India’s insurance sector is currently in the news because the government has moved to allow 100% foreign direct investment (FDI) in insurance companies, up from the existing cap of 74%. The change is being implemented through the Insurance Laws (Amendment) Bill, 2025 and related amendments to the Indian Insurance Companies (Foreign Investment) Rules.
​Under the new framework, foreign insurers will be able to set up wholly owned subsidiaries in India without the need for an Indian joint-venture partner, subject to regulatory scrutiny by the Insurance Regulatory and Development Authority of India (IRDAI). The Union Cabinet has already cleared the Bill, and it aims to bring more long-term capital, global expertise, and advanced technology into the Indian insurance market. Policymakers expect that higher FDI will strengthen competition, deepen insurance penetration, and widen product choice for consumers, while IRDAI is being given stronger powers to safeguard policyholder interests and enforce governance and solvency norms.
100 percent FDI in insurance is expected to benefit Indian policyholders mainly through more choice, better products and services, and stronger regulatory protection, though it also requires vigilant supervision to avoid mis‑selling or excessive premium focus. The 2025 Insurance Amendment Bill links higher FDI with expanded powers for IRDAI and new safeguards specifically designed to protect customers. With full foreign ownership allowed, more global insurers are likely to enter India or scale up operations, which should increase competition and widen the range of products available to policyholders. This is expected to bring better product design, more customer‑centric features, and faster, tech‑enabled services such as digital onboarding, instant policy issuance, and quicker claims settlement.
Impact on premiums and claims
Higher competition and fresh capital can help keep premiums in check, especially in segments like term life, health, and motor, as insurers try to attract and retain customers. Stronger balance sheets and better risk management from global players can support timely claim payments, but aggressive growth targets may also increase mis‑selling risk, so regulatory enforcement becomes critical.
Stronger policyholder protection
The Bill proposes a Policyholders’ Education and Protection Fund to improve awareness and provide an additional layer of customer protection. IRDAI is being given enhanced powers such as disgorgement of wrongful gains, higher penalties, and wider investigative authority, which can deter unfair practices and better safeguard policyholders’ interests.