New Delhi: In a major development in India's insurance sector, the Union Cabinet on Friday cleared approved a proposal to raise the foreign direct investment
(FDI) limit to 100%. The government has also approved a set of structural reforms aimed at overhauling the sector. The move is expected to unleash flow of fresh foreign capital in the sector, intensifying competition and eventually benefitting policyholders. The Insurance Laws (Amendment) Bill, 2025 is expected to be tabled during the ongoing Winter Session of Parliament, which concludes on December 19. According to a Lok Sabha bulletin, the bill is among 13 legislative items listed for discussion. At present the FDI limit in the insurance sector has been capped at 74%. With the proposed legislation this ceiling will be raised to 100%, streamlining regulations, and make it easier for companies to operate in the sector. Notably, Finance Minister Nirmala Sitharaman, in her Budget speech, had announced the plan to lift the investment cap “as part of broader financial sector reforms.” So far, India’s insurance industry has attracted Rs 82,000 crore in FDI. To support further growth, the finance ministry has proposed amendments to key provisions in the Insurance Act, 1938, including allowing 100% foreign ownership, reducing paid-up capital requirements, and introducing a composite licence regime. As part of a wider regulatory revamp, the government also plans to amend the Life Insurance Corporation Act, 1956 and the Insurance Regulatory and Development Authority Act, 1999. Changes to the LIC Act are aimed at giving the insurer’s board more operational autonomy, including powers related to branch expansion and hiring. Officials say the overarching aim of these reforms is to strengthen policyholder protection, enhance financial stability, and attract more players to the sector supporting economic growth and job creation. The measures are also expected to improve operational efficiency, simplify compliance, and bolster insurance penetration in line with the government’s vision of “Insurance for All by 2047.”
