The central government has increased the foreign direct investment (FDI) limit in insurance companies from 74 percent to 100 percent. This change came into effect through the Insurance Amendment Act, 2025. From now on, foreign companies can invest in this sector without prior government permission (automatic route). However, the foreign investment limit in LIC will remain unchanged at 20 percent.

According to this new law, investors have to meet certain conditions. At least one of the chairman, managing director or CEO positions of the company must be an Indian citizen. In addition, the investment must be subject to the restrictions issued by IRDAI and the foreign exchange regulations of the RBI. 100% foreign investment will also continue in ancillary services such as insurance brokers and surveyors.

The Indian insurance market is expected to become the sixth largest market in the world in the coming decade. With the influx of foreign capital, this will help in the availability of modern technology and more innovative insurance services. While this will increase competition in the market, this change will also be a great boost for the growth of the digital insurance sector and the spread of insurance policies that ensure social security.