Cover for all: The reform is about reshaping insurance landscape to ensure every individual, business can access risk protection
| Photo Credit: Sushil Kumar Verma
Finance Minister Nirmala Sitharaman on Saturday said the foreign direct investment (FDI) limit for the insurance sector will be raised from 74% to 100%.
However, the “enhanced limit will be available for those companies which invest the entire premium in India,” she said, announcing the proposal to remove the cap on FDI, on the condition, in Budget 2025-26 speech.
Current guardrails and conditionalities associated with foreign investment will be reviewed and simplified, she said.
The government in 2020 had permitted 100% FDI in insurance intermediaries such as insurance brokers.
In November 2024, the Department of Financial Services had initiated the process of public consultation on raising FDI in Indian insurance companies from 74% to 100% as well as enabling an insurer to carry on one or more classes of insurance business and activities related/incidental to insurance.
At the heart of the measures is ‘Insurance for All by 2047’ goal being pursued by the government.
Insurance industry leaders and top executives were quick to welcome the Budget proposal.
Attract investors
“The decision to allow 100% FDI in the insurance sector will attract global investments, strengthen the industry and foster innovation. The move promotes healthy competition, leading to better services, more choices, and potentially lower premiums for consumers,” said PB Fintech Joint Group CEO Sarbvir Singh.
The reform is not just about increasing capital inflows — it is also about reshaping the insurance landscape to ensure every individual and business has access to risk protection. “As competition intensifies, we will see more transparency, faster claims processing and stronger trust in the industry,” Bajaj Allianz General Insurance MD- CEO Tapan Singhel said.
The announcement comes even as wait for customers on reduction in the Goods and Services Tax on insurance, especially health covers, from existing 18% grew longer with the GST Council deciding on further deliberations before taking a decision.
“Global insurance companies can now invest fully and we anticipate the emergence of innovative products and services tailored to meet the diverse needs of Indian consumers,” Universal Sompo General Insurance MD and CEO Sharad Mathur said.
The Budget raised the threshold to deduct or collect tax at source on insurance commission from ₹15,000 to ₹20,000. The rate of deduction of income tax at source on insurance commission will be cut from 5% to 2% with effect from April 1.
The Union government is also proposing to exempt the proceeds received on life insurance policy issued by International Financial Services Centre (IFSC) insurance intermediary office without the condition on maximum premium amount.
Published – February 01, 2025 11:26 pm IST
