Insurance Bill Proposes 100% FDI to Boost Sector Growth

The government has moved a significant step toward reshaping India’s insurance landscape by listing the Insurance Laws (Amendment) Bill for the upcoming winter session of Parliament. The draft legislation seeks to enhance foreign investment limits, streamline regulatory structures, and widen access to insurance services across the country.

Bill Targets Higher Foreign Investment

A key feature of the proposed legislation is the plan to raise the foreign direct investment ceiling from 74 per cent to 100 per cent. This change, aligned with the FY26 Budget announcement, aims to attract sustained overseas capital. The enhanced limit will apply to companies that invest the entire premium in India. Existing restrictions on foreign participation are expected to be simplified, creating a more investor-friendly environment.

Broader Framework for Sector Reforms

The bill incorporates amendments to three major laws: the Insurance Act 1928, the Life Insurance Corporation Act 1956, and the IRDAI Act 1999. These revisions aim to improve affordability and accessibility of insurance products, support industry expansion, and reduce procedural bottlenecks. The overarching objective is to encourage deeper penetration and strengthen market development.

Composite Licences and Market Flexibility

One of the standout proposals is the introduction of composite licences, enabling insurers to offer life, health, and general insurance under a single permit. This model is expected to simplify compliance, promote innovation, and reduce operational costs. It supports the national goal of achieving “Insurance for All by 2047,” particularly by encouraging product diversification and streamlining supervision.

Exam Oriented Facts

• The bill proposes raising FDI in insurance from 74% to 100%.
• Composite licences will allow life, health, and general insurance under one permit.
• IRDAI may set entry capital as low as ₹50 crore for select segments.
• Net Owned Funds requirement for foreign reinsurers may drop to ₹1,000 crore.

Expected Economic and Regulatory Impact

Authorities project that complete foreign ownership will help unlock the sector’s growth potential, with India’s insurance market expected to expand at 7.1 per cent annually over the next five years. Enhanced investor participation is also expected to drive competition, improve product quality, enable technology transfer, and strengthen customer service. Countries such as Canada, Brazil, Australia, and China already permit full foreign ownership, and India aims to align with these global norms to attract greater expertise and capital.