India’s insurance market set for major overhaul with 100% FDI
The removal of the FDI cap in the insurance sector is expected to ease long-standing challenges for global insurers and investors, who were previously obligated to partner with local entities.
The Finance Ministry's decision to permit full foreign ownership of insurers has ignited optimism across the insurance and insurtech sectors, with executives anticipating an influx of capital, technology transfers, and heightened competition that could reshape the country’s underpenetrated market.
The move, announced by Finance Minister Nirmala Sitharaman during Union Budget 2025, removes the cap that previously limited foreign ownership to 74%, which hindered consolidation and control deals in the industry.
This change is expected to eliminate long-standing hurdles for global insurers and investors, who were required to partner with local entities. Industry leaders argue that this limitation stifled deal flow and innovation, according to startup founders and legal experts who spoke to YourStory.
Ankit Agrawal, CEO of InsuranceDekho, called the policy shift a “game-changer,” emphasising its potential to bridge India’s insurance gap. “With increased foreign investment, startups can leverage advanced technology to make insurance more accessible, especially in rural and underserved segments,” he said.
The reform is also expected to spur consolidation and new market entrants. Niren Patel, Partner at Khaitan & Co., noted the change will “usher in greenfield investment from marquee foreign insurance firms not yet present in India” and enable existing players to buy out Indian joint venture partners. Private equity investors, he added, may now expedite exits.
Parimal Heda, Chief Investment Officer at Go Digit General Insurance, highlighted the long-term structural impact, and said, “More global players setting up in India will improve insurance penetration,” aligning with regulators’ push to expand coverage.
A recurring theme among executives is the role of technology in driving efficiency. Agrawal pointed to foreign expertise in risk assessment and claims automation, which could bolster India’s insurtech backbone.
Sabyasachi Goswami, CEO of Perfios, stressed that simplified regulations and FDI inflows will “unlock opportunities for innovation,” including embedded insurance and on-demand policies.
Yogesh Agarwal, CEO of Onsurity, emphasised tailored solutions for underserved demographics, such as gig workers and SMEs: “Global expertise will lead to smarter underwriting and products aligned with businesses of all sizes.”
The government’s pledge to review “current guardrails and conditionalities” tied to FDI—including a requirement for insurers to invest all premiums domestically—signals further easing.
Patel noted that regulatory reforms by the Insurance Regulatory and Development Authority (IRDAI) in recent years have already primed the sector for growth.