The Indian government plans to introduce a significant overhaul of the insurance sector by allowing 100% foreign direct investment (FDI) in insurance companies, according to reports.
This proposal, part of the Insurance Amendment Bill, is expected to be presented during Parliament’s winter session. If implemented, the move could allow foreign insurers to operate independently in the Indian market.
The bill also aims to relax restrictions on insurance agents, permitting them to sell policies from multiple insurers rather than being tied to a single company.
These reforms are part of the government’s broader goal to expand insurance access as part of its “Insurance for All by 2047” initiative, as highlighted by Insurance Regulatory and Development Authority of India (IRDAI) Chairman Debasish Panda.
India currently caps FDI in insurance companies at 74%, while intermediaries face fewer restrictions. The market includes 24 life insurers, 26 general insurers, six standalone health insurers, and one reinsurer – General Insurance Corporation.
According to The Economic Times, raising the FDI limit to 100% aims to attract international insurers with the financial resources required to grow in a capital-intensive industry. The entry of such players is expected to complement existing domestic firms like SBI, ICICI, HDFC, and prominent conglomerates such as the Tata and Birla groups.
The proposed changes may also prompt foreign companies to reconsider their market strategies. For instance, Allianz, reportedly exploring an end to its partnership with Bajaj Finserv, could potentially enter the Indian market as an independent operator under the new framework.
Relaxing restrictions on agents is another key element of the proposed reforms. Currently, agents often register family members to represent additional insurers, a practice that the new rules would legitimise. By allowing agents to sell products from multiple companies, the government hopes to streamline the market and enhance transparency.
India’s insurance penetration stands at approximately 4%, prompting calls for increased investment and structural reforms to grow the market.
To address this, IRDAI is exploring additional measures, including the introduction of composite licenses. This change would allow insurers to offer life and non-life policies through a single entity, potentially benefiting companies like Life Insurance Corporation of India, which is reportedly seeking to acquire a health insurer to diversify its offerings.
Further proposals include reducing solvency requirements to free up capital, which would enable insurers to expand their underwriting capacity.
During a recent public address, IRDAI Chairman Panda emphasised the need for capital to meet the government’s universal insurance coverage target by 2047. He stressed that attracting new players, including foreign entities, is critical to achieving this objective.
