The Union Cabinet has approved amendments to insurance laws, paving the way for 100% foreign direct investment (FDI) in the sector, up from the current 74%. This long-awaited reform, first announced in the Union Budget, aims to attract substantial foreign capital, enhance competition, and drive deeper insurance penetration in one of the world's fastest-growing markets. Experts hailed the move as "overdue" and transformative. A former member of the Insurance Regulatory and Development Authority of India (IRDAI), described it as a natural progression from earlier increases—starting at 26% when the sector opened, rising to 49% in 2015, and then to 74% in 2021.

He opined that it was “high time” to increase the FDI cap, noting that the change was anticipated following the Finance Minister's budget announcement. The primary intent, according to him, is to grant foreign insurers full ownership and control, eliminating the need for mandatory Indian joint venture partners. This addresses a key deterrent for global players, who previously hesitated due to dilution of stakes and alignment issues with local partners. With 100% FDI, more international insurers are expected to enter India independently, bringing long-term capital that cannot easily flee the sector due to regulatory restrictions on withdrawals.

A retired bureaucrat of the finance ministry emphasized the advantages: increased foreign investment (currently around Rs 82,000 crore, with significant portions in life and general insurance), transfer of global expertise, innovative products, and advanced digital distribution methods. He predicted higher penetration rates, especially as new entrants could operate with lower initial capital under proposed risk-based solvency norms.

A top executive of an online financial platform echoed these views from a distribution platform perspective. He welcomed the influx of well-capitalized players, stating that more competition is "always great" for the ecosystem. He dismissed concerns that Indian firms lack innovation, asserting that domestic talent is strong but constrained by the need for massive upfront investments in market education and behaviour change. Insurance, he noted, is a long-gestation business requiring deep pockets for categories like health and term plans, where India lags significantly.

With only about 40 million private health policies and 15 million term plans among a 400-million-strong middle class, penetration remains low despite widespread awareness of risks. Consumers often struggle to prioritize the modest monthly premium (around Rs 1,000) amid other expenses. Those supporting this decision opine that it could change this dynamic over the next one to two years. Foreign players, accustomed to long-term horizons from mature markets like the US, Europe, or Australia, may invest heavily in digital tools, outpatient coverage, and awareness campaigns—areas needing substantial capital that domestic players sometimes defer for quicker returns. Regarding  safeguards, the ex-IRDAI member assured that IRDAI's track record over 25 years—where no foreign-linked insurer has failed—will continue. Upcoming regulations will introduce risk-based capital requirements, ensuring policyholder protection and disciplined claims settlement remain priorities.

At the same time, this decision has sparked sharp criticism from trade unions and left-leaning political groups. The primary opponents argue that allowing full foreign ownership risks shifting the sector's focus from social security to profit maximization, potentially harming domestic savings and policyholders. The All India Insurance Employees Association (AIIEA), a key voice for insurance sector workers, has been the most vocal critic. In a statement issued on December 14, AIIEA General Secretary Shreekant Mishra termed the decision "irrational," pointing out that capital has never been a constraint for private insurers, with current FDI constituting only about 32% of total employed capital.

Left parties, including the Communist Party of India (Marxist) or CPI(M), have historically opposed such liberalisation, arguing that excessive foreign ownership compromises regulatory oversight, jeopardizes policyholders' privacy and financial security, and erodes state control in a welfare-oriented sector. Regional parties like the DMK have raised parallel issues in past debates, highlighting threats to domestic dominance. Critics also contend that foreign capital cannot substitute domestic savings for national development and may lead to profit repatriation abroad rather than reinvestment in India.

These groups have called for revoking the decision, reorienting policies toward people-centric measures, and bracing for parliamentary showdowns as the bill moves to Lok Sabha debate. Broader opposition appears limited compared to the 1990s-2010s reforms, with unions focusing on employee and public interests amid the government's push for "Insurance for All by 2047.”