Cabinet Likely to Approve Insurance Amendment Bill Today; 100% FDI and Composite Licence on the Agenda

Cabinet May Clear Insurance Amendment Bill Today; Big Reforms Like 100% FDI and Composite Licence Expected

The insurance sector may witness one of its biggest reform decisions soon, as the Union Cabinet is expected to approve the Insurance Amendment Bill in its meeting scheduled for tomorrow. According to sources, the government is preparing to introduce sweeping changes in the country’s insurance landscape, including raising the FDI limit to 100%, reducing paid-up capital requirements, and allowing composite licences for insurance companies.

Economic policy analysts suggest that the government could pass this bill in the current parliamentary session itself. CNBC-Awaaz’s Economic Policy Editor, Laxman Roy, indicated that the Centre is moving swiftly on the matter and may grant approval in the upcoming Cabinet meeting. If passed, foreign investment in India’s insurance sector would rise from the current 74% to a full 100%.

Lower Capital Requirements and Overhaul of LIC Act, IRDA Act

The new legislation aims to bring multiple structural improvements. One of the key proposals is to lower the paid-up capital requirement for companies operating in the insurance sector. In addition, amendments to the LIC Act and the IRDA Act are also likely to be included in the bill, signalling a broad regulatory transformation.

Composite Licence: A Major Shift for the Industry

One of the most awaited and impactful changes is the introduction of the composite licence framework. Under the new system, a single insurance company will be allowed to operate multiple lines of business—life, health, and general (non-life) insurance—under one unified entity.

Currently, India does not permit composite licences. Insurance firms must apply separately for each category, resulting in higher costs, multiple approvals, and operational complexities. The proposed system is expected to streamline operations, lower compliance burdens, and foster innovation.

A composite licence will allow:

• Unified management of multiple insurance segments.

• Reduced regulatory and tax-related complexities.

• Improved operational efficiency due to integrated IT systems.

• Better underwriting practices, particularly in health insurance.

• Lower administrative costs for companies.

• Cross-selling potential, as a single agent will be able to sell both life and non-life products.

This integrated approach is expected to help companies expand their offerings and deliver more comprehensive financial solutions to customers.

100% FDI Could Expand Market Reach and Competition

Raising the FDI limit to 100% is expected to attract global insurance giants to the Indian market. Experts believe that this move will significantly improve the penetration of insurance products across the country, especially in semi-urban and rural areas.

Compared to developed economies, India’s insurance penetration remains relatively low. Allowing full foreign ownership may help bring advanced insurance products, improved claim settlement infrastructure, and more competitive pricing. Increased competition among insurers is also likely to benefit customers through better services, innovative policies, and more affordable premiums.

Government Aiming for Quick Passage of the Bill

The government appears keen to pass this bill within the ongoing parliamentary session. If approved, these reforms could modernize the insurance sector, expand investment opportunities, and enhance consumer access to insurance services across India.

With major changes such as 100% FDI, composite licences, and capital flexibility on the table, the Insurance Amendment Bill has the potential to reshape the future of India’s insurance industry—making it more competitive, accessible, and growth-driven.