller towns and rural markets.
The current GST framework, if left unadjusted, may set a precedent where insurers maintain profitability by squeezing distribution costs rather than improving efficiency. Industry associations and agents are likely to take up the issue with the Insurance Regulatory and Development Authority of India (IRDAI) and the Finance Ministry. The President of the General Insurance Agents Federation Integrated stated that the change will shrink access to insurance, which is against the Prime Minister’s vision of Insurance for All by 2047.
In contrast, Life Insurance Corporation (LIC) and other public sector insurers have decided to maintain existing commission structures, even as they pass the full GST relief to policyholders. LIC plans to offset the impact through higher policy sales and new product pricing. Public sector general insurers, including New India Assurance, Oriental Insurance, United India Insurance, and National Insurance, have also opted against cutting commissions, choosing instead to absorb the ITC loss.
Private insurers, on the other hand, are passing on the ITC burden to agents because their business models and cost structures leave little room to absorb additional expenses. The removal of ITC has raised operating costs by roughly 2-3% of premiums, and private companies must adhere to stricter IRDAI Expense of Management (EoM) caps. Absorbing this loss would directly dent profitability and risk regulatory breaches. Several private general and standalone health insurers, including Tata AIG, Aditya Birla Health Insurance, Niva Bupa, Care Health, and ICICI Lombard, have implemented revised commission structures, making payouts inclusive of 18% GST, which means distributors will bear the tax cost.
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