Draft Insurance Laws (Amendment) Bill 2025: Main Proposals
Why in the news
A draft bill sent to MPs aimed at policyholder protection and prudence in how insurers use life funds, along with a higher foreign investment ceiling.
Key facts
- Surplus rule: shareholder dividends, policyholder bonuses and debenture servicing may come only from surplus disclosed through actuarial valuation and returns filed with IRDAI.
- No artificial surplus: reserve funds cannot be moved to inflate surplus, unless built solely from earlier valuation surpluses already reported.
- Par policies: shareholders’ share, guaranteed dividends included, limited to 10% of surplus.
| Provision | Limit |
|---|---|
| Debenture servicing from surplus | Max 50% of disclosed surplus |
| Debenture interest | 10% of surplus |
| Shareholders’ share, par policies | 10% of surplus |
| Foreign investment | 100% of paid-up equity |
Protection fund
- Mandatory fund fed by grants, donations and IRDAI penalties, meant for policyholder awareness, education and protection.
Exam angle
- Laws to be amended: Insurance Act 1938, LIC Act 1956, IRDA Act 1999.
- FDI proposal: 100% of paid-up equity capital, including foreign portfolio investors.
- New fund: Policyholders’ Education and Protection Fund.