The Union Cabinet on Friday cleared the Insurance Amendment Bill 2025 paving the way for a major round of reforms.
The insurance reforms, including the provision of 100 per cent foreign direct investment (FDI) and the composite licence framework, will go a long way in scaling up the Indian insurance to the global level with positive impact for all stakeholders, according to industry experts.
The Union Cabinet on Friday cleared the Insurance Amendment Bill 2025 paving the way for a major round of reforms. The Bill is expected to be passed in the current winter session of Parliament.
‘A progressive step’
“Opening up the sector to 100 per cent FDI will certainly be a welcome and progressive step – Increased foreign participation can bring fresh thinking, global product innovation, digital capabilities and new service models that ultimately enhance the customer experience. Any move that broadens the industry’s innovation horizon is positive for long-term penetration,’’ Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance, told businessline.
If the proposal for a composite licence is approved, it would be a notable shift in the evolution of the sector. Both life and health insurance remain underpenetrated, and allowing insurers to participate across categories can help create more holistic solutions, greater efficiency and a stronger customer proposition, Rao said.
Sharad Mathur, MD and CEO, Universal Sompo General Insurance, said:“Increasing the FDI limit to 100 per cent can serve as a strong catalyst for the insurance sector. Greater capital inflows will enable insurers to expand their business, strengthen balance sheets, and invest in advanced risk-assessment models and more efficient claims-management systems.
Overall, for the general insurance market, this move can unlock better use of data, more accurate pricing and more sustainable product innovation, ultimately making the sector more resilient and better equipped to serve people at an optimal level, he added.
Transformational
The Cabinet’s approval of the Insurance Amendment Bill, 2025 – particularly the decision to allow 100 per cent Foreign Direct Investment in insurance is a major, transformational reform for the sector and a decisive step towards realising the vision of Insurance for All by 2047, Narendra Bharindwal, President, Insurance Brokers Association of India (IBAI) said.
From an insurer’s standpoint, enhanced capital availability will support deeper penetration in under-insured and rural markets, facilitate the development of specialised products such as health, catastrophe, cyber and longevity covers, and allow companies to make sustained investments in distribution, digital infrastructure and human capital.
At the same time, as the sector opens up further, it is essential that growth remains anchored in strong governance, robust solvency norms and uncompromising policyholder protection. Regulatory clarity, effective supervision and a level playing field will be key to ensuring that increased competition translates into better outcomes for consumers, according to IBAI Chief.
Sarbvir Singh, Joint Group CEO, PB Fintech, said the proposed amendments would bring clarity, confidence and long-term capital into a growing sector. “Global expertise and sustained investment can help accelerate innovation, improve consumer experience and expand access across the country. The move is well positioned to raise the overall quality of service, unlock significant new capital and support India’s long term vision for broader insurance coverage,’’ he said.
Published on December 12, 2025
