Budget 2025: Govt Announces Increase In FDI-limit For Insurance Sector

Union Minister of Finance Nirmala Sitharaman made a major announcement related to the insurance sector in her Budget Speech on February 1, 2025, increasing the foreign direct investment (FDI) limit in insurance from 74 per cent to 100 per cent. 

This update is a part of the upcoming Insurance Amendment Bill, which aims to reshape India’s insurance landscape.  

With an increased FDI limit, the government aims to encourage global insurers to fully own and operate businesses in India. 

At present, India’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. 

Experts Weigh In 

According to experts, this will give a boost to the insurance sector. 

Says Narendra Ganpule, partner, Grant Thornton Bharat, says: “A 100 per cent FDI in insurance will attract infusion of fresh capital and improve the competitiveness of the industry. This will also address un-insurance and under-insurance challenges faced by our country.” 

Adds Dhruv Chopra, managing partner, Dewan P. N. Chopra & Co: “The revised FDI cap will apply to insurance companies that retain their entire premium investment within India. Existing regulations and conditions governing foreign investment in the sector will undergo review and simplification.” 

“In the last year, insurance received the highest inflow of FDI in the service sector. Penetration of insurance is still at the lowest level in India compared to international standards. Hence, an increase in FDI limit in the insurance sector can significantly increase the inflow of FDI into the country,” says Shiju PV, Senior Partner, IndiaLaw LLP. 

What Does It Mean For Policyholders? 

The increased FDI limit is expected to increase insurance penetration in India, which currently is around only 3.5 per cent. 

A higher FDI limit will advance the coming of global players in India’s insurance sector and open the gateway for a wide range of products for customers, particularly tailored to their needs. 

Says Hanut Mehta, CEO and co-founder, Bimapay Finsure: “An increased FDI limit will allow the entry of global insurers in the insurance market of India offering policyholders a wider range of options to choose from. This will empower consumers to select plans that best suit their financial and healthcare needs, driving higher satisfaction and better coverage.” 

He adds, “The most immediate benefit of this change will be its impact on the ‘pricing’ of insurance products.” 

As competition is set to intensify with the coming of global insurance players, insurers will be compelled to offer more cost-effective health plans, leading to a reduction in premiums.  

“This will make health insurance more affordable for a larger segment of the population, ensuring that financial constraints do not prevent people from securing quality healthcare coverage,” Mehta adds. 

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