Insurance reforms are set to receive a big boost with the government listing the Insurance Bill for the winter session. Among various provisions, the Bill aims to raise the FDI limit to 100 per cent.
The Lok Sabha’s bulletin has listed the Insurance Laws (Amendment) Bill for introduction, consideration and passage. The Bill aims “to deepen penetration, accelerate growth and development of the insurance sector and enhance ease of doing business,” the bulletin said. The legislation is intended to fulfil a key FY26 Budget announcement of raising FDI limit from 74 to 100 per cent in the insurance sector. This enhanced limit will be available to companies which invest the entire premium in India. The current guardrails and conditions associated with foreign investment will be reviewed and simplified.
The framework of the Bill is based on a proposal mooted by the Financial Services Department in November last year when it invited comments on the proposed amendments in three laws – Insurance Act 1928, Life Insurance Corporation Act 1956 and Insurance Regulatory and Development Authority Act, 1999. It was said that the amendments are proposed to ensure “accessibility and affordability of insurance to citizens, foster expansion and development of the insurance industry and streamline business processes”.
The proposed amendments are expected to lay down the framework for composite licences, allowing insurers to offer multiple categories of insurance — life, health and general — under a single licence. This is expected to enhance operational flexibility, streamline regulatory processes and foster innovation.
The Bill is aimed at enhancing insurance penetration to achieve the goal of “Insurance for All by 2047”. It is also expected to empower IRDAI to specify lower entry capital (not less than ₹50 crore) for under-served segments on special case basis. At the same time, requirement of Net Owned Funds for foreign re-insurers is proposed to be lowered to ₹1,000 crore from ₹5,000 crore.
Talking about the proposal to hike FDI limit, the Financial Services Department told a Parliamentary panel that the objective of this move is to unlock the full potential of the Indian insurance sector, which is projected to grow at 7.1 per cent annually over the next five years, outpacing global and emerging market growth. “Removing the FDI cap will also attract stable and sustained foreign investment, increase competition, facilitate technology transfer and improve insurance penetration across India,” it said.
The department said India’s FDI norms, duly aligned with global best practices, will position the country as an attractive destination for foreign investors. Countries like Canada, Brazil, Australia and China permit 100 per cent FDI in their insurance sectors.
“The provisions of the Indian Insurance Companies (Foreign Investment) Rules, 2015, which prescribe conditions related to appointment of key management persons, composition of board, dividend repatriation, etc will be reviewed so as to create a congenial atmosphere for bringing more FDI into the insurance sector, thereby boosting its growth,” the department said.
The government hopes that higher FDI limit and the resulting greater foreign participation will enhance competition, better products, improve customer service and reduce insurance premium rates.
Also read: ‘Liberalisation’ of the Insurance Amendment Bill on the cards: FM
Follow us
