For decades, India’s insurance challenge has been one of awareness, purchasing power parity and trust. A sustained focus on urban markets and standardised products led to low penetration, limited risk capacity and persistent protection gaps. This left numerous households uninsured.
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, allowing 100 percent Foreign Direct Investment (FDI), marks a structural shift. Foreign participation was capped at 24 percent when privatisation reopened in the early 2000s to build domestic capability. Over the past 25 years, the limit rose from 26 percent in 2000 to 49 percent in 2015, 74 percent in 2021 and is now fully liberalised.
The key question is: “Will this reform finally make insurance more affordable and accessible for consumers?”
The answer lies in how higher capital, deeper risk capacity and stronger competition translate into outcomes across pricing, products, reach, underwriting and service quality.
Higher capital and deeper reinsurance capacity
With 100 percent FDI permitted, more insurers and reinsurers can establish or expand operations in India, accessing global capital pools. Intensifying competition accelerates market capture, while stronger capital adequacy enables higher risk-taking, efficient underwriting, volatility absorption and reduced reliance on conservative pricing buffers. Per this year’s budget announcement, since 2000, the sector has attracted ₹82,847 crore in FDI, including nearly ₹61,989 crore between 2014 and January 2024. Per IRDAI’s annual report, the number of insurers increased from 53 to 73 during this period. At the same time, penetration rose from approximately 3.3% in 2014 to nearly 3.8% by the pre-pandemic period, later crossing the 4% mark during the pandemic years, underscoring the link between capital inflows and market deepening.
This bill has the potential to nearly double the FDI inflow that has come into the country so far, particularly in health, speciality, annuities, and reinsurance.
Product innovation, underwriting and smarter risk pricing
Greater foreign participation brings advanced actuarial models, sophisticated underwriting frameworks and data-driven risk assessment. As these capabilities scale, pricing can move from one-size-fits-all to a more granular, personalised and usage-based product. Competitive pressure will accelerate innovation.
Competition and improved service quality as consumer catalysts
With new global insurers entering the market and incumbents expanding, competition is expected to intensify in areas such as product innovation and pricing, as well as in aspects such as ease of purchase, service quality and claims experience. Faster claims settlement, simpler products, clearer disclosures and seamless digital journeys will become industry standards. Customer experience, from acquisition to post-sale service and claims, will be a key differentiator, as it is in global insurance markets.
In the new regime, IRDAI has emphasized policyholder protection through a Policyholders’ Education and Protection Fund and enhanced supervisory powers that should be amplified as the new entrants think of what makes them unique. Alongside a legal framework for insurance, digital public infrastructure and one-time intermediary registration, these measures reduce friction, improve interoperability and support faster, consumer-centric expansion.
Scale, structure and global benchmarks
If complemented by other reforms, such as composite licensing and open architecture for agents, this impact could be further deepened. With all reforms in place, India will hopefully reach at least global averages in penetration in mature markets such as the USA, UK, Australia and parts of Europe.
Rethinking how India measures insurance expansion
As the market scales, India may need broader metrics beyond penetration and density. Urban–rural penetration gaps, insurers per capita, unique policyholders versus multiple-policy ownership and the adequacy of coverage offer more profound insights into inclusion and protection quality. Measuring adequate risk coverage, not just policy counts, would better reflect household resilience.
A structural shift, not a short-term boost
This amendment has the promise to reset the industry’s trajectory. Higher capital, more profound expertise and stronger competition can create a virtuous cycle of better products, fairer and individual risk-based pricing, improved trust and broader reach.
The consumer payoff is not immediate discounts, but a market that works, moving India closer to Insurance for All by 2047.
The author Debashish Chatterjee is partner at Deloitte India.