Insurance Sector Opens Up as Cabinet Approves 100% FDI

The Union Cabinet has approved a bill to raise foreign direct investment in the insurance sector to 100 per cent, a major reform aimed at expanding insurance penetration and attracting global capital. The move follows the proposal announced by Finance Minister Nirmala Sitharaman in the Union Budget and marks a significant shift from the existing 74 per cent cap on foreign ownership.

Cabinet Approval and Parliamentary Roadmap

According to official sources, the Insurance Laws (Amendment) Bill, 2025, has received Cabinet clearance and is expected to be introduced during the ongoing winter session of Parliament, which concludes on December 19. The bill is among 13 key legislations listed for the session and is designed to accelerate growth and development in the insurance sector while improving ease of doing business.

Key Provisions of the Insurance Laws Amendment Bill

The proposed legislation seeks to amend the Insurance Act, 1938, along with consequential changes to the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. Besides raising the FDI limit to 100 per cent, the bill allows the merger of non-insurance companies with insurance companies and provides for the creation of a dedicated policyholder fund. Guardrails include a requirement that at least one key managerial position, such as chairman, managing director, or CEO, be held by an Indian citizen.

Rationale Behind Higher Foreign Investment

The government aims to deepen insurance penetration, enhance competition, and bring in global best practices. The insurance sector has already attracted around ₹82,000 crore in foreign direct investment. Higher foreign ownership is expected to infuse long-term capital, improve product innovation, strengthen risk management, and support employment generation across the value chain.

Exam Oriented Facts

• The existing FDI limit in India’s insurance sector was 74 per cent.
• The Insurance Act, 1938, is the principal law governing insurance in India.
• India aims to achieve the target of ‘Insurance for All by 2047’.
• The insurance sector has received about ₹82,000 crore in FDI so far.

Impact on Industry and Policyholders

Industry experts believe the reform will attract more global insurers and expand consumer choice through innovative products and competitive pricing. Amendments to the LIC Act will empower its board to take operational decisions, including branch expansion and recruitment. The reform is expected to strengthen policyholder protection, improve service standards, and support sustainable growth of the insurance ecosystem.