Amendments aim to boost insurance penetration and ease of doing business
The Union Cabinet on Friday approved a Bill to allow up to 100 per cent foreign direct investment (FDI) in India’s insurance sector, a major reform aimed at expanding insurance penetration, attracting global capital and strengthening the financial services ecosystem, official sources said.
The Insurance Laws (Amendment) Bill, 2025 is likely to be introduced during the ongoing Winter Session of Parliament, which concludes on December 19, and could be tabled as early as Monday, according to sources.
A Lok Sabha bulletin lists the proposed legislation among the 13 Bills scheduled for consideration during the session. The Bill seeks to deepen insurance penetration, accelerate sectoral growth and enhance ease of doing business.
Finance Minister Nirmala Sitharaman had announced the proposal in the Union Budget earlier this year, outlining plans to raise the FDI cap from the current 74 per cent to 100 per cent as part of a new-generation financial sector reform agenda. So far, the insurance sector has attracted nearly Rs 82,000 crore in foreign investment.
Key provisions of the Bill
The proposed amendments include allowing full foreign ownership in insurance companies, permitting the merger of non-insurance firms with insurance companies, and creating a dedicated policyholder protection fund, sources said.
As part of regulatory safeguards, the Bill mandates that at least one senior management position—such as Chairman, Managing Director or Chief Executive Officer—must be held by an Indian citizen. The Cabinet has also retained existing net worth requirements for insurers.
The legislative overhaul will amend three key laws—the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
Amendments to the LIC Act are expected to empower the corporation’s board with greater operational autonomy, including decisions related to branch expansion and recruitment.
Focus on policyholders and growth
The government said the proposed changes are aimed at strengthening policyholder protection, enhancing financial security, improving efficiency in the insurance industry, and encouraging the entry of new players. The reforms are expected to contribute to economic growth and employment generation, while supporting the government’s long-term vision of “Insurance for All by 2047.”
Industry leaders welcomed the move, saying higher FDI limits would unlock global capital and expertise. Aditya Birla Sun Life Insurance MD and CEO Kamlesh Rao said the reforms could attract global insurers, though success would depend on how effectively new entrants navigate India’s distribution ecosystem.
Deloitte India partner Debashish Banerjee noted that greater clarity on ownership norms could help convert global interest into long-term commitments. Grant Thornton Bharat partner Narendra Ganpule said the move would foster innovation, competition and better service standards for policyholders.
RenewBuy CEO Balachander Sekhar said allowing 100 per cent FDI would bring global best practices and accelerate the sector’s evolution.
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