The Union Cabinet on Friday approved the Insurance Laws (Amendment) Bill, 2025, paving the way for its introduction in the Lok Sabha during the ongoing Winter Session of Parliament, which ends on December 19. The Bill has been listed in the Lok Sabha bulletin among key legislations scheduled for discussion.
The approval marks a major step in the government’s plan to revamp India’s insurance framework and accelerate sectoral growth.
100% FDI proposal at the core of the Bill
The most significant change proposed in the Bill is raising the foreign direct investment (FDI) limit in insurance companies to 100% from the existing 74%. The move is aimed at attracting long-term global capital, improving competition and strengthening customer services.
India’s insurance penetration remains low compared to global levels, with life insurance penetration at around 3% and general insurance at about 1%. The government believes higher foreign ownership will help insurers expand coverage, introduce new products and improve service standards.
Part of broader financial sector reforms
Finance Minister Nirmala Sitharaman had announced the proposal to raise the FDI cap in the Union Budget as part of new-generation financial sector reforms. So far, the insurance sector has attracted nearly Rs 82,000 crore in FDI, and officials expect the revised limit to unlock significantly higher investments.
The Bill seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the IRDAI Act, 1999, with a focus on modernisation, ease of doing business and stronger policyholder protection.
More autonomy for LIC, stronger regulator
Under the proposed amendments, the Life Insurance Corporation of India (LIC) will get greater operational freedom, allowing its board to take faster decisions on expansion and administration. The Bill also proposes to strengthen the powers of the insurance regulator, IRDAI, to ensure better oversight and consumer protection.
Industry sees growth opportunity
Industry leaders have welcomed the Cabinet’s decision. RenewBuy Co-founder & CEO Balachander Sekhar said the Bill creates a strong foundation for the next decade of insurance growth, while Aon India CEO Rishi Mehra described 100% FDI as a pivotal step toward building a more resilient and competitive insurance ecosystem.
What to watch when the Bill is debated
As the Bill is taken up in Parliament, it is expected to trigger detailed debate. Some long-pending industry demands, such as composite licences and lower capital requirements for new insurers, are either missing or diluted in the final draft.
If passed, the Insurance Laws (Amendment) Bill, 2025 could become one of the most significant reforms in India’s insurance sector in recent years, opening the door to higher investment while testing the balance between growth, regulation and consumer protection.