This enhanced limit will be available for those companies which invest entire premium in India.

• To enhance FDI limit, government will have to bring amendments to Insurance Act 1938, Life Insurance Corporation Act 1956, and Insurance Regulatory and Development Authority Act, 1999.

Significance of 100% FDI in insurance sector

• Higher Investment: More foreign capital for growth and expansion.
• Enhanced Competition: Better products, improved services, and competitive pricing.
• Technological Advancements: Adoption of advanced tech and innovative products.
• Improved Penetration: More people brought under insurance coverage and help achieve the target of 'Insurance for All' by 2047.

Status of India’s Insurance sector (Economic Survey 2024-25)

• Total insurance premium grew 7.7% in FY24, reaching Rs.11.2 lakh crore.
• Insurance penetration declined from 4% in FY23 to 3.7% in FY24.
• Insurance Density rose from USD 92 in FY23 to USD 95 in FY24.
  • Insurance penetration is measured as percentage of insurance premium to GDP whereas insurance density is calculated as ratio of premium to population (per capita premium). 

Challenges Faced by Insurance Sector in India

• Absence of top companies: Out of 25 world’s top insurance firms, 20 are not present in India now.
• Economic Constraints: Affordability issues restrict insurance adoption.
• Cultural Preferences: Preference for traditional financial practices over insurance.