Why in the News?

• The Union government has introduced the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, in the Lok Sabha.

What’s in Today’s Article?

• Sabka Bima Sabki Raksha Bill (Overview, Search & Seizure Powers, Penalty Framework, Regulation of Commissions, Significance, Challenges, Way Forward, etc.)

Background: India’s Insurance Sector

• India’s insurance sector plays a critical role in financial security, risk mitigation, and long-term savings.
• Despite steady growth in insurance penetration, the sector has faced persistent challenges such as mis-selling of policies, opaque commission structures, weak enforcement against intermediaries, and delays in grievance redressal.
• Insurance distribution has expanded rapidly through agents, brokers, banks, NBFCs, fintech platforms, and web aggregators.
• However, regulatory capacity has not always kept pace with this expansion, creating gaps in supervision.
• The new Bill seeks to address these gaps by strengthening IRDAI’s legal authority and enforcement mechanisms.

Overview of the Sabka Bima Sabki Raksha Bill, 2025

• The Bill proposes amendments to existing insurance laws to give IRDAI stronger supervisory, investigative, and enforcement powers.
• It marks a shift from a largely compliance-based regulatory model to a more proactive enforcement-driven framework.
• The proposed changes apply not only to insurance companies but also to a wide range of insurance intermediaries, including agents, brokers, corporate agents (such as banks and NBFCs), web aggregators, third-party administrators (TPAs), surveyors, and insurance marketing firms.

Expanded Search and Seizure Powers

• A key feature of the Bill is granting the IRDAI Chairperson the authority to order searches, seizures, and inspections.
• These powers can be exercised when there is reason to believe that regulated entities are:
  • Withholding or concealing information,
  • Failing to produce the required documents, or
  • Attempting to tamper with or destroy records.
• The Chairperson may authorise senior officers to enter premises, inspect documents, seize records, and even break open locks if keys are unavailable.
• This brings IRDAI’s powers closer to those already exercised by regulators such as SEBI.

Stronger Enforcement and Penalty Framework

• The Bill also empowers IRDAI to disgorge wrongful gains made by insurers or intermediaries through illegal practices such as excess commissions, rebates, or mis-selling.
• Further, IRDAI will have enhanced authority to issue binding directions to insurers in the public interest.
• These directions may be aimed at protecting policyholders, preventing mismanagement, or ensuring sound corporate governance.
• While insurers will be given an opportunity to be heard, compliance with such directions will be mandatory.

Regulation of Commissions and Intermediaries

• Another significant provision relates to tighter control over commissions and remuneration paid to agents and intermediaries. IRDAI will be empowered to:
  • Prescribe commission limits,
  • Mandate disclosure norms, and
  • Regulate payment structures.
• The objective is to curb mis-selling driven by high commissions and ensure that policyholder interests remain central to insurance distribution.
• This is particularly important in the context of growing digital and fintech-led insurance platforms.

Significance for Policyholders and Governance

• For policyholders, the Bill promises stronger safeguards against fraud, mis-selling, and unfair practices.
• Enhanced enforcement powers are expected to improve trust in the insurance system and strengthen grievance redressal mechanisms.
• From a governance perspective, the Bill reinforces IRDAI’s role as a modern financial regulator capable of proactive supervision rather than post-facto action.
• It aligns insurance regulation with global best practices in financial sector oversight.

Challenges and Way Forward

• While the Bill strengthens regulation, concerns may arise regarding excessive concentration of powers and the need for safeguards against arbitrary use.
• Effective implementation will depend on transparency, due process, and institutional capacity within IRDAI.
• Going forward, regulatory reforms must be complemented by consumer awareness, digital literacy, and faster dispute resolution mechanisms to ensure inclusive insurance growth.