Insurance Sector Overhaul: 'Transformative' Bill Expected In Parliament's Monsoon Session

In an aim to bring ‘transformative’ reforms to the insurance sector, during the monsoon session of Parliament, the government is likely to introduce a bill, which includes increasing the Foreign Direct Investment (FDI) limit to 100 per cent. 

A senior government official told a media publication recently that the bill is getting ready. It may be introduced during the monsoon session, post all the consultations and approvals from the cabinet. The bill intends to fulfil the key FY26 Budget announcement of increasing the FDI limit from 74 to 100 per cent in the insurance sector. The current guardrails and conditionalities linked with foreign investment will be reviewed and simplified, according to a media report. 

The structure of the bill is based on a proposal presented by the Financial Services Department in November last year, where it invited comments on the proposed amendments in three laws- the Insurance Act 1928, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act (Irda) 1999. It was said that amendments are proposed to ensure “accessibility and affordability of insurance to citizens, foster expansion and development of the insurance industry, and streamline business processes. 

The proposed amendments are expected to lay down the structure for composite licenses, which would allow insurers to offer multiple categories of insurance- life, health, and general- under a single license. This is a major initiative for improving insurance penetration to achieve the goal of ‘Insurance for All by 2047.’ 

For underserved segments on a special case basis, the bill is also expected to empower Irdai to specify lower entry capital (not less than Rs 50 crore). At the same time, the requirement of Net Owned Funds for Foreign reinsurers is proposed to be lowered from Rs 5000 crore to Rs 1000 crore. 

When it concerns the proposal to hike FDI limit, the Financial Services Department told a Parliamentary panel that the goal of such a move includes unlocking the full potential of the Indian insurance sector, which is expected to grow at 7.1 per cent annually over the next five years. It said that removing the FDI cap would also attract stable and sustained foreign investment, increase competition, facilitate technology transfer, and improve insurance penetration across India.