Key proposals
Insurance Sector Reforms and 100 % FDI: The government has introduced the Insurance Laws (Amendment) Bill for the upcoming winter session of Parliament. The draft legislation proposes to increase the foreign direct investment cap in the insurance sector from 74 % to 100 %, signalling a major shift in policy.
Static GK fact: India’s insurance sector is regulated by the Insurance Regulatory and Development Authority of India (IRDAI), established in 1999 via the IRDAI Act 1999.
Expanded coverage and access
The bill aims to amend three key pieces of legislation: the Insurance Act, 1928, the Life Insurance Corporation Act, 1956 and the IRDAI Act 1999. These amendments are intended to enhance regulatory flexibility, cut procedural bottlenecks, and improve affordability and accessibility of insurance products across India.
Composite licences for insurers
One of the standout features is the introduction of composite licences, allowing companies to issue life, health and general insurance under one unified permit. This move is meant to simplify compliance, encourage innovation in product offerings and reduce operational costs. By offering multiple insurance lines under one licence, firms can diversify faster and scale more smoothly.
Static GK fact: As of 2024, the Indian insurance penetration (premium-to-GDP ratio) was under 5 %, much lower than global peers.
Foreign investment and market dynamics
Permitting 100 % FDI is expected to attract sustained overseas capital, boost competition and catalyse technology transfer. The bill aligns with the FY 2026 Budget announcement and mirrors practices in advanced economies such as Canada, Brazil, Australia and China, which allow full foreign ownership in their insurance markets. With India targeting an insurance market growth rate of approximately 7.1 % annually over the next five years, this reform could accelerate momentum.
Strategic implications
- Increased foreign participation may lead to more premium-funded initiatives, better claim-settlement mechanisms and modern distribution networks.
- Regulatory simplification and composite licences could encourage new entrants, especially in segments like micro-insurance and health cover which remain under-served in rural areas.
- Aligning with global norms may raise India’s attractiveness for foreign insurers and reinsurers. A proposed drop in net owned funds for foreign reinsurers to ₹1,000 crore and an entry capital for select segments as low as ₹50 crore suggests a push toward market liberalisation.
Static GK fact: The Life Insurance Corporation of India (LIC) was established in 1956 and remains the largest insurer in India.
Challenges and next steps
Implementation will require robust oversight, ensuring that competition does not compromise policy-holder protection. Regulatory bodies will need to ensure the solvency of new entrants and guard against systemic risk. The transition to composite licences will demand adjustments in supervision frameworks and possible changes in actuarial, underwriting and claims practices.
Conclusion
The proposed Insurance Laws (Amendment) Bill marks a bold move to open the Indian insurance market, provide greater access to customers and align with global investment norms. If effectively implemented, it could reshape the sector and help achieve the vision of universal insurance coverage by 2047.
Static Usthadian Current Affairs Table
Insurance Sector Reforms and 100 % FDI:
| Topic | Detail |
| Bill name | Insurance Laws (Amendment) Bill |
| Key change | FDI cap raised from 74 % to 100 % |
| Legislation amended | Insurance Act 1928, Life Insurance Corporation Act 1956, IRDAI Act 1999 |
| Licence type introduced | Composite licences for life, health and general insurance |
| Entry capital (select segments) | As low as ₹50 crore |
| Net owned funds for foreign reinsurers | ₹1,000 crore |
| Projected market growth | ~7.1 % annually over next five years |
| Long-term goal | “Insurance for All by 2047” |
