Topic 8: INSURANCE: AMENDING STATION

In May 2025, India’s insurance sector witnessed transformative changes, led by the landmark policy allowing 100% foreign direct investment (FDI) under the automatic route, as announced in the Union Budget 2025–26. This move aims to attract global capital, boost competition, and foster innovation, with the condition that all premium collections remain invested within India. The Finance Minister also signalled further liberalization by promising to review and simplify foreign investment regulations. Simultaneously, the Insurance Regulatory and Development Authority of India (IRDAI) initiated a legal overhaul, forming a seven-member committee propose amendments to the Insurance Act, 1938. Proposed reforms such as risk-based solvency norms and changes to surrender policies are intended to modernize the sector and enhance capital efficiency. Industry performance remained robust, with non-life insurance premiums growing 13.5% year-on-year in April 2025, totalling ₹33,688.5 crore. The sector also crossed the ₹3 lakh crore premium mark for FY25, with projections indicating 7.1% annual growth through 2028—making it the fastest-growing insurance market among G20 nations. The FDI limit hike triggered immediate positive stock market reactions, with major insurers like SBI Life and HDFC Life gaining over 3%, reflecting investor confidence. The policy change also paves the way for increased mergers, restructuring of joint ventures, and entry of new foreign players, reshaping the competitive landscape. The planned composite license regime, allowing insurers to operate across life, health, and general segments, is expected to further intensify competition. Additionally, the push toward digital transformation continues through initiatives like Bima Sugam, Bima Vistaar, and Bima Vahaks, aimed at improving access and innovation, especially in underserved areas. Regulatory safeguards remain in place to ensure sectoral stability, including domestic investment mandates and governance norms. Overall, May 2025 marked a turning point for Indian insurance, setting the stage for rapid expansion, enhanced investor participation, and improved consumer outcomes.

INDIA BECOMES THE 4TH LARGEST ECONO MY - ADVANTAGES AND DISADVANTAGES

India’s rise to the 4th largest economy brings Indian investors more global opportunities, sectoral growth, and policy support, but also exposes them to persistent inequality, structural challenges, and greater vulnerability to global shocks. The benefits for investors will depend on how inclusively and sustainably this growth is managed.



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