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The government has approved increasing the FDI limit in the insurance sector from 74% to 100%. This will pave the way for increased foreign investment and entry of new players. The bill includes major changes in the Insurance Act 1938, LIC Act 1956 and IRDA Act 1999. Their objective is to increase the security of policyholders and modernize the industry. The government’s aim is to bring every citizen of the country under insurance coverage by 2047 and this decision is being considered a big step in that direction.
New Delhi. The central government is preparing to completely open the insurance sector. The Cabinet on Friday approved a bill to increase the FDI limit in the insurance sector from 74% to 100%. According to sources, this bill can be presented in Parliament in this winter session. The government believes that this will increase investment, insurance coverage will reach more people and growth will pick up pace. Finance Minister Nirmala Sitharaman had announced this proposal in her 2025-26 budget speech. Till now, foreign investment worth Rs 82000 crore has come into the insurance industry and the government wants more global players to come so that competition increases and customers get better products.
The government is going to make major changes in the Insurance Act 1938. The biggest change is to make FDI 100%. Along with this, there is also a proposal to reduce the minimum paid-up capital and introduce a system of joint insurance license. This will mean that it will be easier for new players to enter the market and the expansion of the industry will be faster. Amendments will also be made in LIC Act 1956 and IRDA Act 1999. The proposed changes in LIC will give its board more freedom in taking operational decisions like expansion of branches and appointments. The government wants LIC to be made modern, flexible and competitive so that it can keep pace with private companies.
What is the benefit to policyholders?
The changes in the Insurance Bill are directly aimed at providing stronger protection to policyholders. The government claims that if more companies enter this market, insurance products will become cheaper, claim settlement will improve and customers will get better options. With this, employment will increase and the flow of foreign capital in the financial sector will increase.
Insurance for every citizen
The government has set a target of ‘insurance for every citizen’ by 2047. The decision to increase the FDI limit is part of this roadmap. A large part of India is still out of insurance coverage and the government wants to close this gap. Insurance Act 1938 is the basic law of this sector. It regulates the operations of companies, the relationship between policyholders and the regulator IRDA. The upcoming amendments will update it according to modern needs and accelerate the expansion of the industry.
