Indian Economy News

The government allows 100% Foreign Direct Investment (FDI) in insurance companies in a move that could attract more players, help increase penetration

  • IBEF
  • February 4, 2025

The Indian government has raised the Foreign Direct Investment (FDI) limit in insurance companies from 74% to 100%, allowing full foreign ownership. This decision aims to attract more capital into the long-term, capital-intensive sector, ensuring insurers invest all collected premiums within India. Union Minister of Finance and Corporate Affairs, Ms. Nirmala Sitharaman, stated that existing regulations and conditions on foreign investment would be reviewed and simplified. The move aligns with the Insurance Regulatory and Development Authority of India's (IRDAI) goal of achieving "Insurance for All" by 2047. IRDAI Chairperson, Mr. Debasish Panda, has emphasized the need for additional capital and encouraged large business groups to enter the industry. 

Industry experts believe this policy change will strengthen the financial position of insurers, enhance customer service, and introduce global best practices to the global. MD & CEO of Bajaj Allianz Life Insurance Mr. Tarun Chugh highlighted that increased foreign participation could drive product innovation and service improvements. India’s insurance penetration has declined from 4.2% in FY22 to 3.7% in FY24, significantly lower than the global average of 7%. Legal experts, including Partner at Shardul Amarchand Mangaldas and Co. Ms. Shailaja Lall, view this as a bold step to boost FDI and expand insurance coverage. While the 2021 increase in FDI to 74% saw limited uptake, with players like Ageas, Aviva, and Generali increasing stakes, many global investors were waiting for full ownership rights before committing more capital. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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