The Centre has cleared a key reform to raise FDI in insurance companies to 100 percent, while holding back other proposals from the broader Insurance Amendment Bill. The move, approved by the Union Cabinet on December 12, aims to attract more foreign capital and strengthen the sector as the bill heads to Parliament this session.
The Centre has moved ahead with a key part of its long-debated insurance reforms — raising foreign direct investment (FDI) in insurance companies to 100 per cent.
On December 12, the Union Cabinet chaired by Prime Minister Narendra Modi approved a bill to increase the FDI cap from the existing 74 per cent, saying the change will help strengthen the sector by drawing more foreign capital and boosting competition.
Bill set for introduction in Winter Session
The bill is expected to be introduced in the ongoing Winter Session of Parliament, which concludes on December 19. Officials said the higher FDI ceiling will help insurers improve solvency levels, bolster balance sheets and widen coverage in a market where insurance penetration remains low. Increased competition is also expected to drive product innovation and improve customer services.
Wider reforms on hold
Several broader reforms initially proposed — such as composite licences, lower minimum capital requirements and easier entry rules for specialised players — have not been taken up at this stage. Earlier reports suggested these measures were still under examination, and the Cabinet has cleared only the FDI hike for now.
A Lok Sabha bulletin lists the Insurance Laws (Amendment) Bill 2025 among 13 items scheduled for discussion this session. The legislation aims to deepen insurance penetration, support sectoral growth and improve the ease of doing business. The proposal to raise the FDI limit had first appeared in Finance Minister Nirmala Sitharaman’s Budget speech as part of wider financial-sector reforms.
Broader legislative overhaul planned
The insurance sector has so far attracted ₹82,000 crore in FDI. The finance ministry has proposed amendments to the Insurance Act, 1938, including reduced paid-up capital requirements and the provision of composite licences. As part of the larger legislative exercise, changes are also planned for the LIC Act of 1956 and the IRDAI Act of 1999.
Planned amendments to the LIC Act would grant the board greater operational flexibility, including over expansion and recruitment decisions.
Reform goal: Insurance for All by 2047
The broader reform push seeks to protect policyholder interests, strengthen financial security, encourage new entrants and support the goal of achieving ‘Insurance for All by 2047’. The Insurance Act of 1938 remains the principal framework governing insurers, policyholders, shareholders and the regulator.
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