Green signal for 100 pc FDI in insurance sector

New Delhi: The Union Cabinet on Friday approved a bill to raise foreign direct investment in the insurance sector to 100 per cent, according to sources. The bill may be introduced in the ongoing Winter session of Parliament, which is slated to conclude on December 19. According to a Lok Sabha bulletin, the Insurance Laws (Amendment) Bill 2025, which seeks to deepen penetration, accelerate growth and development of the insurance sector.

Finance Minister Nirmala Sitharaman, in this year's Budget speech, proposed to raise the foreign investment limit to 100 per cent from the existing 74 per cent in the insurance sector as part of new-generation financial sector reforms. So far, the insurance sector has attracted Rs 82,000 crore through foreign direct investment (FDI).

The finance ministry has proposed amending various provisions of the Insurance Act, 1938, including raising FDI in the insurance sector to 100 per cent, reducing paid-up capital, and introducing a composite licence. As part of a comprehensive legislative exercise, the Life Insurance Corporation Act 1956 and the Insurance Regulatory and Development Authority Act 1999 will be amended, alongside the Insurance Act 1938. The amendments to the LIC Act propose empowering its board to take operational decisions, such as branch expansion and recruitment. The proposed amendment primarily focuses on promoting policyholders' interests, enhancing their financial security, and facilitating the entry of additional players into the insurance market, thereby driving economic growth and employment generation.

Such changes will help enhance the efficiency of the insurance industry, enable ease of doing business, and enhance insurance penetration to achieve the goal of 'Insurance for All by 2047'. The Insurance Act of 1938 serves as the principal Act to provide the legislative framework for insurance in India.