Insurance Amendment Bill may be tabled in the Winter Session, says FM Sitharaman

Finance Minister Nirmala Sitharaman has indicated that the Insurance Amendment Bill, proposing to allow 100 per cent foreign direct investment (FDI) in India’s insurance sector, could be tabled in the Winter session of Parliament. The session typically commences in the latter half of November and concludes before Christmas. 

Responding to a question on the Bill’s introduction, Sitharaman stated, "I hope to." The proposal, first announced during this year’s Budget speech, seeks to reform financial sector policies and aligns with objectives to further open up the insurance industry and broaden capital inflows.

The planned changes involve increasing the current FDI cap in the insurance sector from 74 per cent to 100 per cent for companies investing the entire premium in India. The Finance Minister noted that regulatory guardrails and conditions on such foreign investments would be reviewed and simplified. 

Since the insurance sector opened up to foreign capital, it has attracted Rs 82,000 crore in FDI. The government expects these measures to enhance sectoral efficiency, simplify business procedures, and contribute to the goal of achieving 'Insurance for All by 2047'.

The Insurance Amendment Bill proposes modifications to various provisions of the Insurance Act, 1938, including raising FDI limits, reducing paid-up capital requirements, and introducing a composite licence. 

In addition, amendments are planned for the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. For the Life Insurance Corporation (LIC), new provisions would empower its board to make operational decisions such as opening branches and recruitment, reflecting a broader push for operational autonomy.

These reforms aim to protect policyholders' interests, bolster financial security, and encourage more companies to participate in the insurance market. Current figures show 25 life insurance companies and 34 non-life or general insurance firms operate in India, including specialised entities like Agriculture Insurance Company of India Ltd and ECGC Ltd. Increased competition is expected to drive insurance penetration further and generate employment opportunities nationwide.

India’s insurance sector has seen steady FDI limit increases in recent years, rising from 26 per cent to 49 per cent in 2015 and then to 74 per cent in 2021. The Insurance Act, 1938, remains the principal legislation for the sector, governing relations among insurers, policyholders, shareholders, and the Insurance Regulatory and Development Authority of India (IRDAI). The proposed amendments represent a continuation of the government's strategy to modernise and liberalise the industry.