India has taken a significant step toward liberalising its insurance sector after Finance Minister Nirmala Sitharaman introduced a bill in the Lok Sabha to raise foreign direct investment in insurance companies to 100 percent.
The proposed legislation, titled the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, aims to amend three key statutes governing the sector: the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory and Development Authority Act of 1999.
If passed, the amendment will increase the FDI cap from the current 74 percent to full foreign ownership, signalling a significant policy shift as the government seeks to expand insurance coverage and attract long-term global capital.
Push for “Insurance for All by 2047”
The move aligns with the government’s stated objective of achieving universal insurance coverage by 2047. Officials say higher foreign participation will help bring in stable capital, advanced technology, and global best practices to a sector that remains underpenetrated relative to India’s economy.
The Bill was cleared by the Union Cabinet last week and introduced during the Winter Session of Parliament. Policymakers believe the reform will help insurers strengthen balance sheets, improve solvency ratios, and expand coverage across health, life, and general insurance segments.
Investor-Friendly Reform With Safeguards
While the proposed changes enable full foreign ownership, the Bill retains certain safeguards. At least one of the top leadership positions, chairman, managing director, or chief executive officer, must continue to be held by an Indian citizen.
The legislation also permits the merger of non-insurance companies with insurance companies, a move expected to drive consolidation and unlock operational efficiencies across the sector.
Since liberalisation began, India’s insurance industry has attracted approximately ₹82,000 crore in foreign direct investment. Authorities expect the revised cap to significantly accelerate capital inflows, particularly from global insurers and long-term institutional investors.
Impact on Competition and Policyholders
Government officials say the reform is expected to sharpen competition, encourage product innovation, and potentially reduce policyholders’ costs. Greater capital availability could also support the expansion of insurance into underserved rural and semi-urban markets.
The Bill proposes establishing a Policyholders’ Education and Protection Fund to strengthen consumer awareness and safeguard policyholders’ interests. It also seeks to enhance regulatory transparency, improve the ease of doing business for insurers and intermediaries, and maintain the insurance regulator’s oversight.
Broader Implications for Global Investors
For international insurers and private equity firms, the move positions India as one of the most open major insurance markets globally. Analysts note that full ownership rights could make India more attractive for strategic investments, especially given the country’s long-term growth prospects and rising demand for financial protection products.
If enacted, the legislation would mark one of the most significant reforms in India’s financial services sector in recent years, reshaping the competitive landscape and deepening the role of global capital in the country’s insurance market.
