The Union Cabinet has cleared the Insurance Amendment Bill, allowing 100% FDI in India’s insurance sector. According to a news published on Financial Express, citing CNBCTV18, the government is likely to introduce the bill in the Lok Sabha on Monday, December 15.
The amendment aims to raise the FDI cap for insurance companies from the current 74% to 100%, allowing foreign investors to acquire full ownership of insurers operating in India. The proposed relaxation will be extended to companies that invest their entire premium income within the country.
Union Finance Minister Nirmala Sitharaman announced the proposal for the first time in the Union Budget for 2025-26 as part of broader reforms to strengthen the financial sector. She had said that existing conditions related to foreign investment would be reviewed and simplified to promote long-term, stable capital flows.
The insurance industry should see explosive growth with the opening up of a fully open FDI, according to officials, and is forecasted for the next five years to grow at 7.1% annually-this is above the global and emerging-market averages.
Sitharaman had argued that the move would cut the compulsion for foreign players to seek Indian partners to bridge the earlier 26% gap, easing market entry and potentially increasing the number of insurers in the country. The reform, she said, was ‘an enabling provision’ aimed at boosting competition, improving efficiency, and accelerating technology transfer into the sector.
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Despite the presence of 57 insurers, 24 life and 33 non-life, insurance penetration in India remains low. For FY24, premium penetration was 3.7% of GDP, comprising 2.8% for life and 0.9% for non-life.
Foreign ownership levels are also all over the place: investors held 47.82% in life insurers, 40.8% in private general insurers, and 29.46% in standalone health insurers as of end-2024. The removal of the cap is expected to attract deeper pools of global capital and bring India closer to its long-term objective of expanding insurance access across the population.