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JAIIB Paper 1 • Indian Economy & Indian Financial System (IE&IFS)

Insurance Companies in India

From a state monopoly to a 100%-FDI-open market — the story of Indian insurance. Covers the history and development of insurance, privatisation & FDI, penetration & density, the number of insurers operating today, key legislations, insurance intermediaries, reinsurance and GIC Re, and Insurance Repositories (electronic insurance accounts) — with 50 exam-style MCQs with hidden answers.

📅 Updated: September 2026 • 30 min read

📊 At a Glance

MetricPosition
RegulatorIRDAI (Insurance Regulatory and Development Authority of India)
FDI limit in insuranceUp to 100% (Insurance Laws (Amendment) Act, 2025), subject to conditions
Life insurersLIC + around two dozen private life insurers
National reinsurerGIC Re
Note: For IRDAI's role among other regulators, see our Indian Financial System guide; for insurance products (term, ULIP, PMJJBY, PMSBY), see our forthcoming Insurance Products guide (Module D).

1 History & Development of Insurance in India

1818Oriental Life Insurance Company — India's first life insurer — established in Calcutta.
1938Insurance Act, 1938 enacted — the principal legislation still governing insurance business in India today.
1956Nationalisation of life insurance — 245 private life insurers/provident societies merged into the newly formed Life Insurance Corporation of India (LIC), via the LIC Act, 1956.
1972Nationalisation of general insurance — general insurers merged into the General Insurance Corporation of India (GIC) and its four subsidiaries, via the GIC Act, 1972.
1999IRDA Act, 1999 ends the public-sector monopoly — establishes IRDAI and opens the sector to private (and limited foreign) participation.
2025 & afterInsurance Laws (Amendment) Act, 2025 raises the FDI cap to 100% (subject to conditions) and enables composite licences — part of IRDAI's "Insurance for All by 2047" mission.

2 Privatisation & FDI in the Insurance Sector

1999 (IRDA Act)
26%
2015 Amendment
49%
2021 Amendment
74%
2025 Amendment → now
100%

India's insurance sector was opened to private players by the IRDA Act, 1999, which permitted private entry with an FDI cap of 26%. The cap was raised to 49% by the Insurance Laws (Amendment) Act, 2015, then to 74% by the Insurance (Amendment) Act, 2021 (for insurers meeting specified Indian-ownership/control safeguards), and most recently to 100% under the Insurance Laws (Amendment) Act, 2025 — subject to conditions such as retaining a specified share of premium/investment within India.

JAIIB tip: Memorise this exact FDI escalation ladder — 26% (1999) → 49% (2015) → 74% (2021) → 100% (2025) — it is one of the highest-yield, most frequently tested current-affairs facts in this topic.

3 Insurance Business — Globally and in India

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Global Market

The world's largest insurance markets are the US, China and Japan by premium volume; India ranks among the fastest-growing large markets, though its share of global premium remains modest relative to its population/GDP.

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Indian Market Structure

Split into Life Insurance (LIC + private insurers) and General/Non-Life Insurance (public sector insurers, private insurers, standalone health insurers, specialised insurers like ECGC and AIC).

LIC remains India's largest life insurer by assets and market share despite two-and-a-half decades of private competition, reflecting deep brand trust and its extensive distribution network built over nationalisation-era decades.

4 Insurance Penetration & Density

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Insurance Penetration

Total insurance premium as a % of GDP — a measure of how developed the insurance market is relative to the size of the economy.

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Insurance Density

Insurance premium per capita (usually in USD) — a measure of average insurance spend per person.

As per IRDAI's Handbook on Indian Insurance Statistics, India's overall insurance penetration has hovered around 4% of GDP (life insurance contributing the larger share, non-life a smaller share) — below the global average — while insurance density has been rising steadily but remains well below developed-market levels, reflecting significant headroom for growth as incomes rise and IRDAI's "Insurance for All by 2047" push gains traction.

JAIIB tip: Remember the direction of these metrics even if exact figures shift year to year: India's insurance penetration and density are both low relative to global peers but on a rising trend — this trend, not the precise number, is what examiners most often test.

5 Number of Insurance Companies Operating in India

CategoryComposition
Life InsurersLIC (the sole public-sector life insurer) + around two dozen private life insurers
General/Non-Life InsurersPublic-sector general insurers, numerous private general insurers, standalone health insurers, and specialised insurers (ECGC for export credit insurance, AIC for agriculture insurance)
ReinsurersGIC Re (India's sole domestic reinsurer) + a growing number of Foreign Reinsurance Branches (FRBs) and Lloyd's India, operating since the sector opened to foreign reinsurers
JAIIB tip: Exact company counts change as new licences are issued — IRDAI's website carries the current, authoritative list. Focus on remembering the categories (life / general / standalone health / specialised / reinsurers) rather than memorising a number that will be outdated by exam day.

6 Legislations Governing Insurance Companies

LegislationSignificance
Insurance Act, 1938The principal Act governing insurance business in India — registration, capital, investments, solvency
LIC Act, 1956Created LIC, nationalising life insurance
GIC Act, 1972Created GIC and its subsidiaries, nationalising general insurance
IRDA Act, 1999Established IRDAI as regulator; opened the sector to private participation
Insurance Laws (Amendment) Act, 2015Raised FDI cap to 49%; modernised several provisions of the 1938 Act
Insurance (Amendment) Act, 2021Raised FDI cap to 74%
Insurance Laws (Amendment) Act, 2025Raised FDI cap to 100% (with conditions); enabled composite licensing

7 Insurance Intermediaries

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Agents

Individual or corporate agents representing one (or, for composite corporate agents, a limited number of) insurer(s) to solicit and service business.

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Insurance Brokers

Represent the customer (not tied to one insurer), sourcing quotes/comparing policies across multiple insurers.

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Surveyors & Loss Assessors

Independently assess the quantum of loss on a claim, especially in general insurance.

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Third Party Administrators (TPAs)

Process and settle health insurance claims on behalf of insurers (especially cashless hospitalisation).

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Web Aggregators

Online platforms displaying/comparing insurance products from multiple insurers.

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Point of Sales Persons (PoSP)

Sell simple, pre-defined insurance products after limited (light-touch) training/certification — expanding low-cost distribution reach.

8 Reinsurance

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"Insurance for Insurers"

Reinsurance is the mechanism by which an insurance company (the "cedant") transfers part of its risk on a policy to another insurer (the "reinsurer"), in exchange for a share of the premium — spreading catastrophic/concentrated risk across the market and protecting the primary insurer's solvency.

Key Players in India

  • GIC Re (General Insurance Corporation of India) — India's sole domestic reinsurer, historically enjoying a right of "obligatory cession", under which every Indian non-life insurer must cede a specified minimum percentage of each policy's sum insured to GIC Re.
  • Foreign Reinsurance Branches (FRBs) — Since the sector's opening (post-2015 amendments), several global reinsurers and Lloyd's of London (via "Lloyd's India") have set up branch offices to write reinsurance business directly in India.
JAIIB tip: "Obligatory cession" to GIC Re is a distinctly Indian regulatory feature (not universal globally) — ensuring GIC Re retains a base level of reinsurance business even as foreign reinsurers compete for the rest of the market.

9 Insurance Repository / Insurance Account

An Insurance Repository (IR) is an IRDAI-licensed entity that holds insurance policies in electronic form — conceptually similar to a securities depository (NSDL/CDSL) holding shares in demat form.

Electronic Insurance Account (eIA)

  • A policyholder opens a single electronic Insurance Account (eIA) with a licensed IR, into which all their insurance policies (life, health, general) — across different insurers — can be converted to electronic form and held.
  • Benefits: a single consolidated view of all policies, easier renewal/servicing/claims, elimination of physical-document loss risk, and reduced scope for fraud.
  • Introduced from 2013, with several IRDAI-licensed Insurance Repositories now operating.
JAIIB tip: Think of the eIA as the insurance-sector equivalent of a demat account for securities — same underlying idea of dematerialising paper instruments into one digital account.

✓ Key Takeaways

  • Life insurance was nationalised in 1956 (LIC); general insurance in 1972 (GIC); the IRDA Act, 1999 re-opened the sector to private players.
  • FDI in insurance climbed: 26% (1999) → 49% (2015) → 74% (2021) → 100% (2025).
  • Insurance penetration = premium/GDP; Insurance density = premium per capita — both low but rising in India.
  • Key legislations: Insurance Act, 1938 (principal Act), LIC Act, 1956, GIC Act, 1972, IRDA Act, 1999, and successive FDI-raising amendments (2015/2021/2025).
  • Intermediaries: agents, brokers, surveyors/loss assessors, TPAs, web aggregators, PoSPs.
  • GIC Re is India's national reinsurer with a right of obligatory cession; foreign reinsurers/Lloyd's India also operate branches.
  • An eIA (electronic Insurance Account), held with a licensed Insurance Repository, is the demat-style digital home for all of a policyholder's insurance policies.

📝 Top 50 JAIIB-Style MCQs on Insurance Companies

Test your understanding with these 50 practice MCQs, closely modelled on the JAIIB (IE & IFS) exam pattern. Each question has 5 options — the correct answer is hidden by default; tap "Show Answer" to reveal it along with a short explanation.

🕰ī¸ History & Development
1 India's first life insurance company was:
A. LIC
B. Oriental Life Insurance Company (1818)
C. GIC
D. New India Assurance
E. Bajaj Allianz
Answer: B. Oriental Life Insurance Company (1818) was India's first life insurer.
2 Life insurance in India was nationalised, forming LIC, in the year:
A. 1938
B. 1956
C. 1972
D. 1999
E. 1991
Answer: B. Life insurance was nationalised in 1956.
3 How many private life insurers/provident societies were merged to form LIC?
A. 24
B. 100
C. 245
D. 500
E. 1
Answer: C. 245 entities were merged to form LIC in 1956.
4 General insurance in India was nationalised, forming GIC, in the year:
A. 1956
B. 1972
C. 1991
D. 1999
E. 2015
Answer: B. General insurance was nationalised in 1972.
5 The Act that ended the public-sector insurance monopoly and re-opened the sector to private players was the:
A. Insurance Act, 1938
B. LIC Act, 1956
C. GIC Act, 1972
D. IRDA Act, 1999
E. Companies Act, 2013
Answer: D. The IRDA Act, 1999 re-opened the sector.
💹 Privatisation & FDI
6 When private insurers were first permitted in 1999, the FDI cap in insurance was set at:
A. 26%
B. 49%
C. 74%
D. 100%
E. 51%
Answer: A. The initial FDI cap in 1999 was 26%.
7 The Insurance Laws (Amendment) Act, 2015 raised the FDI cap in insurance to:
A. 26%
B. 49%
C. 74%
D. 100%
E. 20%
Answer: B. The 2015 amendment raised the cap to 49%.
8 The Insurance (Amendment) Act, 2021 raised the FDI cap in insurance to:
A. 26%
B. 49%
C. 74%
D. 100%
E. 51%
Answer: C. The 2021 amendment raised the cap to 74%.
9 As of 2026, the maximum permissible FDI in the insurance sector (subject to conditions) is:
A. 49%
B. 74%
C. 100%
D. 26%
E. FDI is prohibited entirely
Answer: C. FDI up to 100% is now permitted, subject to conditions, per the 2025 Amendment Act.
10 The correct chronological order of India's FDI-in-insurance cap increases is:
A. 49% → 26% → 100% → 74%
B. 26% → 49% → 74% → 100%
C. 100% → 74% → 49% → 26%
D. 74% → 100% → 26% → 49%
E. All changed simultaneously in one year
Answer: B. The correct escalation is 26% → 49% → 74% → 100%.
🌍 Insurance Business Globally & in India
11 Despite over two decades of private competition, India's largest life insurer by market share remains:
A. HDFC Life
B. LIC
C. ICICI Prudential
D. SBI Life
E. Max Life
Answer: B. LIC remains India's largest life insurer by market share.
12 Indian general/non-life insurance business includes specialised insurers such as ECGC, which focuses on:
A. Agriculture insurance
B. Export credit insurance
C. Health insurance only
D. Motor insurance only
E. Life insurance
Answer: B. ECGC specialises in export credit insurance.
13 AIC (Agriculture Insurance Company of India) specialises in:
A. Motor insurance
B. Crop/agriculture insurance
C. Export credit insurance
D. Health insurance
E. Marine insurance only
Answer: B. AIC specialises in agriculture/crop insurance.
📈 Penetration & Density
14 Insurance Penetration is defined as:
A. Insurance premium as a percentage of GDP
B. Insurance premium per capita
C. Number of insurance companies in a country
D. Number of claims settled per year
E. Total FDI in insurance
Answer: A. Insurance penetration is premium as a % of GDP.
15 Insurance Density is defined as:
A. Insurance premium as a percentage of GDP
B. Insurance premium per capita
C. The physical density of insurance branch offices
D. The number of insurers per state
E. Claim settlement ratio
Answer: B. Insurance density is premium per capita.
16 Relative to developed markets, India's insurance penetration and density are generally:
A. Higher than the global average
B. Lower than developed markets, but on a rising trend
C. Exactly equal to the US
D. Zero
E. Declining every year
Answer: B. India's metrics remain below developed-market levels but are rising.
17 Which body publishes India's authoritative annual insurance statistics, including penetration and density?
A. SEBI
B. IRDAI (Handbook on Indian Insurance Statistics)
C. RBI
D. NABARD
E. PFRDA
Answer: B. IRDAI publishes the Handbook on Indian Insurance Statistics.
đŸ”ĸ Number of Insurance Companies
18 India's sole public-sector life insurer is:
A. GIC
B. LIC
C. ECGC
D. AIC
E. NHB
Answer: B. LIC is India's sole public-sector life insurer.
19 "Standalone Health Insurers" refer to companies that:
A. Sell only health insurance products, not life or other general lines
B. Sell only life insurance
C. Are foreign reinsurance branches
D. Are agriculture-only insurers
E. Are brokers, not insurers
Answer: A. Standalone health insurers focus exclusively on health insurance.
20 India's sole domestic reinsurer is:
A. LIC
B. GIC Re
C. New India Assurance
D. ECGC
E. Lloyd's India
Answer: B. GIC Re is India's sole domestic reinsurer.
📜 Legislations
21 The principal legislation governing insurance business in India is the:
A. Insurance Act, 1938
B. Companies Act, 2013
C. Banking Regulation Act, 1949
D. SEBI Act, 1992
E. FEMA, 1999
Answer: A. The Insurance Act, 1938 is the principal insurance legislation.
22 IRDAI was established under the:
A. Insurance Act, 1938
B. LIC Act, 1956
C. IRDA Act, 1999
D. GIC Act, 1972
E. Companies Act, 2013
Answer: C. IRDAI was established under the IRDA Act, 1999.
23 Which Act created LIC by nationalising life insurance?
A. Insurance Act, 1938
B. LIC Act, 1956
C. GIC Act, 1972
D. IRDA Act, 1999
E. Insurance Laws (Amendment) Act, 2015
Answer: B. The LIC Act, 1956 created LIC.
24 Which Act enabled composite insurance licensing alongside raising the FDI cap to 100%?
A. Insurance Act, 1938
B. Insurance Laws (Amendment) Act, 2015
C. Insurance (Amendment) Act, 2021
D. Insurance Laws (Amendment) Act, 2025
E. LIC Act, 1956
Answer: D. The 2025 Amendment Act enabled composite licensing and 100% FDI.
🧑‍đŸ’ŧ Insurance Intermediaries
25 Unlike an agent, an insurance broker represents:
A. Only one insurer
B. The customer, sourcing/comparing across multiple insurers
C. Only the government
D. Only RBI
E. Only reinsurers
Answer: B. Brokers represent the customer across multiple insurers.
26 Who independently assesses the quantum of loss on a general insurance claim?
A. Insurance agent
B. Surveyor and loss assessor
C. Web aggregator
D. PoSP
E. Reinsurer only
Answer: B. Surveyors and loss assessors assess claim quantum.
27 TPAs (Third Party Administrators) are most closely associated with processing:
A. Health insurance claims, especially cashless hospitalisation
B. Motor insurance premiums only
C. Life insurance underwriting
D. Reinsurance treaties
E. Export credit guarantees
Answer: A. TPAs primarily handle health insurance claims processing.
28 Point of Sales Persons (PoSPs) are permitted to sell:
A. Any insurance product without restriction
B. Simple, pre-defined insurance products, after limited/light-touch certification
C. Only reinsurance treaties
D. Only group corporate policies above ₹10 crore
E. Only foreign currency policies
Answer: B. PoSPs sell simple, standardised products after basic certification.
29 Web aggregators in insurance primarily serve to:
A. Underwrite policies directly
B. Display and compare insurance products from multiple insurers online
C. Settle claims on behalf of insurers
D. Reinsure large risks
E. Regulate the insurance sector
Answer: B. Web aggregators display/compare products online.
🔁 Reinsurance
30 Reinsurance is best described as:
A. Insurance for insurers, spreading risk from a primary insurer to another insurer
B. A loan from RBI to an insurer
C. A tax on insurance premiums
D. A type of life insurance product for individuals
E. A government subsidy scheme
Answer: A. Reinsurance is "insurance for insurers."
31 "Obligatory cession" in the Indian reinsurance context refers to:
A. A requirement for Indian insurers to cede a specified minimum share of each policy to GIC Re
B. A ban on all reinsurance
C. A tax paid by policyholders
D. A rule applicable only to life insurers
E. A voluntary, optional practice with no regulatory basis
Answer: A. Obligatory cession requires ceding a minimum share to GIC Re.
32 Foreign Reinsurance Branches (FRBs) and Lloyd's India were enabled to operate in India following:
A. The 1938 Insurance Act alone
B. The sector-opening reforms post the 2015 Insurance Laws Amendment
C. The 1956 nationalisation
D. The 1972 nationalisation
E. No such entities operate in India
Answer: B. FRBs/Lloyd's India entered following the sector's post-2015 opening.
33 The primary purpose of reinsurance is to:
A. Increase a primary insurer's profits with zero risk transfer
B. Spread catastrophic/concentrated risk and protect a primary insurer's solvency
C. Replace the need for any insurance regulator
D. Eliminate the need for policyholders to pay premiums
E. Set the repo rate
Answer: B. Reinsurance spreads risk and protects insurer solvency.
💾 Insurance Repository
34 An electronic Insurance Account (eIA) is conceptually most similar to a:
A. Demat account for securities
B. Savings bank account
C. Fixed deposit receipt
D. Credit card statement
E. Provident fund passbook
Answer: A. An eIA is the insurance-sector equivalent of a demat account.
35 Insurance Repositories were introduced in India starting:
A. 1999
B. 2013
C. 2015
D. 2021
E. 1956
Answer: B. Insurance Repositories were introduced from 2013.
36 A key benefit of holding policies via an eIA is:
A. Guaranteed higher returns on the policy
B. A single consolidated view of all policies with easier servicing and reduced fraud risk
C. Automatic waiver of all premiums
D. Elimination of the need for a nominee
E. Guaranteed tax exemption
Answer: B. eIAs give a consolidated, easily-serviced, fraud-resistant record.
37 Can policies from different insurers (life, health, general) be held in a single eIA?
A. No, one eIA per insurer is required
B. Yes, a single eIA can hold policies from multiple insurers/lines
C. Only life policies are eligible
D. Only group policies are eligible
E. eIAs cannot hold any policies
Answer: B. A single eIA can consolidate policies across insurers and lines.
🧩 Mixed / Comprehensive
38 Which of the following correctly orders these insurance-sector events chronologically?
A. Insurance Act 1938 → LIC 1956 → GIC 1972 → IRDA Act 1999
B. IRDA Act 1999 → LIC 1956 → GIC 1972 → Insurance Act 1938
C. GIC 1972 → LIC 1956 → Insurance Act 1938 → IRDA Act 1999
D. LIC 1956 → Insurance Act 1938 → IRDA Act 1999 → GIC 1972
E. All occurred in the same year
Answer: A. This is the correct chronological order.
39 IRDAI's long-term stated mission for the insurance sector is often summarised as:
A. Insurance for All by 2047
B. Zero Insurance by 2030
C. Cashless India by 2025
D. Housing for All by 2022
E. Digital India by 2020
Answer: A. IRDAI's mission is often framed as "Insurance for All by 2047."
40 Which regulator directly oversees insurance companies and intermediaries in India?
A. RBI
B. SEBI
C. IRDAI
D. PFRDA
E. NABARD
Answer: C. IRDAI regulates insurance companies and intermediaries.
41 Bancassurance, a distribution model relevant to bankers, refers to:
A. Banks selling insurance products through their branch network
B. Insurers issuing currency
C. RBI regulating insurers
D. Insurers accepting demand deposits
E. A type of reinsurance treaty only
Answer: A. Bancassurance is banks distributing insurance via their branches.
42 Which of the following is generally a condition attached to raising the FDI cap to 100% in insurance?
A. No conditions whatsoever
B. Safeguards such as retaining a specified share of premium/investment within India
C. A ban on any Indian directors
D. Mandatory closure of LIC
E. Complete prohibition on domestic insurers
Answer: B. Higher FDI comes with India-retention/other safeguard conditions.
43 Which of the following would be classified under "Life Insurance" rather than "General Insurance"?
A. Motor insurance
B. A ULIP (Unit Linked Insurance Plan)
C. Fire insurance
D. Marine insurance
E. Crop insurance
Answer: B. A ULIP is a life insurance product.
44 Which of the following best distinguishes an insurance "agent" from an insurance "broker"?
A. Agents represent insurer(s); brokers represent the customer across multiple insurers
B. Brokers represent only one insurer; agents represent the customer
C. There is no legal distinction
D. Only brokers can sell life insurance
E. Only agents can sell general insurance
Answer: A. This is the core agent-vs-broker distinction.
45 Why is deep, longstanding brand trust cited as a reason LIC retains dominant market share despite competition?
A. LIC is legally barred from losing market share
B. Decades as a public-sector monopoly built extensive distribution and customer trust
C. Private insurers are barred from selling life products
D. LIC offers the lowest premiums by law
E. LIC has no private competitors
Answer: B. LIC's decades-long incumbency built trust and reach.
46 Which statement about GIC's post-1972 structure is correct?
A. GIC and its four subsidiaries were formed by nationalising general insurers
B. GIC was a private company throughout
C. GIC never existed
D. GIC only insures life products
E. GIC was formed before LIC
Answer: A. GIC and its subsidiaries emerged from the 1972 nationalisation.
47 A bank wanting to distribute a partner insurer's policies through its branches would primarily rely on the concept of:
A. Reinsurance
B. Bancassurance
C. Obligatory cession
D. Insurance Repository
E. Composite licensing only
Answer: B. Bancassurance is the bank-channel insurance distribution model.
48 A "composite licence," enabled under the 2025 Amendment, would most likely allow an insurer to:
A. Sell both life and general insurance products under one licence, rather than separate entities
B. Avoid all IRDAI regulation
C. Operate without any capital requirement
D. Merge with a bank automatically
E. Issue currency
Answer: A. Composite licensing allows combined life+general (and other) business under one licence.
49 Which of the following would most plausibly explain rising insurance density in India over time?
A. Falling per-capita income
B. Rising per-capita income and expanding insurance awareness/distribution
C. A shrinking population
D. Reduced number of insurers
E. Banning of all insurance products
Answer: B. Rising income and awareness drive density growth.
50 Overall, which statement best summarises India's insurance sector evolution?
A. From private fragmentation (pre-1956) → nationalisation (1956/1972) → re-liberalisation with rising FDI caps (1999-2025)
B. Always fully private with no government role
C. Always a single monopoly with no change since 1818
D. Nationalised only after 2015
E. FDI has been falling steadily since 1999
Answer: A. This correctly captures the sector's full arc.

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Disclaimer: This article is prepared for educational and exam-preparation purposes only. Company counts, penetration/density figures and FDI provisions reflect the position as of September 2026 and are updated periodically by IRDAI and through legislative amendments. Candidates should cross-check the latest official IIBF syllabus and IRDAI's current data before the exam.
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