What Changes Are Coming to India's Insurance Sector? Nirmala Sitharaman Reveals Major FDI Plans!

Upcoming Insurance Amendment Bill

New Delhi: The Finance Minister, Nirmala Sitharaman, has announced that the Insurance Amendment Bill, which aims to allow 100% foreign direct investment (FDI) in the insurance sector, is expected to be presented in Parliament during the upcoming Winter session.

Typically, the Winter session of Parliament starts in the latter half of November and wraps up before Christmas.

When asked about the bill's introduction, she expressed optimism, stating, 'I hope to'.

In her Budget speech earlier this year, she suggested increasing the foreign investment cap in the insurance sector from the current 74% to a full 100% as part of broader financial sector reforms.

This new limit will apply to companies that invest all their premiums within India. The existing regulations surrounding foreign investments will be reassessed and simplified.

To date, the insurance sector has garnered approximately ₹82,000 crore through FDI.

The finance ministry plans to revise several sections of the Insurance Act of 1938, including the proposed increase of FDI to 100%, lowering the required paid-up capital, and introducing a composite license.

As part of a comprehensive legislative overhaul, amendments will also be made to the Life Insurance Corporation Act of 1956 and the Insurance Regulatory and Development Authority Act of 1999.

The proposed changes to the LIC Act aim to empower its board with operational decision-making capabilities, such as branch expansion and recruitment.

These amendments are primarily designed to safeguard policyholders' interests, boost their financial security, and encourage more entrants into the insurance market, ultimately fostering economic growth and job creation.

Such reforms are expected to improve the efficiency of the insurance sector, facilitate business operations, and increase insurance coverage to meet the goal of 'Insurance for All by 2047'.

The Insurance Act of 1938 is the foundational legislation governing insurance in India, outlining the operational framework for insurance companies and regulating the relationships among insurers, policyholders, shareholders, and the Insurance Regulatory and Development Authority (IRDAI).

The influx of new players in the market is anticipated to enhance penetration and create more job opportunities nationwide.

Currently, India has 25 life insurance companies and 34 non-life or general insurance firms, including specialized entities like the Agriculture Insurance Company of India Ltd and ECGC Ltd.

The FDI limit in the insurance sector was last increased from 49% to 74% in 2021, following a previous hike from 26% to 49% in 2015.