Budget 2025: Govt Announces 100% FDI In Insurance: Here’s What It Means For You

Giving a boost for positive disruption in the insurance sector, Union Minister of Finance Nirmala Sitharaman announced an increase in foreign direct investment (FDI) in the insurance sector from 74 per cent to 100 per cent, in her Budget Speech.

Insurance industry leaders have welcomed this announcement as a policy that will help India move towards a robust insurance market.

Says Tapan Singhel, managing director and CEO, Bajaj Allianz General Insurance: “India, with its vast and diverse population, has immense untapped potential in the insurance sector. In many developed economies, thousands of insurance companies operate to serve the varied needs of their citizens. For a country like ours, achieving deeper insurance penetration requires a significant expansion in the number of players in the industry.”

With the move to allow 100 per cent FDI in insurance, Singhel says India could move towards a future with 1,000 insurers in the next decade. Currently, the country’s insurance sector consists of 24 life insurers, 26 general insurers, six standalone health insurers, and one state-owned reinsurer – the General Insurance Corporation (GIC) of India.

“A larger number of players will bring greater competition, leading to enhanced innovation, customer-centric products, and improved service delivery. More insurers mean better awareness, wider choices for consumers, and a stronger push for financial protection across all segments of society,” Singhel adds.

He says that greater foreign participation, will accelerate the adoption of global best practices, introduce innovative products, and elevate customer service standards. Additionally, the mandate to invest premiums within India ensures that these funds contribute to domestic economic growth and infrastructure development.

Tarun Chugh, managing director and CEO, Bajaj Allianz Life Insurance says, “The mandate to invest premiums within India ensures that these funds contribute to domestic economic growth and infrastructure development. The next five years present a significant and an exciting opportunity to propel the industry forward onto greater heights.”

It is important to note that this limit is only applicable for global insurance companies that will invest their entire premium in India.

“This provision encourages domestic investment, strengthening India’s position as a global investment hub while ensuring long-term sector sustainability. We are optimistic that this move will pave the way for a financially secure Viksit Bharat,” says Satishwar B., managing director and CEO, Bandhan Life Insurance.

What It Means For Customers

Experts have welcomed the move as it will provide customers with more choices.

Says Aatur Thakkar, co-founder and director of Alliance Insurance Brokers, “A 100 per cent FDI will attract substantial foreign capital, which will lead to improved technological interventions and advancements in the country. With international competitors entering the country, consumers can expect better products and services, empowering them with more choices tailored to their needs.”

Sumit Bohra, president, Insurance Brokers Association of India (IBAI) says: “With the decision on nil income tax payable up to Rs 12 lakh, this segment of consumers should become target for buying insurance increased cover. This measure of the government can contribute to increasing insurance penetration.”

The Insurance and Regulatory Development Authority of India (Irdai) has set the target of ‘Insurance for All by 2047’.

The reform to increase FDI limit to 100 per cent aligns with this mission, says Sarbvir Singh, joint group CEO, PB Fintech.

“This will accelerate insurance penetration and significantly boost the start-up ecosystem. It will foster a more dynamic market, encourage innovation, enhance service quality, and offer consumers greater choice while potentially making insurance more affordable,” he adds.

Singh further says that this will lead to a stronger financial backing for insurers, who, in turn, will be better positioned to underwrite larger risks, expand their distribution networks, and invest in advanced digital solutions. “This will elevate customer experience and reinforce the industry's long-term sustainability and resilience,” he adds.

Adds Sharad Mathur, managing director and CEO, Universal Sompo General Insurance: “Now that global insurance companies can now invest fully in India, we anticipate the emergence of innovative products and services tailored to meet the diverse needs of Indian consumers. For customers, this hike means more choices, better services, and potentially lower premiums, as increased competition drives improvements in the sector.”

Key Things To Note:

For the customers, the increased FDI limit would mean:

• Wider and innovative choices in insurance products

• Potentially lower premiums

• More affordable options as insurers compete to cover more customers

• Enhanced service quality

Adds Singhel: “This reform is not just about increasing capital inflows, it is about reshaping the insurance landscape to ensure that every individual and business has access to risk protection. As competition intensifies, we will see more transparency, faster claims processing, and stronger trust in the industry. Ultimately, this will drive economic growth, build financial resilience, and create a more inclusive insurance ecosystem for India.”