India Unveils 100% FDI in Insurance, Boosting Accessibility and Growth
Image Source: Internet
New Delhi: India has taken a significant step towards enhancing insurance accessibility and growth by passing a bill to raise the foreign direct investment (FDI) limit to 100% in the insurance sector. Union Finance Minister Nirmala Sitharaman presented the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, in the Lok Sabha on Tuesday, which aims to promote insurance penetration, ease of compliance, and strengthen regulatory oversight. The current FDI cap of 74% has been an impediment for global firms, as searching for an Indian partner to contribute 26% equity can be a challenging task. With the new bill, global insurance companies can now inject substantial capital directly into the Indian market, subject to all Indian laws. This move is expected to bring in world-class risk assessment techniques, global best practices, and innovative insurance products. Key features of the bill include: - A policyholders' education and protection fund to spread insurance awareness among people - Better regulatory oversight to ensure companies' conduct in insurance business is orderly and transparent - One-time registration for insurance intermediaries to ensure uninterrupted service to citizens - Inflow of foreign capital and introduction of suspension of intermediary licenses instead of termination - Empowerment of the regulator to disgorge wrongful gains and compensate victims - Reduction of the net-owned fund requirement for foreign reinsurance branches - Autonomy for state-owned Life Insurance Corporation (LIC) in opening regional branches The bill also proposes to rationalize penalties on erring companies or defaulting entities by raising the maximum penalty amount to ₹10 crore from the current ₹1 crore. Experts believe the bill has empowered the regulator, the Insurance Regulatory and Development Authority of India (IRDAI), to ensure fair play. The Modi government has brought several flagship insurance schemes to protect the poor with minimal premia, such as Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Fasal Bima Yojana. The gradual opening up of the insurance sector has helped in its expansion, with insurance penetration rising from 3.3% in 2014-15 to about 3.8% now. Opposition members, however, expressed concerns over the bill, questioning the hurry in passing it and citing potential risks of foreign ownership. They argued that boards of foreign entities would make policies from overseas, pushing risk away from the state to citizens and making democracy fragile. The bill's passage is expected to have a positive impact on the insurance sector, making it more accessible and attractive to global investors. It remains to be seen how the regulator will implement the new provisions and ensure fair play in the sector.
