Cabinet gives go ahead to 100 pc FDI in insurance sector

New Delhi, Dec 12 The Union Cabinet, chaired by Prime Minister Narendra Modi, on Friday approved a proposal to allow 100 per cent foreign direct investment (FDI) in insurance companies in a major economic reform that does away with the 74 per cent limit that was in place for such investments.

The Cabinet approval will pave the way for attracting more foreign investment in the insurance sector, increase competition which in turn will benefit customers.

The Insurance Laws (Amendment) Bill 2025 is likely to be introduced during the ongoing winter session of Parliament which draws to an end on December 19.

The Lok Sabha bulletin lists the Insurance Laws (Amendment) Bill 2025, aimed at boosting insurance penetration, accelerating sectoral growth and development, and improving the ease of doing business, among the 13 legislative items for discussion in the parliamentary session.

Finance Minister Nirmala Sitharaman had, during the presentation of the Union Budget for 2025-26, announced a proposal to increase the foreign investment limit in the insurance industry from 74 per cent to 100 per cent as part of broader financial sector reforms.

The finance ministry has recommended revising several sections of the Insurance Act, 1938. These proposed changes include increasing the FDI limit to 100 per cent, lowering paid-up capital requirements, and creating a composite licence framework.

As part of a wider legislative overhaul, amendments will also be made to the Life Insurance Corporation Act 1956 and the Insurance Regulatory and Development Authority Act 1999, in addition to the Insurance Act 1938.

Changes to the LIC Act are intended to give its board greater authority over operational matters, such as opening new branches and hiring staff.

The overarching purpose of the amendment is to strengthen policyholder protections, bolster financial security, and encourage more participants to enter the insurance market, thereby supporting economic expansion and job creation.

These reforms are expected to improve industry efficiency, simplify business operations, and push insurance penetration forward to achieve the vision of Insurance for All by 2047, according to an official statement.

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