Insurance Sector Reforms in India
On December 16, 2025, the Lok Sabha passed a significant Bill amending insurance laws, focusing on increasing foreign direct investment (FDI) limits in the insurance sector and other key changes.
Key Amendments Proposed
- FDI Increase: The Bill proposes raising the FDI limit in the insurance sector from 74% to 100%. This aims to attract more capital, enhance technology, and improve insurance products.
- Amendments to Laws: Changes are proposed to the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the Insurance Regulatory and Development Authority Act, 1999. All Indian laws will apply to foreign entities as well.
- Net Owned Fund Requirement: The required net owned fund for foreign reinsurance branches is reduced from ₹5,000 crore to ₹1,000 crore to encourage more reinsurers to enter the Indian market.
Government Initiatives and Impacts
- Public Sector Insurance Strengthening: ₹17,450 crore infused into three public sector general insurance companies to bolster their capital base.
- Growth Statistics: The number of insurers increased from 53 in 2014-15 to 74 in 2024-25. Insurance premiums rose from ₹4.15 lakh crore to ₹11.93 lakh crore, and assets under management grew from ₹24.20 lakh crore to ₹74.43 lakh crore.
Empowerment and Penalties
- LIC Autonomy: The Bill grants Life Insurance Corporation (LIC) the autonomy to open zonal offices and align with foreign regulatory compliance.
- IRDAI Empowerment: The insurance regulator can now disgorge wrongful gains from insurers and intermediaries. Penalties for non-compliance by intermediaries increased from ₹1 crore to ₹10 crore.
Industry Perspectives
- Global Participation Benefits: The Bill is expected to bring long-term investment, global expertise, and improved customer experience, expanding insurance coverage and creating jobs.
