Parliament Winter Session: Govt Tables Bill To Raise FDI In Insurance Sector To 100%

Union Finance Minister Nirmala Sitharaman on Tuesday introduced The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 in the Lok Sabha, proposing to increase foreign direct investment (FDI) in the insurance sector to 100 per cent from the existing 74 per cent. The move is aimed at achieving the government's goal of providing insurance coverage to all citizens by 2047.

The proposed legislation seeks to amend three key laws governing the sector - the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. While opening the sector fully to foreign investment, the government has proposed safeguards to retain a degree of domestic control. Under the Bill, at least one of the top executives - the Chairman, Managing Director or Chief Executive Officer - must be an Indian citizen.

According to the statement of objects and reasons, the Bill also enables the merger of a non-insurance company with an insurance company. It is intended to accelerate the growth and development of the insurance sector while strengthening protection for policyholders. The Union Cabinet approved the Bill last Friday, clearing the way for its introduction in Parliament during the Winter Session.

A key provision of the Bill is the establishment of a Policyholders' Education and Protection Fund, designed to safeguard the interests of insurance customers. Official documents state that the amendments would also improve the ease of doing business for insurers, intermediaries and other stakeholders, enhance transparency in regulation-making, and strengthen regulatory oversight of the sector.

The proposal follows a signal given by Sitharaman in her Budget speech earlier this year, where she announced plans to raise the foreign investment cap in insurance to 100 per cent as part of a broader set of new-generation financial sector reforms.

The amendments primarily focus on promoting policyholders' interests, improving their financial security, and encouraging the entry of additional players into the market, which the government believes will help drive economic growth and generate employment.

In August 2025, the finance ministry issued a notification replacing the existing 74 per cent FDI limit in insurance companies with the provision "as stipulated by the Insurance Act, 1938," laying the groundwork for the legislative changes required to allow 100 per cent foreign investment.

During the Monsoon Session of Parliament, Sitharaman told the Lok Sabha that allowing 100 per cent FDI in insurance would help unlock the sector's full potential and expand coverage. She noted that India's insurance sector is projected to grow at an annual rate of 7.1 per cent over the next five years, outpacing both global and emerging market growth.

Latest data shows that India's insurance penetration, measured as total premium as a percentage of GDP, declined to 3.7 per cent in 2023-24 from 4 per cent in 2022-23. Life insurance penetration fell to 2.8 per cent from 3 per cent, while non-life insurance penetration remained unchanged at 1 per cent. To date, India's insurance industry has attracted Rs 82,000 crore in foreign direct investment.