The central government is set to introduce major reforms in the insurance sector, including allowing 100% foreign direct investment (FDI) and relaxing rules for insurance agents, according to a report by The Times of India. These changes will be part of the proposed Insurance Amendment Bill, expected to be introduced during the winter session of Parliament later this month.
Currently, the FDI cap for insurance companies is set at 74%, but the new bill aims to lift this limit entirely, enabling foreign companies to operate independently within the Indian market. This move is expected to attract large global insurance firms, increasing competition and investment in the sector.
The bill also proposes to allow insurance agents to sell policies from multiple companies, removing the current restriction that limits them to one life insurance and one general insurance company. While some agents have already found ways around this rule by registering family members as agents for different firms, the new changes would officially grant agents the flexibility to sell a broader range of insurance products.
These reforms are part of the government’s strategy to boost insurance penetration in India, which remains low at around 4%. By attracting more insurers and offering agents more flexibility, the government aims to improve access to insurance products across the country.
India currently has 24 life insurance companies, 26 general insurers, and 6 standalone health insurance firms, with the General Insurance Corporation (GIC) serving as the sole reinsurer. The proposed reforms come as foreign players, such as Allianz, seek to exit their partnerships with Indian firms like Bajaj Finserv and enter the market independently.
The government’s analysis suggests that large domestic players like SBI, ICICI, HDFC Bank, the Tatas, and the Birlas are already well-established in the sector. However, due to the capital-intensive nature of life insurance, few domestic companies may have the financial strength to compete at a larger scale.
In addition to raising the FDI limit, the Insurance Amendment Bill is expected to ease regulatory requirements, including those related to company directors. The Insurance Regulatory and Development Authority of India (IRDAI) is also looking to allow firms to hold composite licenses, which would enable companies like Life Insurance Corporation of India (LIC) to expand by acquiring health insurance companies.
Moreover, the government plans to relax solvency requirements, providing insurers with more capital to strengthen their operations and expand their offerings.