Union Home and Cooperation Minister Amit Shah’s announcement that the government will facilitate a cooperative-sector life insurance company follows a change in law, enacted weeks earlier, that removed the principal capital barrier such an entity would have faced. It lands in a market where life insurance penetration is falling.
Shah said on Monday in New Delhi, at the fifth Foundation Day of the Ministry of Cooperation, that the government intends to set up a life insurer under the cooperative model. “We will be setting up a life insurance company in the cooperative sector. This will help in the growth of cooperatives in the insurance sector,” he said, according to CNBC-TV18. He did not disclose the ownership structure, timeline, capital requirement, or regulatory status, CNBC-TV18 reported.
The proposal follows the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which received presidential assent on Dec. 20, 2025, and was published in the Official Gazette as Act No. 40 of 2025, according to the Department of Financial Services. Parliament passed the legislation on Dec. 17, 2025, according to the Press Information Bureau.
The amendment revised the definition of an insurance co-operative society to remove the ₹100 crore minimum paid-up share capital requirement for life, general, and health insurance business, according to PRS Legislative Research. The waiver is specific to that category; it does not lift the general threshold for other insurers. The Insurance Regulatory and Development Authority’s (IRDAI) registration requirements still specify evidence of ₹100 crore or more in paid-up equity capital for a life insurance licence. The Act’s commencement is subject to a separate government notification, per the gazette text.
The same reform package raised the foreign direct investment ceiling in insurers to 100% and provided for a Policyholders’ Education and Protection Fund, the PIB said, and introduced composite licensing across life, general, and health lines.
A waived entry-capital floor does not lift ongoing prudential obligations. Insurers must maintain a solvency ratio of at least 1.5 times the required solvency margin at all times under IRDAI requirements. That standard would apply to a cooperative insurer as to any other, and it bears directly on the governance question below, because sustaining solvency capital over decades is where a life insurer’s model is tested.
The market data frames the rationale. Life insurance penetration fell to 2.7% of GDP in 2024-25 from 2.8% a year earlier, the third consecutive annual decline, even as life premium income rose 6.73% to ₹8.86 lakh crore, per figures released with IRDAI’s FY25 annual report and cited by the PIB. Insurance density stood at US$97, the DFS noted, citing the Swiss Re Sigma report. India Brand Equity Foundation, the Ministry of Commerce-backed body, reported that life insurers issued fewer new individual policies in FY25 than the prior year, indicating growth concentrated rather than broad.
The incumbent structure is concentrated at the top. IBEF reported that in FY26, through February, the Life Insurance Corporation of India (LIC) held about 56.57% of first-year premium, with private insurers at 43.43%; the state insurer’s share runs higher on some monthly and group-premium cuts. IBEF put the number of life insurers in India at 26. Cooperatives’ rural reach is the stated commercial case for a new entrant.
Shah tied the plan to the cooperative sector’s existing insurance footprint through IFFCO-Tokio General Insurance. Business Standard reported that IFFCO-Tokio was incorporated in 2000 as a joint venture between the Indian Farmers Fertiliser Cooperative (IFFCO) and Japan’s Tokio Marine group, with IFFCO holding 51% and Tokio Marine 49%. The move from general to life insurance involves longer-dated liabilities and sustained capital, a different profile from the IFFCO-Tokio template.
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Business Standard reported, citing sources, that the plan is at an early stage and could take the form of a company in which existing cooperatives are the founding promoters, with a partner added later. A senior official told the outlet the model could resemble recently formed multi-state cooperatives for seeds, organic farming, and export promotion, promoted by bodies including Amul, the National Dairy Development Board (NDDB), IFFCO, Krishak Bharati Cooperative Ltd, and the National Cooperative Development Corporation (NCDC).
Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, told Business Standard the concept stems from the ministry’s financial inclusion objective and that no regulatory discussions appear to have begun. “Cooperative institutions already have a deep presence in rural areas and established relationships with members, which could improve insurance penetration and reduce customer acquisition costs. However, commercial insurers or joint venture partners may not find partnerships with cooperative institutions attractive because of governance concerns and cultural differences. Any cooperative insurer would require strong regulatory oversight and standards to inspire confidence. As a result, policymakers may consider creating a separate cooperative-owned insurance entity instead,” he told Business Standard.
Shah also said the cooperative ride-hailing platform Bharat Taxi, run by Sahakar Taxi Cooperative Ltd, would expand to 500 cities over two years, both CNBC-TV18 and Business Standard reported. He said India has around 8.5 lakh cooperative societies – roughly 850,000 – with more than 30 crore, or 300 million, members, and that cooperatives are moving beyond dairy, sugar, fertilisers, and banking into new sectors including mobility and life insurance.
