Cabinet Clears Bill To Raise FDI In Insurance To 100%

The Union cabinet today approved an amendment Bill to raise the foreign direct investment (FDI) limit in insurance companies to 100% from 74%. The move is part of a larger push to reform and modernise the sector.

The Insurance Laws (Amendment) Bill, 2025 will be taken up in the ongoing Winter Session of Parliament, which ends on December 19, PTI reported. It is one of 13 Bills listed for discussion. 

The changes are meant to boost insurance penetration, improve ease of doing business and attract more investment into the sector. 

Notably, India’s insurance industry has so far received INR 82,000 Cr in FDI.

The finance ministry has also recommended updating several sections of the Insurance Act, 1938, including lowering paid-up capital requirements and introducing a composite licence framework. The plan also involves amendments to the LIC Act, 1956 and the IRDAI Act, 1999.

The changes to the LIC Act aim to give insurers’ boards more control over operations, including opening branches and hiring staff.

The government aims to strengthen policyholder protection, improve financial stability and bring more players into the market.

Meanwhile, the Cabinet also cleared the path for private participation in the civil nuclear power sector by approving the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill.

Finance minister Nirmala Sitharaman had made both the announcements – opening up the civil nuclear sector for private players and allowing 100% FDI in insurance – in Union Budget 2025-26.

What Does The Bill Mean For Insurtech Startups?

This comes at a time when India’s insurance market is projected to become the world’s sixth-largest insurance market within a decade, overtaking several developed economies, according to IRDAI.  

India’s broader fintech ecosystem is projected to reach a value of $2.1 Tn by 2030, with the insurtech segment alone estimated to grow into a $307 Bn opportunity.

Higher competition and foreign participation are expected to accelerate digital adoption, streamline underwriting, and push innovation in product design. 

For domestic insurers and insurtech startups, the reform presents both opportunities and risks. Indian players hold an advantage in their deep understanding of local consumer behaviour, price sensitivities and regional needs, supported by their distribution networks and existing regulatory familiarity. 

However, the entry of fully foreign-owned insurers is expected to reshape the competitive landscape. Global companies may bring advanced risk models, stronger capital buffers and technology-led processes that could pressure domestic firms to accelerate their own digital and operational transformation.

Further, exclusive partnerships between large fintech platforms and foreign insurers, if they emerge, could alter established agency-led models and force traditional insurers to recalibrate their outreach strategies.

Commenting on the Cabinet’s nod for the amendment, PB Fintech’s joint group CEO Sarbvir Singh said, “Global expertise and sustained investment can help accelerate innovation, improve consumer experience and expand access across the country. The move is well positioned to raise the overall quality of service, unlock significant new capital and support India’s long term vision for broader insurance coverage.”