Rise in FDI Cap Will Boost Growth Of Insurance Sector

The Indian government has raised the FDI limit in the insurance sector from 74% to 100%, a move expected to attract international insurers and boost competition. Industry lead-ers believe this decision will drive innovation, improve customer-centric services, and enhance financial protection

Mumbai: The central government has raised the foreign direct investment (FDI) limit in the insurance sector from 74 per cent to 100 per cent, a significant move aimed at attracting glob-al insurers to the Indian market. This decision comes at a time when India, now the world’s most populous country, is looking to enhance its financial and insurance landscape.

Currently, life insurance penetration in India stands at approximately 3 per cent, with a premi-um size of Rs9 lakh crore. In contrast, non-life insurance penetration remains at just 1 per cent, with a premium size of Rs2.89 lakh crore. The increase in FDI is expected to boost these figures by bringing in more players and capital, ultimately driving better coverage and service delivery.

Speaking to Bizz Buzz, CR Vijayan, a veteran in the insurance industry, called it a positive de-velopment. "Increasing the FDI limit to 100 per cent is a crucial step in attracting multination-al insurers to India. However, it remains to be seen whether the management control of insur-ance companies will continue to be in the hands of an Indian CEO,” he said.

In addition to the FDI reform, the Finance Minister has announced amendments to the Civil Liability Act concerning nuclear plants. This will require GIC Re, India's national reinsurer, to expand the Nuclear Insurance Pool to three times its current size in the future.

Commenting on this, Vijayan noted, "The amendment to the civil liability law for nuclear plants may necessitate a reassessment of the Nuclear Pool structure."

Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, highlighted the immense po-tential of India’s insurance sector.

"With its vast and diverse population, India remains largely underinsured. In developed econ-omies, thousands of insurance companies cater to various customer needs. To deepen insur-ance penetration in India, we need a significant increase in the number of players. Allowing 100 per cent FDI could pave the way for India to have 1,000 insurers over the next decade," Singhel stated.

He emphasized that greater competition will lead to innovation, improved customer-centric products, and better service delivery. "More insurers mean higher awareness, wider choices for consumers, and stronger financial protection for all segments of society. This reform is about more than just capital- it will reshape the industry, ensuring faster claims processing, enhanced transparency, and increased trust," he added.

Navin Chandra Jha, MD & CEO of SBI General Insurance, echoed similar sentiments, calling Budget 2025 a “transformative step” for the industry.

“The introduction of 100 per cent FDI will attract more capital, intensify competition, and facilitate the adoption of global best practices. The government’s commitment to strengthen-ing healthcare infrastructure- such as setting up Day Care Cancer Centres in district hospitals-is another major step in improving critical care access. At SBI General, we are committed to bridging the protection gap by expanding health insurance reach across both urban and rural India,” Jha said.

Additionally, he highlighted how the proposed tax reforms- such as TDS rationalization and increased thresholds for senior citizens, will empower taxpayers and promote financial inclu-sion. "These initiatives collectively lay the groundwork for a stronger insurance ecosystem, supporting the government’s vision of 'Insurance for All' by 2047," he concluded.

With the insurance sector now open to 100 per cent foreign direct investment, India is set to witness a transformation in the industry. Increased participation from global insurers is ex-pected to drive competition, innovation, and wider coverage, ultimately leading to a more fi-nancially resilient nation.