Cabinet approves Bill to hike FDI in insurance sector to 100 per cent

In a bid to expand insurance penetration in the country, the Union Cabinet on Friday approved a Bill to raise foreign direct investment in the insurance sector to 100 per cent, according to sources.

The Bill may be introduced in the ongoing Winter session of Parliament, which is slated to conclude on December 19.

According to a Lok Sabha bulletin, the Insurance Laws (Amendment) Bill 2025, which seeks to deepen penetration, accelerate growth and development of the insurance sector and enhance ease of doing business, is part of the 13 legislations listed for the ongoing session of Parliament.

The Insurance Laws (Amendment) Bill, 2025, may be introduced in Parliament on Monday, sources said.

Finance Minister Nirmala Sitharaman, in this year's Budget speech, proposed to raise the foreign investment limit to 100 per cent from the existing 74 per cent in the insurance sector as part of new-generation financial sector reforms.

So far, the insurance sector has attracted Rs 82,000 crore through foreign direct investment (FDI).

The finance ministry has proposed amending various provisions of the Insurance Act, 1938, including raising FDI in the insurance sector to 100 per cent, permitting the merger of a non-insurance company with an insurance company, and creating a dedicated policyholder fund.

According to sources, the proposed Bill also provides a provision for at least one among the top management, like the Chairman, Managing Director, or CEO, to be an Indian citizen as part of the guardrails.

The Cabinet has retained the net worth requirements for insurance companies, sources added.

As part of a comprehensive legislative exercise, the Life Insurance Corporation Act 1956 and the Insurance Regulatory and Development Authority Act 1999 will be amended, alongside the Insurance Act 1938.

The amendments to the LIC Act propose empowering its board to take operational decisions, such as branch expansion and recruitment.

The proposed amendment primarily focuses on promoting policyholders' interests, enhancing their financial security, and facilitating the entry of additional players into the insurance market, thereby driving economic growth and employment generation.

Such changes will help enhance the efficiency of the insurance industry, enable ease of doing business, and enhance insurance penetration to achieve the goal of 'Insurance for All by 2047'.

The Insurance Act of 1938 serves as the principal Act to provide the legislative framework for insurance in India. It provides the framework for the functioning of insurance businesses and regulates the relationships among insurers, their policyholders, shareholders, and the regulator, Irdai.

Commenting on the proposed legislation, Aditya Birla Sun Life Insurance MD and CEO Kamlesh Rao said the move may encourage more global players to explore India, translating that interest into meaningful scale will depend on how effectively new entrants can navigate this distribution landscape.

“Over the past few months, we have seen growing interest from several global insurers who are actively evaluating India as a long-term market, and greater clarity on ownership norms will help in moving those conversations forward,” Deloitte India partner Debashish Banerjee said.

According to Grant Thornton Bharat partner Narendra Ganpule, this move is designed with the policyholders in mind, fostering an environment that delivers more choice, encourages highly innovative products, ensures robustly competitive prices, and hopefully delivers better service standards.

The shift to 100 per cent FDI will bring global capital and expertise into the fold, RenewBuy CEO Balachander Sekhar said.