Government to table Bill this week to raise insurance FDI cap to 100 per cent

The government is set to introduce a Bill in Parliament this week to raise foreign direct investment (FDI) in the insurance sector to 100 per cent, a move aimed at expanding insurance coverage across the country by 2047.

The proposed legislation, titled the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999, according to the Bill circulated to members of Parliament ahead of its introduction.

The amendment proposes to increase the FDI limit in the insurance sector from the existing 74 per cent to 100 per cent. However, it stipulates that at least one top official — the Chairman, Managing Director or Chief Executive Officer — must be an Indian citizen.

The Bill also provides for the merger of a non-insurance company with an insurance company and received the Union Cabinet’s approval on Friday, clearing the way for its introduction in Parliament.

According to the statement of objects and reasons, the proposed law aims to accelerate the growth and development of the insurance sector and ensure better protection for policyholders. It also provides for the establishment of a Policyholders’ Education and Protection Fund to safeguard policyholders’ interests.

The legislation seeks to improve the ease of doing business for insurance companies, intermediaries and other stakeholders, enhance transparency in regulation-making, and strengthen regulatory oversight of the sector.

With regard to regulatory appointments, the Bill proposes a term of five years for the Chairperson and other whole-time members, or until they attain the age of 65 years, whichever is earlier. At present, the upper age limit for whole-time members is 62 years, while it is 65 years for the Chairman.

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

So far, the insurance sector has attracted Rs 82,000 crore through foreign direct investment.

Amendments to the LIC Act under the Bill also seek to empower the corporation’s board to take operational decisions, including branch expansion and recruitment.

The proposed changes primarily focus on promoting policyholders’ interests, enhancing financial security, and facilitating the entry of additional players into the insurance market, with a view to supporting economic growth and employment generation.