The government’s decision to introduce the Insurance Laws (Amendment) Bill, 2025 in the sixth session of 18th Lok Sabha sets the stage for a forward-looking, cohesive reform package that could define the next decade of India’s underpenetrated insurance sector. Industry stakeholders expect the Bill to receive final approval, unlocking the sector’s full potential for growth, capital inflows and innovation.

On February 1, 2025, Finance Minister Nirmala Sitharaman announced a major increase in foreign direct investment (FDI) in insurance—from 74 per cent to 100 per cent—clearing the path for global insurance giants and substantial foreign capital to enter the Indian market. This step is expected to intensify competition and enhance efficiency across the sector. To implement the higher FDI cap, the government will amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. Sitharaman has already indicated that the draft Bill will be tabled in Parliament shortly.

Of the world’s top 25 insurance companies, nearly 20 do not yet operate in India. The new framework could encourage global firms to enter the market, while foreign partners in existing joint ventures may choose either to exit or to acquire their Indian partners and establish fully owned subsidiaries. “We could see India moving towards a future with 1,000 insurers in the next decade,” said the CEO of an insurance company.

100% FDI

The proposed full foreign ownership will bring in the capital that India’s insurance sector needs to expand its reach, improve products and upgrade services. The government hopes this reform will help raise India’s insurance penetration, which stood at 3.7 per cent in 2023–24, down from 4 per cent in 2022–23. By comparison, global penetration is around 7 per cent.

Source: indianexpress.com​