Union Finance Minister Nirmala Sitharaman has indicated that the Insurance Amendment Bill, which seeks to allow 100% foreign direct investment (FDI) in India's insurance sector, may be introduced in the upcoming Winter session of Parliament. The session typically begins in the second half of November and concludes before Christmas.
In this year's Budget speech, Sitharaman had proposed raising the FDI limit in the insurance sector from 74% to 100%, as part of a broader set of new-generation financial sector reforms. She highlighted that this enhanced FDI cap would be available to companies that invest their entire premium collection in India, with existing guardrails and conditionalities being reviewed and simplified.
Currently, India's insurance sector has attracted Rs 82,000 crore through FDI. The government plans to amend the Insurance Act, 1938, alongside the Life Insurance Corporation (LIC) Act, 1956 and the Insurance Regulatory and Development Authority (IRDAI) Act, 1999.
Key proposed changes include:
- Raising FDI in insurance to 100%.
- Reducing paid-up capital requirements.
- Introducing a composite licence system.
- Empowering LIC's board to make operational decisions such as branch expansion and recruitment.
The amendments aim to protect policyholders' interests, enhance their financial security and encourage new entrants in the insurance market, which is expected to boost economic growth and generate employment.
Currently, India hosts 25 life insurance companies and 34 non-life insurers, including specialised firms such as Agriculture Insurance Company of India Ltd and ECGC Ltd. Analysts expect that allowing 100% FDI will increase competition, improve insurance penetration and create more jobs nationwide.
The last FDI increase in the insurance sector was in 2021, when the cap was raised from 49% to 74%. Earlier, in 2015, it had been increased from 26% to 49%.
With these reforms, the government aims to achieve 'Insurance for All by 2047', ensuring greater accessibility, efficiency and ease of doing business in India's insurance landscape.
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