In a landmark reform move, the Union Cabinet has approved a proposal allowing 100 percent foreign direct investment (FDI) in India’s insurance sector. The decision, announced during the ongoing Winter Session of Parliament, marks a significant shift from the earlier cap of 74 percent and is aimed at attracting greater foreign capital, strengthening competition, and expanding insurance coverage across the country.
The approval comes as part of the Insurance Laws (Amendment) Bill, 2025, which is expected to be tabled in Parliament before the session concludes on December 19. Officials stated that the reform will help insurers improve their capital base, enhance product offerings, and accelerate claim settlements. The government has emphasized that the move is designed to modernize the sector, improve customer service, and ensure stronger protection for policyholders.
Finance Minister Nirmala Sitharaman had signaled this policy shift earlier in the Union Budget for 2025–26, highlighting the need to remove investment barriers in one of the world’s fastest-growing insurance markets. By opening the sector to full foreign ownership, the government expects to boost industry growth, encourage innovation, and expand penetration in rural and underserved areas.
Industry experts have welcomed the reform, noting that it will likely attract global insurers to set up wholly owned subsidiaries in India. This could lead to increased competition, better insurance products, and improved efficiency in operations. Analysts also believe that the move will help bridge India’s low insurance penetration, which remains below the global average despite rapid economic growth.
The Cabinet’s decision is part of a broader reform agenda, though other proposals under the Insurance Amendment Bill have been held back for now. The government has indicated that existing regulations governing foreign investment will be reviewed to ensure smooth implementation of the new policy.
