Push Towards “Insurance for All by 2047”
New Delhi, India – The Union Budget 2025 is expected to introduce major reforms in India’s insurance sector, aligning with the government’s ambitious “Insurance for All by 2047” vision. These reforms aim to boost investment, enhance accessibility, and make insurance more affordable for Indian citizens.
In preparation, the Department of Financial Services under the Finance Ministry has conducted extensive discussions with industry stakeholders regarding amendments to the Insurance Act. Additionally, IRDAI Chairman Debasish Panda has been promoting investment opportunities in India’s insurance sector through global roadshows. According to sources, these reforms are likely to be introduced through the Finance Bill, 2025.
Key Expected Reforms in Budget 2025
100 Percent FDI in Insurance
A major policy shift under consideration is the increase in foreign direct investment (FDI) limit in the insurance sector from 74 percent to 100 percent.
India has gradually liberalized FDI in insurance:
- 2015 – FDI cap raised from 26 percent to 49 percent
- 2021 – Further increased to 74 percent
The proposed 100 percent FDI would:
- Fully open India’s insurance market to global investors
- Attract significant foreign capital inflows
- Strengthen the sector’s financial stability and growth potential
GST Reduction on Insurance Premiums
Another critical expectation is a roadmap for reducing Goods and Services Tax (GST) rates on term and health insurance premiums, currently taxed at 18 percent.
The reform, if approved by the GST Council, would:
- Make insurance more affordable for all income groups
- Encourage more families to invest in health and life insurance
- Support India’s financial inclusion goals
Composite Licenses for Insurers
The government is also expected to introduce composite licenses, allowing insurance companies to offer life, health, and general insurance under a single license.
Benefits of this reform:
- Simplifies regulatory approvals
- Increases operational efficiency for insurers
- Helps companies offer diverse insurance products under one umbrella
Value-Added Services for Policyholders
To make insurance more customer-centric, the budget may introduce reforms allowing insurers to offer value-added services such as:
- Health-monitoring devices bundled with health insurance policies
- Rewards programs for healthy behavior and timely premium payments
These initiatives align with global trends in personalized insurance, aimed at attracting new policyholders and improving customer retention.
Missed Reform: Selling Financial Products
One anticipated reform—the proposal to allow insurance companies to sell other financial products like bank deposits and mutual funds—will likely be absent from this year’s budget. Sources indicate that regulatory challenges and operational complexities have delayed its implementation.
Industry Leaders Weigh In on Budget 2025 Reforms
Tapan Singhel, Managing Director and CEO of Bajaj Allianz General Insurance, stated, “As we approach Budget 2025, it is crucial to implement measures that make insurance more accessible and impactful for individuals and businesses alike. If a GST reduction on health insurance premiums is not feasible, allowing a complete deduction of premiums paid towards health insurance under the existing tax regime would significantly encourage more people to prioritize their health protection.”
Subhrajit Mukhopadhyay, Executive Director of Edelweiss Life Insurance, emphasized that reforms such as increasing the permissible FDI limit and reducing capital requirements would accelerate industry growth and support financial inclusion efforts. “These proposed reforms will be a positive step in facilitating insurance adoption at the last mile and bolstering overall sectoral growth,” he said.
Prashant Tripathy, Managing Director and CEO of Axis Max Life Insurance, recommended a dedicated tax deduction for life insurance policies, particularly term insurance, under Section 80C of the Income Tax Act. “This benefit should also be extended under the new tax regime to enhance the social and financial security for a wider segment of the population,” he added.
With the Union Budget 2025 on the horizon, these expected reforms could bring a transformative shift to India’s insurance industry, making coverage more accessible and fostering growth in the sector.
