LIC and other stocks in focus after Government set to consider 100% FDI in insurance companies

Synopsis:  An increase in the Foreign Direct Investment (FDI) limit from 74 percent to 100 percent could attract roughly Rs 10 lakh crore of foreign capital to the sector.

India’s insurance industry is a critical part of the financial services ecosystem, as it provides life, health, and general insurance coverage to millions of citizens while mobilising long-term savings for investment. Despite its size, the insurance penetration in India has remained relatively low when compared to its global peers. This sector presents significant growth potential if structural support is given along with surplus capital. 

With rising incomes, increasing digital adoption and expanding awareness of different insurance products, this sector is on its way for a deeper transformation with a major policy shift that is imminent.

This Friday i.e December 12, 2025, the Union Cabinet has planned to consider the Insurance Amendment Bill, which proposes increasing the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74 percent to 100 percent. This move was long anticipated since it was announced in the Budget of 2025-26, with the aim of attracting fresh foreign capital and competition in order to accelerate sectoral growth. As per government data, foreign investors held 47.82% stake in life insurance companies at the end of 2024, 40.8% in private sector general insurers and 29.46% in private sector standalone health insurers.

Why 100 percent FDI Matters

Industry leaders and experts believe that raising the FDI cap to 100 percent could be transformational for the Indian insurance sector. At present, foreign investors need Indian partners once they cross the 74 percent ownership threshold, which has limited direct global participation. Allowing full foreign ownership would remove this barrier and make it easier for multinational insurers and global capital to enter and expand in the Indian market.

According to the Managing Director and CEO of Bajaj General Insurance, a fully open FDI policy could help attract roughly Rs 10 lakh crore of foreign capital, this would create millions of new jobs, and support the expansion of insurance offerings across the country. When the competition increases and global expertise comes into the country we can expect the customers to benefit from competitive pricing, innovative products and stronger risk management practices.

What the Proposed Amendment Includes

This Bill is expected to amend the Insurance Act, the LIC Act and the IRDAI Act. And this reform could seek more than just an FDI increase. It could also include structural reforms such as:

• Streamlining licensing norms within the sector.
• Widening access to capital through foreign participation and potentially composite licences that allow companies to operate across multiple insurance segments under one authorisation.
• Reinforcement of governance frameworks to support policyholder protection and sector stability.

These reforms are part of a broader government goal of expanding insurance coverage, improving risk protection, and deepening the financial markets, as the country pursues its vision of- Insurance for All by 2047.

Impact on Insurance Stocks

As investors anticipate the Cabinet’s approval, several insurance stocks have come into focus in the Indian markets:

1. HDFC Life Insurance– Even though the company saw its YoY sales dip by 27 percent to Rs 20,651,  they managed to boost their YoY profit by 2.9 percent to Rs 448 Cr in the latest quarter. And currently FII has 24.82 percent stake in the company.
2. Life Insurance Corporation of India (LIC)– The largest Insurance provider saw its YoY revenue go up by 4.4 percent to Rs 2,41,524 Cr, while the YoY profit went up by 30 percent to Rs 10,096 Cr in Q2FY26. Currently FII has 0.13 percent stake in the company, while 96 percent lies with the president of India .
3. ICICI Prudential Life– This company saw its YoY revenue fall by 52 percent to Rs 11,936 Cr, but still managed to increase their profit by almost 18 percent to Rs 296 Cr in Q2FY26. Currently FII has 13.15 percent stake in the company

Conclusion 

The push for 100 percent FDI is set to be more than just a regulatory change, marking a major opening for India’s financial services and insurance sector by attracting global players and boosting competitiveness. Increased foreign capital is expected to accelerate digital transformation, expand product portfolios, and enhance customer experience, while global entrants could introduce advanced underwriting practices that strengthen industry resilience. 

Greater foreign participation will also support India’s mission- Insurance for All by 2047, by improving distribution reach and extending coverage to underserved markets. The proposed increase in the FDI limit from 74 percent to 100 percent represents a structural shift for the insurance industry, and with the Cabinet poised to review the Insurance Amendment Bill, investors are closely tracking major insurance stocks such as HDFC Life, LIC, and ICICI Prudential. Once implemented, the reform could unlock significant capital inflows, boost innovation, and create strong growth opportunities that would trigger a rapid expansion in the Indian insurance market.

Written by Adithya Menon

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post LIC and other stocks in focus after Government set to consider 100% FDI in insurance companies appeared first on Trade Brains.