The Indian government has raised the foreign direct investment (FDI) limit in the insurance sector from 74% to 100%, provided the invested premium remains within the country.
This policy change was announced as part of the Union Budget 2025-26 and is expected to encourage greater foreign participation in the sector.
Finance Minister Nirmala Sitharaman, while presenting the budget, stated that the government would simplify the regulatory conditions governing foreign investment in insurance to attract capital inflows.
“This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” she said.
The announcement comes amid the country’s changing claims landscape. A recent report by Policybazaar highlighted major trends in health, motor, and term insurance claims, driven by shifting consumer behaviour, rising costs, and regional variations.
Health insurance claims are increasingly linked to seasonal ailments like fever and chronic conditions such as diabetes, cancer, and cardiovascular diseases. The report suggested that these trends reflect both short-term disease outbreaks and the growing impact of lifestyle-related health issues.
The average claim payout is expected to rise from ₹62,014 in FY23 to ₹81,025 in FY25, an estimated increase of 30%. The report attributed this growth to rising healthcare costs and increased dependence on insurance amid medical inflation.
Motor insurance claims remain affected by accidents, natural disasters, and vehicle theft. The report highlighted a 40% increase in claims during the monsoon season, particularly in regions prone to heavy rainfall.
Hatchbacks account for 54% of total motor insurance claims, with average payouts ranging from ₹20,000 to ₹25,000. SUVs, which represent 26% of claims, have higher average repair costs, with payouts typically between ₹30,000 and ₹35,000.
There is also a rising trend in policyholders opting for additional coverage options such as zero depreciation and engine protection. The report suggested that even owners of older vehicles are increasingly seeking more comprehensive coverage.
Meanwhile, claims in the term insurance segment are primarily driven by heart-related conditions and natural causes. According to the report, heart disease accounts for 25% to 30% of claims, while natural causes represent 30% to 35%. Accidents make up 15% to 20% of claims.
Male policyholders account for 90% to 92% of term insurance claims, a pattern that may be linked to higher insurance penetration among men and their greater mortality risk.
Additionally, around 35% to 40% of policyholders are now adding riders such as critical illness and accidental death benefits to their policies, indicating a shift toward enhanced financial protection.
