Govt set to introduce Bill to hike FDI in insurance sector to 100 pc in Parliament

The government is planning to introduce a Bill in Parliament this week to raise Foreign Direct Investment (FDI) in the insurance sector to 100 per cent , aiming to provide insurance coverage to all by 2047.

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, seeks to amend the Insurance Act, 1938 , the Life Insurance Corporation Act, 1956 , and the Insurance Regulatory and Development Authority Act, 1999 , according to the draft circulated to members of Parliament ahead of its introduction. The amendment will raise the FDI limit in the insurance sector from 74 per cent to 100 per cent.

While allowing full foreign ownership, the Bill mandates that at least one of the top officials, Chairman, Managing Director, or CEO , must be an Indian citizen. It also enables mergers between non-insurance and insurance companies, opening opportunities for consolidation in the market.

The Bill received the Union Cabinet's nod on Friday, clearing the way for its introduction in Parliament. It aims to accelerate growth in the insurance sector, enhance policyholder protection , and improve the ease of doing business for insurance companies, intermediaries, and other stakeholders. To this end, it proposes the establishment of a Policyholders’ Education and Protection Fund , designed to safeguard policyholders’ interests and raise awareness.

The draft also seeks to improve transparency in regulation by laying down formal procedures for rule-making and giving clearer criteria for penalties. It strengthens IRDAI’s oversight powers, ensuring stricter compliance and better protection for policyholders.

Governance reforms under the Bill include setting a five-year term for the IRDAI Chairperson and whole-time members, or until they turn 65, whichever is earlier, updating the previous age and term limits. Amendments to the LIC Act will empower the board to make operational decisions such as branch expansion and recruitment, strengthening LIC’s competitive positioning.

However, some earlier proposals did not make it into the final draft. Composite licensing , which would allow insurers to offer both life and non-life products under a single licence, and measures to lower capital requirements for new entrants, have been left out. Other proposed reforms, including digital infrastructure initiatives and captive insurance subsidiaries for large corporations, are also pending.

The Bill also addresses reinsurance norms, potentially lowering capital requirements for foreign reinsurers to attract global players and improve risk distribution in the market.

Finance Minister Nirmala Sitharaman , in her Budget speech earlier this year, had proposed raising the FDI limit as part of new-generation financial sector reforms. So far, the insurance sector has attracted FDI worth Rs 82,000 crore.

The proposed amendments focus on promoting policyholder interests, enhancing financial security, and facilitating the entry of additional players into the insurance market, expected to drive economic growth and employment generation. The Bill is now poised to be introduced in Parliament during the Winter Session, where it is likely to spark debate over the balance between foreign investment, consumer protection, and structural reform in India’s rapidly growing insurance sector.