Fundamentals of Indian Insurance Law and the IRDAI Regulatory Regime

A primer on the structure, participants, and legal framework of the Indian insurance market.

1. The Regulatory Framework

Q1. What are the primary legislations governing the insurance sector in India?

The insurance sector is principally governed by three statutes: (i) the Insurance Act, 1938, (“Insurance Act”) the foundational law regulating the carrying on of insurance business in India; (ii) the Insurance Regulatory and Development Authority Act, 1999 (“IRDA Act”), which established the sector regulator; and (iii) the Life Insurance Corporation Act, 1956 (“LIC Act”), which governs the state-owned Life Insurance Corporation (“LIC”). All three statutes were substantially amended by the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“2025 Act”).

Q2. Who is the insurance regulator in India and what is its mandate?

The Insurance Regulatory and Development Authority of India (“IRDAI”) is the statutory regulator for the insurance sector. Established under the IRDA Act, 1999, its mandate includes protecting the interests of policyholders; promoting of speedy and orderly growth of the insurance industry; and ensuring the financial soundness and integrity of insurers. IRDAI issues regulations, guidelines, circulars, and orders covering all aspects of insurance from registration of insurers and intermediaries to product approvals, investment norms, and claims management.

Q3. What key changes were introduced by the 2025 Act?

The 2025 Act introduced several landmark reforms: (i) the foreign direct investment (“FDI”) cap in private insurers was raised from 74% to 100% under the automatic route; (ii) the net-owned fund requirement for foreign reinsurance branches (“FRBs”) was reduced from Rs. 5,000 crore (approx. USD 527.6 million)* to Rs. 1,000 crore (approx. USD 105.5 million)*; (iii) perpetual registration was introduced for insurance intermediaries subject to payment of annual fees as may be specified; and (iv) the definition of ‘insurance intermediary’ was expanded to include managing general agents (“MGA”) and insurance repositories.

2. Classes of insurance businesses

Q4. What are the broad classes of insurance businesses that may be carried on in India?

Under the Insurance Act, insurance businesses in India are classified into four broad classes: (i) life insurance business (“LIB”); (ii) general insurance business (“GIB”); (iii) health insurance business (“HIB”); and (iv) reinsurance business (“RB”). Companies registering under each category require a separate certificate of registration from IRDAI. Carrying on an insurance business without registration is a criminal offence under the Insurance Act and can lead to a penalty not exceeding Rs. 25 crores (approx. USD 2.637 million)* and imprisonment which may extend to ten years.

Q5. What is LIB and what products does it typically cover?

LIB involves contracts under which the insurer agrees to pay a specified sum upon the death of the insured (except death by accident only), or upon the occurrence of a contingency dependent on human life. According to the Insurance Act, LIB is deemed to include granting of disability benefits (if provided in the contract of insurance), granting of annuities upon human life and granting of superannuation allowances. It includes unit linked insurance policy or scrips or any such instrument.  As of April 2025, 26 life insurers operate in India, including the state-owned LIC.

Q6. What is GIB and what classes of risk does it cover?

GIB includes fire, marine or miscellaneous insurance business whether carried on singly or in combination of one or more of them. As of 31 March 2025, 25 general insurers operate in India (excluding standalone health insurers), including four public sector entities.

Q7. What is HIB and how does it differ from a GIB?

A health insurer is a company licensed exclusively to underwrite health-related insurance covering individual and group health, personal accident, and travel insurance products. Unlike a general insurer, which may cover a wide range of non-life risks, a HIB’s underwriting is restricted to health lines. As of April 2025, six standalone HIBs operate in India.

Q8. What is reinsurance and who is permitted to carry on RB in India?

Reinsurance is the arrangement by which an insurer transfers a portion of its underwritten risk to another insurer (the reinsurer) who accepts the risk for a mutually acceptable premium. As of March 2025, two Indian reinsurance businesses include (i) General Insurance Corporation of India (“GIC Re”), the state-owned national reinsurer; and (ii) Valueattics Reinsurance Limited. GIC Re has been providing reinsurance support to Indian and foreign insurers. Further, there are FRBs of overseas reinsurers which provide reinsurance service in India are required to be registered with IRDAI. Indian insurers are required to follow an order of preference prescribed by IRDAI when ceding reinsurance, prioritising Indian reinsurers before placing business cross-border.

Q9. Can a single insurer carry on both LIB and GIB (i.e., a composite insurer)?

The Insurance Act requires LIB and GIB to be conducted in separate legal entities. It was proposed to introduce a composite licensing framework through the 2025 Act. However, the final bill which was passed as the 2025 Act does not provide for such a provision. However, the 2025 Act amends the definition of “class of insurance business” to include such other class of insurance business as may be notified by the central government. Thus, the central government has the power to include a new class of insurance business.

3. Setting up an Insurance Business — Requirements for registration and capital

Q10. What is the process for obtaining a certificate of registration from IRDAI to carry on insurance business?

Registration involves multiple stages: (i) incorporation of a company under the Companies Act, 2013; (ii) obtaining a ‘no objection’ certificate from IRDAI; (iii) submission of a Form IRDAI/R1 to IRDAI along with certain documents including certificate of incorporation, memorandum of association, projection of business, details of promoter; (iv) submission of Form IRDAI/R2 along with certain documents including affidavit backing capital requirements, shareholding pattern, details of foreign investment etc.; (v) IRDAI’s grant of an approval in the Form IRDAI/R3 upon satisfaction of “fit-and-proper” criteria and business viability.

Post-registration, the insurer must file regular returns and reports with IRDAI.

Q11. What are the minimum paid-up capital requirements for life, general, health, and reinsurance businesses?

The minimum paid-up capital requirements are:

Sl. No.	Class of insurance business	Minimum paid-up capital requirement
1	Life insurance	Rs. 100 crore (approx. USD 10.6 million)*
2	General insurance	Rs. 100 crore (approx. USD 10.6 million)*;
3	Health insurance	Rs. 100 crore (approx. USD 10.6 million)*;
4	Reinsurance	Rs. 200 crore (approx. USD 21.1 million)*.

For foreign reinsurance businesses, the net-owned fund requirement was reduced from Rs. 5,000 crore (approx. USD 527.6 million)* to Rs. 1,000 crore (approx. USD 105.5 million)* pursuant to the 2025 Act. Minimum capital requirements for insurance cooperative societies have also been removed.

Q12. Who can be a promoter of an insurance company in India, and what eligibility criteria apply?

Promoters may be Indian or foreign companies, financial institutions, banks, or other eligible bodies corporate. All promoters must satisfy the criteria assessed under the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024 covering financial soundness, integrity, competence, and business track record. Foreign promoters must additionally comply with Foreign Exchange Management Act (“FEMA”) and FDI policy requirements. With 100% FDI now permitted, wholly foreign-owned insurance companies are permissible subject to registration with IRDAI and applicable governance conditions.

Q13. What ongoing solvency and financial soundness requirements must Indian insurers maintain?

Every insurer and reinsurer must at all times maintain an excess value of assets over the amount of liabilities of not less than fifty percent of the minimum paid up capital requirements. If not complied with, the insurer or reinsurer in question shall be deemed to be insolvent.

Further, the Insurance Act provides the power to IRDAI to specify a ‘control level of solvency’. Insurers must maintain a solvency ratio of at least 1.5 at all times meaning the available solvency margin must be at least 150% of the required solvency margin. If the solvency ratio falls below the prescribed level, the entity must provide a financial plan to IRDAI to correct the deficiency. If the financial plan is not complied with, it shall be deemed to be a default in compliance of the Insurance Act. Investment of insurer funds is governed by the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations,2024 which prescribe asset class limits and prudential norms to ensure safety, liquidity, and returns. Quarterly solvency returns must be filed with IRDAI.

4. Foreign Direct Investment in Insurance

Q14. What is the current FDI limit applicable to private insurance companies in India?

Following the 2025 Act and the consequential amendment to the FEMA (Non-Debt Instruments) Rules, 2019 (notified in May 2026), FDI in private insurance companies is now permissible up to 100% of paid-up equity capital. This applies across all classes of insurance businesses including life, general, health, and reinsurance. India’s FDI cap in insurance was progressively liberalised from 26% (2000) to 49% (2015), then 74% (2021), and finally 100% (2025–26).

Q15. Under what route is FDI in insurance now permitted – automatic or government approval?

FDI up to 100% in insurance companies is now permitted under the automatic route meaning no prior government approval is required. This represents a significant liberalisation since previously, FDI beyond a certain percentage required government approval. Foreign investors may now invest directly in Indian insurance companies subject only to IRDAI’s requirements for registration, solvency and governance.

Q16. Are there governance conditions or safeguards attached to 100% foreign ownership of an Indian insurer?

Yes. Notwithstanding full foreign ownership, it is mandated that at least one of the chairperson, managing director, or chief executive officer of the insurer must be a resident Indian citizen. Additionally, all insurers with foreign investment remain subject to comprehensive IRDAI oversight, including compliance with Indian insurance regulations, product approval requirements, investment norms, and solvency standards.

Q17. Does the 100% FDI limit extend to insurance intermediaries such as brokers and corporate agents?

Yes. The 100% FDI limit extends to insurance intermediaries including insurance brokers, reinsurance brokers, composite brokers, corporate agents, third party administrators (“TPAs”), surveyors and loss assessors (“SLAs”), MGAs, and insurance repositories, subject to compliance with the applicable IRDAI regulations governing each category of intermediary.

Q18. What is the special FDI rule applicable to the LIC?

LIC is a statutory body incorporated under the LIC Act and is treated separately from private insurers. Foreign investment in LIC is capped at 20% of its paid-up equity capital, irrespective of the general 100% FDI limit applicable to private insurers. This carve-out preserves government majority ownership and control of LIC, which commands the dominant share of India’s life insurance market.

5. Shareholders and Ownership Structure

Q19. What lock-in and transfer restrictions apply to the shareholding of promoters in an insurance company?

Under the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024, where the insurer is not listed on any stock exchange recognised in India, promoter shareholding is subject to lock-in periods based on time of investment. For investments made after 15 years from the grant of certificate of registration, the lock-in is one year for promoters. Further, investors holding 1% or less are exempt from lock-in requirements.

Q20. What disclosures and IRDAI approvals are required before a change in control or significant acquisition of shares in an insurer?

Any acquisition of 5% or more of the voting equity of a registered insurer, or any transaction likely to result in a change of control, requires prior approval of IRDAI. The applicant must satisfy IRDAI’s fit and proper criteria and demonstrate adequate financial capacity. If the insurer is a listed entity, compliance with SEBI’s Substantial Acquisition of Shares and Takeovers Regulations, 2011 is also required simultaneously.

6. Insurance Distribution — Intermediaries Overview

Q21. What categories of intermediaries are permitted to distribute or solicit insurance business in India?

IRDAI recognises the following categories of insurance intermediaries: (i) insurance brokers); (ii) re-insurance brokers; (iii) insurance consultants; (iv) corporate agents (including banks and NBFCs); (v) TPAs; (vi) SLAs; (vii) MGAs and (viii) insurance repositories. Each category operates under specific IRDAI regulations and registration requirements.

Q22. What is the key distinction between an insurance agent and an insurance broker?

An insurance agent acts on behalf of and is appointed by a specific insurer (or up to one insurer per class of business), earning commission from that insurer. An insurance broker, by contrast, acts on behalf of the policyholder/client, can approach multiple insurers to source the best available product, and owes a duty of care to the client. Brokers must disclose their remuneration and any conflicts of interest. Brokers are also subject to higher minimum capital requirements and more comprehensive regulatory obligations than agents.

7. Insurance Agents

Q23. Who is an insurance agent, how is an agent appointed, and what licensing requirements apply?

An insurance agent is an individual appointed to solicit and procure insurance business on behalf of one or more insurers. To be appointed, a candidate must pass the IRDAI-prescribed examination, meet minimum educational qualifications and undergo training (as provided in the board approved policy of the insurer) to be appointed by an insurer (which acts as the principal). The licence is granted through the insurer. Point-of-sales persons are a simplified agent category permitted to sell standardised, pre-approved insurance products.

Q24. How many insurers can an individual insurance agent represent simultaneously?

An individual insurance agent may represent one life insurer, one general insurer, and one health insurer at the same time, therefore, a maximum of three insurers across three classes of business. Agents are not permitted to hold appointments across competing insurers within the same class of business.

8. Corporate Agents

Q25. What is a corporate agent and who qualifies to act as one?

A corporate agent is a company, LLP, bank, NBFC, cooperative society, or other body corporate registered by IRDAI to solicit and procure insurance business. To qualify, the applicant must satisfy IRDAI’s fit-and-proper criteria, designate a principal officer holding an IRDAI-recognised qualification, and appoint specified persons to manage client interactions. The category is governed by the IRDAI (Registration of Corporate Agents) Regulations, 2015.

Q26. Can banks and NBFCs act as corporate agents, and how many insurers may they tie up with in each class of business?

Yes. Banks and NBFCs are among the most prominent corporate agents in India, distributing insurance through their branch networks, a model commonly referred to as bancassurance. Under IRDAI regulations, a corporate agent (including a bank or NBFC) of each class may have arrangements with up to nine life, general or health insurers. This multi-tie arrangement gives policyholders a wider product choice while preserving a degree of strategic alignment between the bank and its insurer partners.

9. Insurance Brokers

Q27. What is an insurance broker and what categories of broker licence does IRDAI grant?

An insurance broker is an IRDAI-registered independent intermediary that arranges insurance or reinsurance on behalf of clients. Under the IRDAI (Insurance Brokers) Regulations, 2018, IRDAI grants the following categories of broker licence: (i) Direct broker (life); (ii) Direct broker (general); (iii) Direct broker (life and general); (iv) Reinsurance broker; and (v) Composite broker (covering both direct insurance and reinsurance). Following the 2025 Act, broker registrations are perpetual, subject to annual compliance and fee requirements.

Q28. What are the capital and net-worth requirements for different categories of insurance broker?

Under the IRDAI (Insurance Brokers) Regulations, 2018, the minimum requirements are:

Sl. No.	Category of insurance broker	Minimum paid-up capital requirement	Net worth
1	Direct broker	Rs. 75 lakh (approx. USD 79,100)*	Rs. 50 lakh (approx. USD 52,800)*
2	Reinsurance broker	Rs. 4 crore (approx. USD 422,000)*	Rs. 2 crore (approx. USD 211,000)*;
3	Composite broker	Rs. 5 crore (approx. USD 527,600)*	Rs. 2.5 crore (approx. USD 263,800)*

In addition, brokers must maintain professional indemnity insurance and deposit a security amount with a scheduled bank as a financial safeguard.

Q29. How does a composite insurance broker differ from a direct or reinsurance broker?

A composite broker holds the broadest licence, being authorised to place both direct insurance business (covering life and general insurance clients) and reinsurance on behalf of insurers located in India or abroad. A direct broker is limited to placing direct insurance only (life, general, or both), while a reinsurance broker arranges only reinsurance treaties and facultative placements. Given their broader scope, composite brokers face the highest capital requirement. Further, composite brokers must maintain internal audit systems and a dedicated compliance officer.

10. Other Key Intermediaries and Service Providers

Q30. What is an insurance web aggregator and what services may it offer?

An insurance web aggregator is an IRDAI-registered entity that operates a digital platform enabling consumers to compare insurance products from multiple insurers on parameters such as premium, coverage, and features and to facilitate the purchase of those products online. Web aggregators must display objective and accurate product information, clearly disclose their remuneration, and comply with applicable data protection norms. They are governed by the IRDAI (Insurance Web Aggregators) Regulations,2017.

Q31. What is an Insurance Marketing Firm (“IMF”) and how does it differ from a broker or corporate agent?

An IMF is an IRDAI-registered entity that may solicit and procure insurance business while also distributing other financial products such as mutual funds and banking products. IMFs may tie up with a limited number of insurers (maximum of six life, six general and six health insurers, at any point of time) and may employ insurance salespersons. Unlike a broker, an IMF does not owe a client-side fiduciary duty and cannot place reinsurance. Unlike a corporate agent, an IMF is expressly permitted to offer non-insurance financial services alongside insurance distribution.

Q32. What is a Third-Party Administrator (“TPA”) and what functions does it perform in the insurance ecosystem?

A TPA is an IRDAI-registered company that provides health insurance administration and claims processing services on behalf of health insurers. Its functions include servicing of claims under health insurance policies by way of settlement of claims other than cashless claims or both; providing pre-authorisation for cashless treatment; conducting pre-insurance medical examinations; and operating helplines. TPAs may only perform these specified functions and are prohibited from engaging in any other commercial activity.

Q33. What is the role of a surveyor and loss assessor (SLA) in the claims settlement process?

An SLA is an IRDAI-licensed professional appointed by a general insurer to independently assess the cause, nature, extent, and quantum of loss or damage upon the filing of a non-life insurance claim. The appointment of a licensed SLA is mandatory for claims exceeding Rs. 50,000 (approx. USD 528)* in cases of motor insurance and for claims other than motor insurance, the threshold prescribed is Rs. 1,00,000 (approx. USD 1,055)*. The SLA’s independent assessment report forms the primary evidentiary basis for the insurer’s decision on the quantum of the claim settlement.

Q34. What is the role of the appointed actuary in an insurance company, and what regulations govern the actuarial function in India?

Every registered insurer must appoint a qualified actuary its Appointed Actuary. The Appointed Actuary is responsible for: certifying the valuation of insurance liabilities; ensuring the adequacy of premium rates; overseeing the insurer’s solvency margin; and certifying the annual actuarial report submitted to IRDAI. The function is governed by the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 and the Master Circular issued in May 2024.

11. Policyholder Protection and Grievance Redressal

Q35. What mechanisms exist under Indian law for the protection of policyholders’ interests?

Policyholder protection is embedded at multiple levels: (i) IRDAI’s product approval process ensures fairness and transparency in insurance products; (ii) insurers must maintain an internal grievance redressal system and resolve complaints within prescribed timelines; (iii) a free-look period (30 days from receipt of the document) allows policyholders to cancel a recently purchased policy and obtain a refund; (iv) standardised policy wordings and mandatory pre-sale disclosures protect informed consumer decision-making; (v) the BIMA Bharosa portal provides a centralised online complaint platform; and (vi) the Insurance Ombudsman scheme offers independent, dispute resolution.

Q36. How can a policyholder escalate a grievance against an insurer? What is the Insurance Ombudsman framework?

The Insurance Ombudsman framework, established under the Insurance Ombudsman Rules, 2017, offers policyholders a cost effective, informal, and expeditious mechanism to resolve complaints against insurers on various grounds. There are currently 17 Ombudsman offices across India. A policyholder may approach the Ombudsman if the insurer fails to resolve the complaint within 30 days of representation made to the insurer or if the resolution provided is unsatisfactory. The Ombudsman may pass awards of up to Rs. 50 lakh (approx. USD 52,800)* (enhanced from Rs. 30 lakh (approx. USD 31,700)* in November 2023). Awards passed by the Ombudsman are binding on the insurer. Policyholders who remain dissatisfied may approach the appropriate consumer forum or civil court.

Notes

* USD equivalents are indicative only, converted at the RBI Reference Rate as of 7 May 2026: USD 1 = INR 94.7759. Figures have been rounded for ease of reference.

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