Bill doesn’t have any of the much talked about features like Composite License, Open Architecture and allowing Differential Capital

Among new provisions, the bill proposes to constitute a Policyholders’ Education and Protection Fund, One-time registration of insurance intermediaries(Perpetual license),Net Owned Funds for foreign re-insurers to be reduced from Rs. 5,000 crores to Rs. 1,000 crores, a provision for standard operating procedure for regulation making to be introduced in IRDAI Act, to make levying of penalty transparent and rational, factors for levying penalties are also being introduced,permitting merger of a non-insurance company with an insurance company

New Delhi:The Union Cabinet, chaired by Prime Minister Narendra Modi,on Friday has approved the Insurance Amendment Bill for raising foreign direct Investment(FDI) limit in the industry to 100% from 74%.

The amendment will raise the FDI limit in the Indian insurance companies from 74% to 100%. This will help in attracting stable and sustainable investment, facilitate technology transfer, enhance insurance penetration & social protection and aid achieve goal of ‘Insurance for All by 2047’, said the proposed Bill.

However, the bill doesn’t have any of the other much talked about features like Composite License, Open Architecture and allowing Differential Capital.

The Insurance Amendment Bill,2025,has been cleared by the Cabinet for its introduction in the Parliament for the purpose of amending various provisions of the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and Insurance Regulatory and Development Authority Act, 1999, with a view to enhance citizens protection, fubill rther deepen insurance penetration, accelerate growth and development of the insurance sector and to enhance the ease of doing business, outlined the Bill.

New Features of Insurance Amendment Bill,2025

-For enhancing insurance awareness and protection of policyholders, it is proposed to constitute a Policyholders’ Education and Protection Fund. For greater Policyholders’ protection, Insurance Regulatory and Development Authority of India (IRDAI) is being granted the power of disgorgement of wrongful gains made by an insurer or intermediary. It is proposed to create legal anchor for creation and effective use of digital public infrastructure in insurance sector to ensure that policyholders’ information is duly secured and protected.

-To ensure uninterrupted service and support to policyholders and to promote ease of doing business, one-time registration of insurance intermediaries is proposed. Further, the limit for seeking IRDAI approval for transfer of shares of paid up equity capital is being raised from the current 1% to 5% for insurance companies.

-The requirement of Net Owned Funds for foreign re-insurers is proposed to be reduced from Rs. 5,000 crores to Rs. 1,000 crores to facilitate entry of more re-insurers, building greater re-insurance capacities in the country.

-Life Insurance Corporation of India is being provided greater operational autonomy for setting up zonal offices and aligning their foreign operations with the laws and regulations of respective jurisdictions.

-To improve regulatory governance, a provision for standard operating procedure for regulation making is being introduced in IRDAI Act. To make levying of penalty transparent and rational, factors for levying penalties are also being introduced.

According to sources, the proposed bill also provides a provision for at least one among the top management, like the Chairman, Managing Director, or CEO, to be an Indian citizen as part of the guardrails.

It also allows merger of insurance companies with non-insurance companies.

This amendment is expected to lead to the growth of the insurance sector by bringing more citizens under insurance security net and by increasing the number of insurers, intermediaries and agents in the country.

After the cabinet approval, the bill can now be tabled in the ongoing session of the Parliament,which will end on Dec 19.

Sources said the Bill may be tabled in the Lok Sabha on Monday.

Finance Minister Nirmala Sitharaman, in this year’s Budget speech, had proposed to raise the foreign investment limit to 100 per cent from the existing 74 per cent in the insurance sector as part of new-generation financial sector reforms.

“This enhanced limit will be available for those companies which invest entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” she had said.

However, sources said, the bill after its tabling in Parliament may be sent to a Select Committee for further scruitinies.

So far, the insurance sector has attracted Rs 82,000 crore through FDI.

The move to raise the FDI limit to 100 percent is a transformative step for the insurance sector and for the country. It brings in meaningful capital and global expertise at a time when India is on a strong growth path. India has about seventy insurers, while the world has close to ten thousand. Even if a small share of them chooses to participate in India, the capital coming in is very large. The potential investment is close to ten lakh crore rupees and it will create millions of jobs across the value chain,said Tapan Singhel, MD and CEO, Bajaj General Insurance.

“This decision will expand the market, encourage innovation, and make insurance solutions more accessible and more affordable for people. With greater participation and stronger competition, customers will benefit from better products, better service and better pricing. As the sector grows, insurance will reach many more families and businesses and will continue to support the country in its economic journey and national aspirations,”commented Singhel.

Sharad Mathur,MD and CEO, Universal Sompo General Insurance,“Increasing the FDI limit to 100 percent can serve as a strong catalyst for the insurance sector. Greater capital inflows will enable insurers to expand their business, strengthen balance sheets, and invest in advanced risk-assessment models and more efficient claims-management systems. It will also support deeper market penetration, particularly in Tier-3 cities where insurance adoption remains low.

Overall, for the general insurance market, this move can unlock better use of data, more accurate pricing and more sustainable product innovation, ultimately making the sector more resilient and better equipped to serve people at an optimal level,he said.

Debashish Banerjee, Partner, Deloitte India, said. “While the intent to allow 100 percent FDI in insurance was indicated earlier this year, today’s announcement is a positive step in translating that intent into action. Over the past few months, we have seen growing interest from several global insurers who are actively evaluating India as a long-term market, and greater clarity on ownership norms will help in moving those conversations forward.”

As the detailed rules, regulations and operational guidelines emerge, this should give investors the confidence to commit capital and capability more meaningfully. For the industry, this is a constructive development. To enable the sector to scale fully, it will be important to see how the other reforms the government is contemplating come together, so that growth, governance and inclusion progress in parallel,he added.

This is a watershed moment for the Indian insurance landscape. Allowing 100% FDI is a strong signal of confidence in the sector’s potential and commitment to economic reforms.This move will not only boost foreign investments but also fundamentally improve the quality and reach of insurance services for every Indian citizen, said Narendra Ganpule, Partner and Insurance Industry Leader, Grant Thornton Bharat.

“100% FDI in insurance is a welcome measure. However, it may not straightaway open floodgates of foreign capital in Indian insurance sector as is being prophesied. The relaxation of foreign investment ceiling from 49% to 74% and the omission of ‘Indian owned and controlled’ condition in 2021 failed to trigger the desired momentum in foreign investment in the insurance sector,”Satyendra Shrivastava, co-founding partner of Consortia Legal,.

The restrictive conditions under the foreign investment rules deterred many foreign investors from increasing their investment in Indian ventures. Similarly, permitting 100% foreign investment in insurance intermediaries did not lead to a dash of foreign investment,cautioned Shrivastava..

The orginal Insurance Amendment Bill, which was almost prepared two years back,had provisions for:
-Composite licence, by which one company can do both life and health business with one license,
-distributing other financial products like mutual funds, loans, and credit cards, creating new revenue streams and offering integrated solutions, reduced capital requirements,
-more flexibility in revising investment norms in line with market needs, potentially improving returns for policyholders.
-permit individual insurance agents to sell policies of multiple companies, eliminating the existing restriction that limits them to one life and one general insurer.

While the changes to the Insurance Act, 1938 (including the increase in the FDI limit) remain to come into force, the Government has already initiated steps to introduce changes to legislations which will need to be amended in light of the proposed FDI increase, and to ensure consistency within the statutory framework.

On 29 August 2025, the Ministry of Finance (Department of Financial Services) issued draft amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015 (Amended 2015 Rules). The Indian Insurance Companies (Foreign Investment) Rules, 2015 (2015 Rules) were notified by the Central Government to regulate foreign investment in Indian insurance companies and intermediaries.

The 2015 Rules were framed under the Insurance Act,1938 and the Insurance Regulatory and Development Authority Act, 1999, setting out the framework for FDI and foreign portfolio investment (FPI) in the sector as per the applicable Foreign Exchange Management regulations.