Union government plans 100% FDIs to raise insurance penetration rate: Report 

The government is preparing to introduce major reforms in the insurance sector by allowing 100 percent foreign direct investment (FDI) in insurance companies, according to a report in the Times of India.  

These changes are part of the upcoming Insurance Amendment Bill, which will be presented during the winter session of Parliament.  

If passed, the bill will mark a significant shift in India’s insurance landscape, opening the door for global players to enter the market and enabling individual agents to sell policies from multiple insurance providers. This move departs from the current rule, which limits agents to a single association per type of insurance (life or general).  

Currently, the FDI cap in the insurance industry is set at 74 percent, covering life, general and health insurance sectors. The industry currently consists of 24 life insurers, 26 general insurers, 6 standalone health insurers, and one reinsurer—General Insurance Corporation.  

By raising the FDI cap to 100 percent, the government aims to attract well-capitalised global insurers capable of underwriting policies in this capital-intensive sector.  

Additionally, the Bill will provide insurance agents the flexibility to sell products from multiple companies, effectively lifting the restriction that currently limits them to working with one life insurer and one general insurer. Though some agents have found ways around this rule by registering family members as agents for different firms, the proposed changes would formally allow agents to offer a broader range of insurance products. 

These reforms are part of a broader strategy to boost insurance penetration in India, which remains low at about 4 percent. The policy seeks to increase the number of insurers and provide consumers with a wider selection of products, while also making it easier for agents to navigate the market.  

In addition to raising the FDI limit, the Insurance Amendment Bill is expected to ease certain regulatory requirements, including those concerning company directors.  

Furthermore, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed allowing insurers to hold composite licenses, which could benefit firms like Life Insurance Corporation of India (LIC), enabling them to enter the health insurance market.  

The government is also considering relaxing solvency requirements, which would free up capital for insurers to enhance their operations and expand their offerings.