Insurance questions appear in the financial awareness section of IBPS, SBI, RBI and LIC/NIACL exams. This guide covers the regulator, the history, types of insurance, key principles and the latest reforms.
IRDAI at a glance
Fact Detail Full form Insurance Regulatory and Development Authority of India Law IRDA Act, 1999 Set up April 2000 (statutory body)Recommended by R.N. Malhotra Committee (1993–94)Headquarters Hyderabad Chairperson Ajay Seth (since 2025)Mission “Insurance for All by 2047”
History of insurance in India
Year Event 1818 Oriental Life Insurance Company , Kolkata, first life insurer in India1850 Triton Insurance Company , Kolkata, first general insurer1870 Bombay Mutual Life Assurance Society , first Indian-owned life insurer1938 Insurance Act, 1938 (still the main insurance law)1 September 1956 LIC formed after life insurance was nationalised (245 companies merged)1972 General insurance nationalised under the GIC Act (effective 1 January 1973)1993 Malhotra Committee recommended opening up the sector1999–2000 IRDA Act; private companies allowed 2015 FDI limit raised from 26% to 49% 2021 FDI limit raised to 74% 2025 Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 allows 100% FDI
The 2025 insurance law (key points)
100% FDI allowed in Indian insurance companies (from 74%).Amends the Insurance Act, 1938 , the LIC Act, 1956 and the IRDA Act, 1999 .
Net owned fund for foreign reinsurers cut from ₹5,000 crore to ₹1,000 crore .IRDAI gets power to recover wrongful gains (disgorgement) from insurers and intermediaries.
One-time registration for intermediaries; higher threshold (5%) for IRDAI approval of share transfers.
LIC can open zonal offices without prior government approval.
Public sector insurers
Company Headquarters Type LIC Mumbai Life (listed in May 2022 in India’s biggest IPO at the time) New India Assurance Mumbai General United India Insurance Chennai General Oriental Insurance New Delhi General National Insurance Kolkata General (oldest PSU general insurer, 1906) GIC Re Mumbai National reinsurer Agriculture Insurance Company (AIC) New Delhi Crop insurance ECGC Mumbai Export credit insurance
Types of insurance
Life insurance General (non-life) insurance Term plan : pure cover, no maturity benefit, cheapestHealth : hospital bills (now also sold by standalone health insurers)Endowment : cover + savings, pays on maturity or deathMotor : third-party cover is compulsory under the Motor Vehicles Act, 1988Whole life : cover until age 99/100Fire : buildings, stockMoney-back : part payouts during the termMarine : goods in transit, shipsULIP : investment + insurance (5-year lock-in)Travel, home, crop, liability Annuity / pension plans Cyber insurance
Six principles of insurance
Principle Meaning Utmost good faith (*uberrimae fidei*)Both sides must disclose all material facts Insurable interest You must suffer a financial loss if the event happens Indemnity You are compensated only for the actual loss; you cannot profit. Does not apply to life insurance Contribution If insured with several insurers, they share the loss Subrogation After paying, the insurer takes over your right to recover from a third party Proximate cause The nearest (main) cause of loss decides whether the claim is payable
Useful terms
Term Meaning Premium Amount paid for the cover Sum assured Amount promised under a life policy Free-look period Time to return a new policy and get a refund: 30 days (raised from 15 days in 2024) Grace period Extra time to pay a missed premium (usually 15–30 days) Reinsurance Insurance taken by insurers to share their risk Bancassurance Banks selling insurance products Insurance Ombudsman Free grievance redressal; about 17 offices (approx), under the Insurance Ombudsman Rules, 2017 Bima Sugam IRDAI’s one-stop online platform to buy, renew and claim insurance Insurance penetration Premium as % of GDP; India’s was about 3.7% (approx, 2024-25)
Exam-ready one-liners
IRDAI was set up under the IRDA Act, 1999; HQ Hyderabad.
LIC was formed on 1 September 1956; general insurance was nationalised in 1972.
The Malhotra Committee (1993) recommended opening up insurance.
FDI in insurance: 26% → 49% (2015) → 74% (2021) → 100% (2025).
GIC Re is India’s national reinsurer.
Motor third-party insurance is compulsory under the Motor Vehicles Act, 1988.
The principle of indemnity does not apply to life insurance.
Free-look period: 30 days.
Related reading
Quiz: test yourself
Based on IRDAI rules and the Insurance Laws (Amendment) Act, 2025 as reported. Check irdai.gov.in for the latest.