MUMBAI: The insurance industry is expecting better days ahead on the back of the much-delayed reforms that allow 100% foreign direct investment along with a more empowered regulator, as these “most consequential reforms” not only bring in more growth capital but also ease capital requirements, modernise intermediaries and reinforce policyholder protection, helping increase penetration and protect more lives.
However, the industry is peeved that the government did not heed to their demand for composite licence which would allowed life players to enter health insurance and general insurance. The new Insurance Act, which was passed by Parliament earlier this month, does not include composite licence.
According to Naveen Chandra Jha, chief executive of SBI General Insurance, “2025 has highlighted the resilience of the general insurance industry, despite regulatory changes and base-related adjustments. As the impact of GST waiver stabilised and demand strengthened across segments, the industry closed the year on a significantly stronger footing and is well-positioned for sustained growth.
Describing the new Insurance Act as “a milestone” he said “this forward-looking reform strengthens the country’s ambition to build a well-capitalised, globally competitive insurance ecosystem by attracting long-term capital, enabling access to global expertise, and accelerating innovation across technology, risk management, and product design.
It is expected to expand customer choice and support sustainable, long-term growth across the sector. This new Act reinforces the three A’s of insurance--awareness, accessibility, and affordability, reflecting strong alignment between the government, the regulator, and the industry towards the shared vision of insurance for all by 2047, Jha said.
Looking ahead to 2026, he said “climate risk is emerging as a significant financial and public health challenge. We are seeing growing demand for coverage beyond traditional health and motor insurance, including cyber risks, fire insurance and emerging business lines, reflecting a more complex and interconnected risk environment.
He feels that to close the huge protection gap, the industry will require continuous product innovation, especially integrated, health-led solutions that emphasise prevention, early intervention, and long-term resilience, along with sustained regulatory support helping build a more prepared and protected nation.
Echoing similarly Tarun Chugh, chief executive of Bajaj Life Insurance, said, “the reforms introduced in 2025 mark an important phase for the life insurance sector. They bring together regulatory intent, customer centricity and long-term industry development. At their core, these changes make protection simpler, affordable and inclusive.”The GST waiver on individual life and health insurance is a meaningful step and this is closely aligned to the regulator’s vision of insurance for all by 2047.
The move is expected to drive renewed interest in protection-focused products like term insurance and other product categories too, he added.Digital reforms such as the introduction of Bima ASBA are improving customer journey as it reduces friction, shorten onboarding time and creates a more seamless end-to-end experience. Collectively, these reforms help customers stay better informed and better protected, Chugh said.
Looking ahead to 2026, Chugh expects the sector to gain further momentum. Greater digital adoption, sharper focus on long-term protection, more personalised solutions and continued policy clarity will help expand coverage across the country. All these factors together will strengthen trust, improve accessibility and position life insurance as a key pillar of financial security for our households.
”According to Sanjay Agarwal, a senior director with Careedge Ratings, the new Insurance Act strengthens the insurance framework by raising FDI limit to 100%, enhancing Irdai’s powers, easing capital requirements, modernising intermediaries, and reinforcing policyholder protection. For those insurers already operating close to the 74% foreign ownership cap, the enhanced limit provides additional headroom for incremental capital infusion by existing foreign promoters, supporting growth and solvency.
“Collectively, these measures are expected to improve insurance penetration, operational efficiency, and market resilience, advancing insurance for all by 2047,” he said.
“Additionally, governance will be easier. However, particular areas, such as composite licensing, flexible capital norms, captive insurers, broader product distribution, investment norms, and open agent architecture, remain unaddressed. Overall, it works a fine balance between enabling regulations and over-regulations,” Agarwal said.
Sandeep Dadia, chief executive of insurance brokerage Lockton India, the outgoing 2025 brought greater clarity to the evolving risk landscape facing the insurance industry. There was a sharper focus on emerging and systemic risks, particularly as digital acceleration increased exposure to cyber threats, reinforcing the need for more comprehensive coverage and stronger risk-mitigation strategies.
The year also marked a period of meaningful regulatory evolution for the insurance sector, including GST waiver and parliamentary approval for 100% FDI, which will help more product innovation and data-led underwriting that will help drive affordability, expand penetration and support the industry’s long-term growth agenda.
“Increased capital inflows and closer alignment with global best practices are expected to support the development of products aligned with evolving lifestyles and increasingly complex risk exposures in the mew year. Next year, the industry is also likely to see greater adoption of data-led solutions such as parametric insurance, alongside technology enabling sharper underwriting and more precise pricing. This transition into 2026 comes with valuable learnings and a more flexible regulatory environment, setting the stage for a phase defined by innovation, capital efficiency and more disciplined risk management,” Dadia said.
Describing the new Insurance Act as “one of the most consequential reforms for the insurance sector in decades,” Parag Raja, chief executive of Bharti AXA Life Insurance, said; "By raising the FDI limit to 100%, strengthening the powers of the regulator, and creating a dedicated policyholders’ education and protection fund, it paves the way for deeper capital inflows, enhanced competition, and a broader range of innovative products for customers and policyholders. It will prove to be fundamental catalyst.”
Over the long term, these structural changes will not only support Irdai’s mission of insurance for all by 2047 but also improve affordability, the quality of service and regulatory safeguards for policyholders, Raja said, adding that; "For customers, it means more options, better protection and an insurance industry better equipped to serve the evolving needs of a growing and diverse nation.”
Rakesh Jain, chief executive of Indusind General Insurance (formerly Reliance General Insurance), said new Act is a defining moment for the insurance ecosystem.
“Allowing 100% FDI is not merely a capital-inflow opportunity, it fundamentally enhances the sector’s ability to underwrite larger and more complex risks, build long-term technical capacity, and bring global standards of governance and innovation into the domestic market.“As the economy grows bigger, the scale and complexity of risks are also rising faster than ever. This reform directly addresses the industry’s long-standing need for stronger balance sheets, enabling insurers to invest meaningfully in advanced underwriting, digital infrastructure, and climate-resilient risk solutions,” Jain said.
Shruti Ladwa, partner and insurance leader at EY India, said that the new Insurance Act is a timely reform that can catalyse the next phase of growth by attracting global capital and advanced underwriting expertise, strengthening domestic reinsurance capacity and insurance penetration. Its emphasis on enhanced policyholder protection should bolster consumer confidence and help build a more resilient, customer-centric insurance ecosystem.
Anup Rau, chief executive of Generali Central Insurance Company considers the Insurance Act as one of the most significant reforms in the sector to date. The nod for 100% FDI move will not only be instrumental in attracting fresh capital from overseas insurers but also facilitate entry of more players thereby spurring healthy competition leading to better pricing outcomes for customers. This will also develop the secondary and peripheral ecosystem to scale, he said.
"More importantly, this move will secure robust growth for the insurance sector for the next two decades, he said adding that since 2015, when the government liberalised the FDI norms and allowed at first 49% and subsequently in 2021 increased it to 74% the sector has received close to Rs 54,000 crore in FDI. Now 100% FDI will provide a huge fillip to the sector as the country with too few (over 60 insurers operating in both life and general insurance sectors) insurers need many more players. The US has over 5,000 insurers, small countries like England has around 400, and the tiny Singapore over 200, he said.
On the provision of having a legal framework for digital public infrastructure in insurance, he said that; “Leveraging digital public infrastructure can help reduce costs and extend essential insurance products to underserved areas thereby enhancing penetration of insurance. It also proposes one-time registration for intermediaries against the current disposition, which requires insurance intermediaries to renew their registrations every three years. The move will go a long way in encouraging more people to enter the industry thereby aiding better penetration of insurance products.”