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Published 12:26 IST, February 2nd 2025

FDI In Insurance Hiked To 100%: How Will It Affect Policy Buyers?

This reform may boost insurance penetration in the market, which according to an IRDAI report, was at 3.7% in 2023-24.

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budget 2025 FDI limit
budget 2025 FDI limit | Image: Republic

The Union Finance Minister Nirmala Sitharaman on Saturday announced a significant hike in foreign direct investment (FDI) in the insurance sector as she presented her eighth consecutive Budget for the financial year 2024-25.

The minister announced a hike in FDI in the insurance sector from 74% to 100%, making it easier for global insurance companies to foray in the Indian market, bringing substantial investments.

How Will It Affect Policy Buyers?

This reform may boost insurance penetration in the market, which according to an IRDAI report, was at 3.7% in 2023-24.

As foreign insurers get full autonomy to operate in India with FDI being increased to 100%, policy buyers will get an access to policies being offered by global market players at competitive rates.

This would also require sophisticated risk management practices, advanced technology and innovative products, according to experts.

Additionally, this will also drive Indian insurers to adopt global best practices in their product as well as services.

Further, foreign investment will also provide much-needed capital to the domestic insurance sector, with insurers offering a plethora of products and services.

Users will also get access to better claim settlement process due to efficient claim procesing and global best practices. 

What Does The Government Need To Do?

To increase the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999. The draft bill for the same will be tabled in the Parliament soon, Nirmala Sitharaman said.

Background

The insurance sector received the highest FDI in the services sector during the April-September period of FY25, according to the Economic Survey for 2024-25. The segment also accounted for over 62% of the $5.7-billion equity inflows into the services sector.

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Updated 12:31 IST, February 2nd 2025