Insurance appears in general awareness for banking and insurance exams, and the questions are almost always about structure rather than theory — which body regulates insurance, where its headquarters is, what the nationalisation years were, which scheme covers what. This post covers how insurance works, IRDAI and its role, the public-sector insurers, the government insurance schemes exams ask about, and the terms that turn up in options, followed by 15 previous year questions.
Key Points (Quick Revision)
- Insurance in India is regulated by IRDAI, with its headquarters at Hyderabad
- IRDAI was set up in 1999 under the IRDA Act and became a statutory body in 2000
- LIC was formed in 1956 by nationalising life insurance; general insurance was nationalised in 1972
- Insurance is divided into life insurance and general or non-life insurance
- PMJJBY is life cover, PMSBY is accident cover, and Ayushman Bharat PM-JAY is health cover
1. What insurance is and how it works
Insurance is a contract in which one party agrees to compensate another for a specified loss, in return for a payment called the premium. Its working idea is the pooling of risk — many people contribute small amounts, and the pool pays the few who actually suffer a loss.
The vocabulary is asked directly, so it is worth fixing:
| Term | Meaning |
|---|---|
| Premium | The amount paid by the insured to keep the policy in force |
| Policy | The document containing the contract between insurer and insured |
| Sum assured | The amount the insurer agrees to pay on the event insured against |
| Claim | The demand made by the insured for payment under the policy |
| Nominee | The person named to receive the benefit |
| Reinsurance | Insurance taken by an insurance company itself, to spread its own risk |
| Bancassurance | The sale of insurance products through bank branches |
Insurance is divided into two broad classes. Life insurance covers the life of a person. General or non-life insurance covers everything else — health, motor, fire, marine, travel and crop. An insurer is licensed for one class or the other, which is why life and general insurers are separate companies even within the same group.
2. IRDAI — the regulator and its functions
The Insurance Regulatory and Development Authority of India is the body that regulates and develops the insurance sector. It was established in 1999 on the recommendation of the Malhotra Committee, which had reviewed the sector, and it was given statutory status in 2000 under the IRDA Act, 1999. Its headquarters is at Hyderabad, a fact asked almost every year.
Two points about its creation carry exam weight. It came at the moment the sector was opened to private participation, ending the monopoly that the public-sector insurers had held since nationalisation. And it is a statutory body, created by an Act of Parliament, not a constitutional one — the distinction that options regularly test.
Its main functions are:
- Registering and licensing insurers, and cancelling registration where required
- Protecting policyholders' interests, including in matters of claim settlement and policy terms
- Laying down the qualifications and code of conduct for agents and intermediaries
- Regulating investment of funds by insurance companies and their solvency margins
- Promoting insurance penetration, particularly in rural and social sectors
Keep IRDAI separate from the other financial regulators, since a single question often lists them together: RBI regulates banking, SEBI regulates the securities market, IRDAI regulates insurance, and PFRDA regulates pensions. Their headquarters differ too — RBI at Mumbai, SEBI at Mumbai, IRDAI at Hyderabad and PFRDA at New Delhi.
3. LIC, nationalisation and the public-sector insurers
The structure of Indian insurance was set by two rounds of nationalisation, and their years are standard one-mark questions.
Life insurance was nationalised in 1956, when the business of a large number of insurers was taken over and the Life Insurance Corporation of India was formed under the LIC Act. Its headquarters is at Mumbai, and it remains the largest life insurer in the country.
General insurance was nationalised in 1972 under the General Insurance Business (Nationalisation) Act, which created the General Insurance Corporation of India with four subsidiaries — National Insurance, New India Assurance, Oriental Insurance and United India Insurance. Those four names are asked as a set, so learn them together. GIC itself later became the national reinsurer.
Two further institutions complete the picture. Agriculture Insurance Company of India handles crop insurance business, and ECGC provides export credit insurance to exporters and banks.
The sector was closed to private companies from nationalisation until the reforms of 1999, after which private and foreign-partnered insurers entered alongside the public-sector ones. The permitted limit of foreign investment in insurance has been raised more than once since then, so if a question asks for the current FDI limit, take the figure from the latest official announcement rather than from an older compilation.
4. Government insurance schemes exams ask about
Scheme questions are almost always about which scheme covers what, and the three social security schemes are confused with one another more than any other group.
| Scheme | What it covers | Nature |
|---|---|---|
| PMJJBY Pradhan Mantri Jeevan Jyoti Bima Yojana | Life cover — payable on death from any cause | Renewable term life cover, one-year term |
| PMSBY Pradhan Mantri Suraksha Bima Yojana | Accident cover — accidental death and disability | Renewable accident cover, one-year term |
| Atal Pension Yojana | Pension after the age of 60 | Pension scheme, regulated by PFRDA |
| Ayushman Bharat PM-JAY | Health cover for hospitalisation | Health assurance for eligible families |
| PM Fasal Bima Yojana | Crop insurance against failure of notified crops | Crop insurance scheme |
The cleanest way to hold these apart is by what triggers the payment: death from any cause for PMJJBY, an accident for PMSBY, reaching pension age for APY, hospitalisation for PM-JAY, and crop loss for PMFBY.
The premium amounts, the age bands, the sum assured and the cover limits under these schemes have been revised since they were launched. If a question or an application form asks for a current figure, confirm it from the official scheme page rather than from a list prepared in an earlier year.
One structural point is worth noting alongside. All three of the social security schemes are delivered through bank accounts, which is why they are treated as part of the financial inclusion push that began with basic savings accounts, and why they appear in banking exam papers rather than only in general awareness.
5. Previous year questions
- Which body regulates the insurance sector in India? — IRDAI
- Where is the headquarters of IRDAI located? — Hyderabad
- IRDAI was given statutory status in which year? — 2000, under the IRDA Act, 1999
- On the recommendation of which committee was IRDAI set up? — Malhotra Committee
- In which year was life insurance nationalised in India? — 1956
- In which year was general insurance nationalised? — 1972
- Where is the headquarters of LIC? — Mumbai
- Which company acts as the national reinsurer of India? — General Insurance Corporation of India (GIC)
- Name the four public-sector general insurers. — National, New India Assurance, Oriental and United India
- Which scheme provides accidental death and disability cover? — PMSBY
- Which scheme provides life cover on death from any cause? — PMJJBY
- Which scheme provides health cover for hospitalisation? — Ayushman Bharat PM-JAY
- Which scheme provides crop insurance to farmers? — Pradhan Mantri Fasal Bima Yojana
- What is the sale of insurance products through bank branches called? — Bancassurance
- Insurance taken by an insurance company itself is called what? — Reinsurance
6. How to revise this topic
Learn this chapter as a set of names, years and headquarters, because that is how it is asked. Write the five dates in one line — 1956, 1972, 1999, 2000 — with what happened at each, and revise that line rather than paragraphs.
Keep the four regulators together with their sectors and headquarters. RBI for banking, SEBI for securities, IRDAI for insurance, PFRDA for pensions, with Mumbai, Mumbai, Hyderabad and New Delhi beside them. A single question often mixes two of these, and the pairing is what saves you.
For the schemes, revise by what triggers the payment rather than by the scheme name. Death, accident, pension age, hospitalisation, crop loss — five triggers, five schemes, and the options sort themselves.
Finally, keep the four public-sector general insurers as a group of four. They are asked as a set, and a candidate who knows three of them and guesses the fourth is exactly the candidate the question was written for.
7. Frequently Asked Questions
Who regulates the insurance sector in India?
IRDAI, the Insurance Regulatory and Development Authority of India, with its headquarters at Hyderabad. It was established in 1999 on the recommendation of the Malhotra Committee and became a statutory body in 2000 under the IRDA Act, 1999.
Is IRDAI a constitutional body or a statutory body?
A statutory body. It was created by an Act of Parliament, the IRDA Act, 1999, and not by a provision of the Constitution. Options frequently offer constitutional body as a distractor here.
What is the difference between PMJJBY and PMSBY?
PMJJBY is life cover, payable on death from any cause. PMSBY is accident cover, payable on accidental death or disability. The simplest way to keep them apart is by what triggers the payment.
When were life insurance and general insurance nationalised in India?
Life insurance was nationalised in 1956, when the Life Insurance Corporation of India was formed. General insurance was nationalised in 1972 under the General Insurance Business (Nationalisation) Act, which created the General Insurance Corporation of India.
What is the difference between reinsurance and bancassurance?
Reinsurance is insurance taken by an insurance company itself, to spread its own risk, and GIC acts as India's national reinsurer. Bancassurance is the selling of insurance products through bank branches.
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