- Why in news
- On 23 April 2026, PIB published an explainer on India's insurance sector. It covers the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, the GST exemption and the social insurance schemes.
- What it is
- The Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025 amends three laws: the Insurance Act 1938, the LIC Act 1956 and the IRDA Act 1999. It opens insurers to 100% foreign investment and tightens policyholder protection. It sits alongside IRDAI's goal of 'Insurance for All by 2047' and government-backed schemes for life, accident, health and crop cover.
- FDI limit
- The Act raises the FDI cap in Indian insurance companies from 74% to 100%.
- Laws amended
- The Act amends the Insurance Act 1938, the LIC Act 1956 and the IRDA Act 1999.
- Penalty and disgorgement
- IRDAI can order disgorgement of wrongful gains. The maximum penalty for non-compliance rises from ₹1 crore to ₹10 crore.
- GST exemption
- Individual life and health insurance policies, including family floater, and reinsurance are exempt from GST from 22 September 2025.
Don’t confuse with Insurance penetration vs density: Penetration is premium as a share of GDP. Density is premium per head of population.
Don’t confuse with PMJJBY vs PMSBY: PMJJBY is term life cover (₹436, ages 18-50). PMSBY is accident and disability cover (₹20, ages 18-70).
Economy terms and data: 42 Prelims questions since 2013, rising in recent years; they test what a term or instrument means. In Mains, 12 news-triggered questions.
Why it matters
- 100% FDI can bring long-term capital and technology, and deepen penetration.
- GST exemption and stronger policyholder rules make cover cheaper and more trusted.
Problems
- Penetration of 3.7% and density of USD 97 remain low.
- Life insurance makes up about 74% of premium, so non-life and health cover lag.
Way forward
- Use the distribution network of over 83 lakh agents and partners to reach rural and weaker sections.
- Enforce the new penalty and disgorgement powers and keep consumer education funded.
Put in your answer
Household financial assets: The share of insurance and pension funds in household financial assets rose from 28.6% to 29.6%.
Health insurance moratorium: IRDAI cut the health insurance moratorium period from 8 years to 5 years in 2024.
- 2013Mains GS2 · Q8Justify merging SEBI and IRDA given overlapping financial and insurance products
- 2016Mains GS3 · Q10Discuss need for crop insurance and features of PMFBY
- 2017Mains GS3 · Q15Significance of crop insurance, MSP and processing for small farmers
- 2024Prelims Q43Which entities can trade in corporate bonds and government securities, including insurers
- 2026Prelims Q96Which statements on aviation hull insurance and Montreal Convention liability are correct
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
No practice question for this one; the card may still help an answer. Why: Explainer on lasting topic: 100% FDI in insurance and PMJJBY. Mostly background data; no fresh decision to anchor a question.
Worth revising until Prelims 2027: most news questions come within two years of the event.