Winter Parliamentary Session: What the insurance sector is watching closely

Winter Parliamentary Session: What the insurance sector is watching closely

As Parliament’s Winter Session approaches, the insurance industry is preparing for what could be its most consequential legislative reset in nearly a decade. The proposed amendments to the Insurance Act, LIC Act and IRDAI Act are expected to recalibrate the sector’s ownership structure, entry barriers and supervisory framework.

While the Centre has framed these reforms as part of its wider push to improve ease of doing business, deepen insurance penetration and unlock long-term capital, the industry remains cautiously optimistic.

Insurers, intermediaries and foreign partners are watching closely for clarity on the fine print, particularly on how far the government is willing to go on foreign ownership, product flexibility and regulatory discretion.

The key concern is not just what the Bill allows in principle, but how these changes will be sequenced, regulated and enforced in practice, as that will determine whether the reforms translate into sustainable growth or introduce operational uncertainty.

Here are the top expectations from the insurance sector to watch out for from the Winter Session, which is scheduled between December 1 and 9.

Higher FDI limit and relaxed foreign ownership norms

The Bill, which was announced during the Union Budget earlier this year, is expected to revisit foreign direct investment norms in insurance, raising the FDI cap beyond the current 74 percent to 100 percent. This could mark a decisive shift from the existing framework, as it aims to ease conditions around Indian ownership and control.

The insurance sector is of the view that a higher FDI cap combined with relaxed control norms could significantly improve capital availability at a time when insurers are grappling with rising solvency requirements and expanding risk coverage. It may also facilitate the import of global best practices in pricing, claims management and product design, helping Indian insurers scale efficiently.

Over the long term, increased foreign participation could strengthen the sector’s ability to fund capital-intensive segments such as health, life and pension insurance, which require sustained long-term investment capacity. However, the proposed liberalisation has raised serious concerns about diluting domestic control in an industry that deals with household savings and long-term financial security.

This year itself, several foreign investors have exited from smaller domestic insurers, a trend highlighting the uncertain appeal of overseas capital.

Meanwhile, a number of domestic insurers told Moneycontrol that they are sufficiently capitalised and do not require external funding or technical expertise.

Entry of composite licences and new product structures

The Bill proposes allowing insurers to offer both life and general insurance products under a composite licence. Some insurers see this as a welcome reform, one that could reduce costs, simplify operations and pave the way for innovative hybrid products.

However, others remain cautious, pointing out the transitional complexity and compliance burdens involved.

Traditional players, for instance, Life Insurance Corporation of India (LIC), had already explored adding health insurance to their offerings, but found no viable structure under existing rules. They will have to wait for changes to the LIC Act before launching health products.

Supporters argue that composite licensing would enable integrated portfolios, cut redundant infrastructure and boost cross-selling efficiency. Critics, however, fear that complex bundled products could lead to mis-selling, that migration could disrupt operations, and that greater regulatory oversight may push compliance costs up while increasing uncertainty.

Changes specific to LIC

Amendments to the LIC Act could grant the state-owned insurer greater operational flexibility, including the ability to enter new product categories such as health insurance (composite licensing) and a governance structure more aligned with private sector norms. The proposed amendments to the LIC Act are especially significant as the legislation was last substantially amended in 2021 to facilitate LIC’s initial public offering, which centred on dilution of government stake, changes in surplus distribution and alignment with listed company norms. At present, LIC is permitted to sell only life insurance products, unlike private peers that operate across life, general and health insurance segments. If the new amendments are passed, LIC could be allowed to enter health insurance through composite licensing, enabling it to offer a wider suite of products and diversify its revenue base.

Open architecture for individual agents

The proposed move towards open architecture is expected to allow insurers greater freedom to distribute products from multiple insurance companies, moving away from the current model where corporate agents are largely tied to a single insurer or a limited set of partners.

Industry stakeholders view this as a step towards improving consumer choice and product transparency, as it could enable distributors to offer more customised solutions based on customer needs rather than being restricted by exclusive arrangements.

However, insurers and agents have expressed concerns that open architecture could intensify competition for distribution, squeeze margins, and increase operational complexity, particularly in terms of managing multiple insurer relationships, compliance requirements and ensuring consistent service quality across a wider product universe.

Reduction in minimum capital requirement for new insurers

The Bill is expected to revisit the minimum paid-up capital requirement for insurers, currently Rs 100 crore for life and general insurers and Rs 200 crore for reinsurers, with proposals to lower these thresholds to encourage new entrants, regional players and niche insurers.