The Bill seeks to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
While the legislation has been introduced, detailed parliamentary discussion is scheduled later.
According to the draft Bill, foreign ownership in insurance companies would be permitted up to 100%, while retaining governance safeguards such as a requirement that at least one of the key managerial positions—Chairperson, Managing Director or Chief Executive Officer—be held by an Indian citizen.
Legal experts note that the Bill provides an enabling framework, with several operational aspects expected to be finalised through subsequent rules and regulations.
Shailaja Lall, Partner at Shardul Amarchand Mangaldas, said the proposed amendments seek to ease entry barriers for foreign insurers, streamline share transfer approvals and expand IRDAI’s supervisory powers, while deferring several specifics to future rule-making.
The Bill also proposes to strengthen IRDAI’s oversight role by expanding its investigative and enforcement powers, revising penalty provisions and introducing criteria to determine penalties. It permits insurers to invest in private companies, lifting an earlier blanket restriction, subject to prudential safeguards.
Governance-related changes include extending restrictions on common directors across all categories of insurers and revising the tenure of IRDAI’s Chairperson and whole-time members to five years or until the age of 65, whichever is earlier.
Amendments to the LIC Act would empower the LIC board to take operational decisions, including branch expansion and recruitment.
From a market perspective, actuaries and industry participants said higher foreign participation could improve capital availability and financial discipline.
Peuli Das, Partner – Actuarial Services at BDO India, said the sector has largely utilised the existing 74% FDI limit and additional capital could support penetration, competition and efficiency.
Others cautioned that the impact would depend on how capital is deployed.
Arun Ramamurthy, Co-founder of Staywell.Health, said improved governance, underwriting and claims processes would be critical for translating higher investment into better policyholder outcomes.
The Bill also proposes changes affecting insurance intermediaries, including the formal recognition of managing general agents, perpetual registration of intermediaries and recognition of insurance repositories for electronic policy servicing.
Industry representatives said these measures could bring greater regulatory clarity and accountability for distribution participants.
Adjacent segments such as premium financing may also be affected as insurers scale operations.
Hanut Mehta, CEO and Co-founder of BimaPay Finsure, said higher capitalisation and product expansion could increase demand for flexible premium payment structures, particularly for corporate and MSME insurance.
The insurance sector has attracted around ₹82,000 crore in foreign investment so far. The proposal to raise the FDI cap was announced in the Union Budget earlier this year as part of broader financial sector reforms.
The Bill will now be taken up for detailed parliamentary scrutiny before any amendments come into effect.