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Move Aims to Boost Insurance Penetration and Ease of Doing Business

New Delhi: In a major reform aimed at expanding insurance coverage and attracting global capital, the Union Cabinet on Friday approved a Bill to raise foreign direct investment (FDI) in the insurance sector to 100 per cent, sources said. The proposed Insurance Laws (Amendment) Bill, 2025, is expected to be introduced in Parliament during the ongoing Winter Session, which is scheduled to conclude on December 19. According to the Lok Sabha bulletin, the Bill is among the 13 legislations listed for consideration in the current session and may be tabled as early as Monday.

Budget Promise Moves Towards Implementation

Finance Minister Nirmala Sitharaman had announced the proposal to raise the FDI cap from the existing 74 per cent to 100 per cent in her Budget speech this year, terming it part of new-generation financial sector reforms. So far, the insurance sector has attracted around Rs 82,000 crore in foreign investment.

Key Amendments Proposed

The Finance Ministry has proposed amendments to several provisions of the Insurance Act, 1938, aimed at deepening the sector’s growth and improving regulatory flexibility. Key changes include:

• Raising the FDI limit to 100 per cent

• Allowing the merger of non-insurance companies with insurance companies

• Creation of a dedicated policyholder fund to strengthen consumer protection

The government believes these measures will accelerate sectoral growth, improve capital availability, and enhance the overall ease of doing business in the insurance sector.

Industry Sees Opportunity, Flags Distribution Challenges

Reacting to the proposed legislation, Kamlesh Rao, MD and CEO of Aditya Birla Sun Life Insurance, said the move could encourage more global insurers to enter the Indian market. However, he cautioned that translating global interest into meaningful scale would depend on how effectively new entrants navigate India’s complex and competitive distribution landscape.

Push to Expand Coverage

The reform comes as India continues to grapple with low insurance penetration compared to global benchmarks. Policymakers expect that higher foreign investment will help bring in capital, technology, and best practices, expanding coverage across underserved segments of the population.