The finance minister Nirmala Sitharaman while presenting the Union Budget 2025 announced to increase the foreign direct investment (FDI) limit for the insurance sector from 74 to 100 per cent. This enhanced limit will be available for only those companies which invest the entire premium in India. According to insurance industry officials, the move would attract capital inflows, drive innovation, and enhance industry competitiveness. However, they were quick to point out that while increasing foreign ownership is significant, challenges in ease of doing business remain.
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance said, “With the move to allow 100 per cent FDI in insurance, we could see India moving towards a future with 1,000 insurers in the next decade. A larger number of players will bring greater competition, leading to enhanced innovation, customer-centric products, and improved service delivery.”
The FDI limit in insurance was introduced in 2000 with a cap of 26 per cent. This was gradually raised to 49 per cent in 2015 and 74 per cent in 2021.
Since the introduction of FDI in 2000, the insurance sector has received Rs 82,847 crore as of September 2024. This investment has supported growth, enhanced operations, and increased customer reach. Insurance broking companies have received Rs 5,688 crore as of September 2023.
At present, there are 26 life insurers, 27 general insurers including 2 specialised insurers, 8 standalone health insurers and 12 reinsurers including 11 foreign re-insurance branches. The sector has registered approximately 10 per cent CAGR in the last five years, generating a total premium of Rs 11.23 lakh crore in the FY 2023-24, with the total Assets Under Management of Rs 67.57 lakh crore as on March 31, 2024. Rakesh Goyal, Director, Probus said, “While increasing foreign ownership from 74 per cent to 100 per cent is significant, challenges in ease of doing business remain. Foreign insurers are still cautious due to a deteriorating business environment in India, which may hinder substantial investments. Large-scale economic measures for growth and development are essential, but ensuring a stable and investor-friendly ecosystem is equally critical to unlocking the sector’s full potential.”
