Opening the Sector, Widening the Net: IRDAI's Reforms and 100% Insurance FDI
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Article summary
The Insurance Regulatory and Development Authority of India (IRDAI) advanced a package of reforms to modernise the insurance sector and strengthen governance, implementing the framework of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which permits up to 100 per cent foreign direct investment (FDI) in insurers, raised from the previous cap of 74 per cent. The reforms include perpetual registration for insurance intermediaries, a Policyholders' Protection and Education Fund, and steps to ease entry and distribution. The stated purpose is to deepen an under-penetrated market: insurance penetration in India — premiums as a share of GDP — remains low by global standards, and a large share of the population, especially the poor and rural, lacks adequate life and health cover. Allowing full foreign ownership aims to attract capital, expertise and competition to expand the sector, in service of the goal of universal insurance — 'Insurance for All' by 2047 — though whether liberalisation reaches the currently uninsured, rather than merely intensifying competition for the already-insured, is the deeper question.
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Sample questions — answers revealed after test
Q1. 'Insurance penetration', a common measure of how insured an economy is, is defined as which of the following?
Q2. The article argues that the analytically important test of insurance liberalisation is 'distributional'. What does that mean here?
Q3. Consider the following statements about India's insurance sector: 1. The IRDAI, established under the IRDA Act, 1999, is the statutory regulator responsible for licensing insurers and protecting policyholders. 2. Allowing higher foreign direct investment can bring capital and expertise that help deepen a shallow insurance market. 3. Raising the foreign investment cap automatically guarantees that insurance cover will reach the currently uninsured rural poor. Which of the statements given above are correct?