By Gitika Sharma
With the decision by the government in its sixth session of the 18th Lok Sabha to adopt the Insurance Laws (Amendment) Bill, 2025, it provides the ground for a proactive, holistic reform programme that could shape the next decade of India’s insurance market, underdeveloped to this point, over the next decade. For the sector to reap its full potential growth, capital inflow, and innovation opportunity, it is also hoped that the Bill will be approved by industry players.
More than 20 of the top 25 insurance companies in the world have yet to operate in India. The new framework could allow global corporations to enter and foreign partners in the present joint ventures could leave or gain full ownership of the Indian partners and new subsidiaries. Insurers have been restricted to working rigorously within their designated parts under the present Insurance Act, 1938. Life insurers are prohibited from selling non-life products, and general insurers are prohibited from financing life programmes. Currently, composite licences are not allowed.
The Bill aims to capsize this by introducing compound licensing. This would allow a single insurance company to hold both life and non-life insurance products. The proposed full foreign ownership will attract the kind of investment that India’s insurance market needs in order to stretch out its reach, improve products and upgrade services. This reform is hoped to help boost the insurance penetration rate in India to 3.7 percent in 2023-24, down from 4 percent in 2022-23, the administration said.
The target will be to boost a high level of foreign direct investment along with faster development of products and increased competition on underwriting, risk management, and customer support services. The inclusion-first approach aims to attract specialised, local players and also solve the problem in rural, informal and developing markets. The reforms underwrite the broader goal of achieving “insurance for all” by 2047 through increased participation.