Exclusive| Union Cabinet approves insurance bill amendments, proposes 100% FDI cap

The Union Cabinet has approved the Insurance Amendment Bill, according to people familiar with the development.

The legislation proposes amendments to the Insurance Act, the LIC Act and the IRDAI Act, including

a provision to raise the foreign direct investment (FDI) cap in insurance companies to 100%.

The changes are aimed at widening capital access, simplifying licensing requirements and strengthening governance across the sector.

The Bill aims to amend three key laws — the Insurance Act, the LIC Act, and the IRDAI Act — with provisions intended to expand access to capital, streamline licensing norms, and strengthen governance frameworks across the sector. The changes form part of the government’s broader objective of achieving “Insurance for All by 2047.”

The draft bill also seeks to establish a dedicated Policyholders Education and Protection Fund, which would be used to strengthen consumer awareness and support mechanisms within the insurance sector.

Additionally, the legislation proposes creating digital public infrastructure in insurance under the Insurance Regulatory and Development Authority of India (IRDAI), enabling wider data-sharing, smoother onboarding and more efficient supervision.

To improve clarity around rule-making, the bill calls for the standardisation of regulations, requiring a more transparent and structured process when IRDAI issues or amends norms.

The regulator will also be empowered to disgorge wrongful gains, strengthening enforcement action against entities that violate insurance laws or mislead consumers.

In a move aimed at simplifying compliance, the bill introduces one-time registration for insurance intermediaries, replacing the current periodic renewal process.

The amendments also provide for the merger of non-insurance companies with insurance companies, a step the government says will help promote ease of doing business and facilitate corporate restructuring where needed.

The proposal further raises the threshold for share capital transfers in insurers to 5% from the current 1%, reducing the number of transactions that require prior regulatory approval.

For reinsurers, the amendment lowers the minimum capital requirement to ₹1,000 crore from ₹5,000 crore, a move expected to widen the pool of new applicants and bolster competition in the domestic reinsurance market.