100% FDI in insurance: Promises & perils

The global insurance narrative is a study in contrasts between maturity and untapped potential.

- Bhaskar Nath Biswal

In advanced economies, insurance is a foundational pillar of the financial system, with the ratio of premiums to GDP often exceeding 7% to 9%. In these markets, insurance is not merely a tax-saving tool but a sophisticated mechanism for risk management and long-term wealth preservation. Conversely, India has historically occupied the other end of the spectrum. Despite being the world’s most populous nation and its fastest-growing major economy, India’s insurance penetration currently stands at a modest 3.7% to 4%, significantly trailing the global average of 7.4%.

For decades, the Indian insurance sector was a state-guarded fortress. It was only in 2000 that the gates were cautiously opened to private players with a 26% FDI cap. This threshold was raised to 49% in 2015 and 74% in 2021, each step bringing asurge of capital and expertise. However, the most definitive shift occurred in late 2025 with the passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, which officially permits 100% FDI in the sector. This landmark reform signals India’s transition from a protective stance to one of full global integration, aiming to achieve ‘Insurance for All by 2047.