Cabinet Clears 100 percent FDI in Insurance Sector, Bill to Be Tabled

Union Cabinet Approves 100% FDI in Insurance Sector

The Union Cabinet has approved a landmark reform to allow 100 per cent foreign direct investment (FDI) in India’s insurance sector, replacing the existing cap of 74 per cent. The decision follows the announcement made in the Union Budget and signals a decisive push to attract global capital, enhance insurance penetration and modernise the regulatory ecosystem.

Legislative Pathway and Timeline

The reform will be carried forward through the Insurance Laws (Amendment) Bill, 2025 , which has received Cabinet approval and is expected to be introduced during the ongoing winter session of Parliament, ending on December 19. The Bill features among the priority legislations identified by the government to improve ease of doing business and unlock sectoral growth.

Key Changes Proposed in the Bill

The legislation proposes amendments to the Insurance Act, 1938 , along with related changes to the LIC Act, 1956 , and the IRDAI Act, 1999 . Apart from permitting full foreign ownership, it enables mergers between insurance and non-insurance entities and introduces a dedicated policyholder protection fund . To safeguard national interests, the Bill mandates that at least one key managerial position—such as CEO, Managing Director or Chairperson—must be held by an Indian citizen.

Why the Government Is Pushing the Reform

India’s insurance penetration remains below global averages. By allowing 100 per cent FDI, the government aims to bring in long-term capital, global expertise, advanced risk management practices and innovative insurance products. The sector has already attracted nearly ?82,000 crore in FDI , and policymakers believe the higher cap will accelerate growth, improve competition and expand employment.

Implications for Consumers and Industry

Industry stakeholders expect greater product diversity, improved service quality and better pricing for policyholders. Reforms to the LIC Act are also expected to give its board more operational flexibility, strengthening the overall insurance ecosystem.

Exam Oriented Facts

• Earlier FDI cap in insurance sector: 74%

• Proposed FDI limit under new Bill: 100%

• Governing law: Insurance Act, 1938

• India’s goal: Insurance for All by 2047