New Delhi: Finance Minister Nirmala Sitharaman told Parliament that raising the Foreign Direct Investment (FDI) limit in Indian insurance companies to 100 percent will bring in more global players, helping create employment opportunities across the country.
The proposal, announced in the Union Budget 2025, increases the current FDI cap from 74 percent to 100 percent, allowing full foreign ownership of insurance firms in India.
Faster Claims, Better Services with Technology
The Finance Minister said that more FDI will lead to the use of better technology and automation in the insurance sector. This will result in faster underwriting, quicker claim processing, and lower turnaround times, making the sector more cost-efficient and consumer-friendly.
Strong Rules for Investment Safety
Despite the increase in foreign investment, strict rules under the Insurance Act, 1938 will continue to apply. These rules make sure that insurance companies:
Invest only within India
- Put money in safe and approved government securities
- Align investments with policyholder interests
- Financial Stability is a Priority
- To ensure financial safety, insurance companies must:
- Maintain assets at least 50 percent more than liabilities
- Keep a solvency margin of 150 percent, as per IRDAI norms
If any insurer acts against the interests of policyholders, IRDAI (Insurance Regulatory and Development Authority of India) has the power to replace the company’s board and appoint an administrator.
Full Regulatory Oversight Will Continue
The IRDAI will continue to monitor insurers for:
- Transparent business practices
- Strong financial health
Effective customer grievance systems
In addition, insurance companies must follow the Companies Act, 2013, for all matters related to governance, dividend payments, and board composition.
Rules on Cooperative Bank Directors Also Amended
In a related update, Sitharaman said that the maximum term for cooperative bank directors (excluding chairpersons and whole-time directors) has been increased from 8 to 10 years. This change came into effect on August 1, 2025, under an amendment to the Banking Regulation Act, 1949.
With these changes, the government aims to make the insurance sector more competitive, modern, and investor-friendly, while ensuring that policyholders remain fully protected.
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