New Delhi: The Lok Sabha on Tuesday passed the Insurance Laws (Amendment) Bill, 2025, marking a significant policy shift by permitting up to 100 per cent Foreign Direct Investment (FDI) in the insurance sector. The move raises the existing foreign investment cap from 74 per cent and is expected to open the doors for greater global participation in India’s insurance industry.
Presenting the bill in the House, Finance Minister Nirmala Sitharaman said the proposed changes are aimed at attracting higher capital inflows, strengthening the financial health of insurers, and expanding insurance coverage across the country. She noted that enhanced foreign investment would also contribute to improving the ease of doing business in the sector and support long-term growth.
The Finance Minister highlighted that the amendment seeks to empower the insurance regulator with stronger oversight and enforcement mechanisms. Under the revised framework, the regulator will be able to act more effectively against insurance companies and intermediaries that generate unjust or illegal profits, including cancelling such gains where necessary. The government believes this will promote transparency and protect policyholders’ interests.
Sitharaman also pointed out that despite the current ceiling of 74 per cent FDI, only four insurance companies have foreign investment at that level. Of the nearly 40 insurance companies operating in the country, 10 have foreign shareholding of less than 26 per cent. According to her, this indicates that the sector still has substantial room for attracting overseas capital, which the new legislation aims to unlock by creating a more level playing field for both domestic and foreign players.
Another key feature of the bill is the strengthening of regulatory powers and the rationalisation of penalties. Until now, fines for violations could only be imposed on insurance companies, with a maximum penalty of Rs 1 crore. The amended law raises this limit to Rs 10 crore and extends the scope of penalties to insurance intermediaries as well, ensuring greater accountability across the sector.
The government maintains that increased competition resulting from higher FDI will benefit consumers by offering a wider range of insurance products at more competitive premium rates. With the Lok Sabha’s approval, the bill now moves to the Rajya Sabha for consideration, and if enacted, it is expected to bring sweeping changes to India’s insurance landscape.