IRDAI: Insurance Regulatory and Development Authority

India’s insurance sector needed one body to police it and to help it grow. That body is the Insurance Regulatory and Development Authority of India, or IRDAI. Parliament created it through the IRDA Act, 1999.

When did it start work?

IRDAI began as an autonomous regulator on 19 April 2000. Before that, a smaller interim body had worked since 1996. The 1999 Act turned the idea into a permanent statutory body.

What is its two-sided job?

IRDAI protects policyholders. It also promotes the orderly growth of the insurance business. Its head office is in Hyderabad, Telangana. Its older short form was IRDA, without the final “I” for India.

A regulator this important did not appear overnight. A government committee designed it first.

What did the Malhotra Committee do?

The Government set up the Malhotra Committee in 1993. It was headed by R. N. Malhotra, a former RBI Governor. It reported in 1994. It said private firms should be allowed into insurance. It also said foreign promoters should be allowed. It wanted regulation by an independent body.

What happened next?

The steps came in order. An interim Insurance Regulatory Authority was set up in 1996. Parliament passed the IRDA Act in 1999. The regulator took shape on 19 April 2000. In August 2000 it invited applications from private insurers. That opened the market to private insurers.

What was the foreign limit then?

An Indian insurance company could have foreign equity of at most 26 per cent. That was the cap when IRDAI started.

IRDAI is not run by one person. A small board of members runs it. The Central Government appoints them.

How is the board built?

Section 4 of the IRDA Act names three groups. They are one Chairperson, not more than five whole-time members and not more than four part-time members. So the board can have at most 10 members. These are ceilings, not fixed numbers.

Who must be on it?

The Government must pick people with knowledge of life insurance, general insurance or actuarial science. At least one person for each must sit among the Chairperson and whole-time members. The Chairperson and whole-time members hold office for a term of five years.

Section 14 of the IRDA Act sets the main duty. The Authority must regulate, promote and ensure orderly growth of insurance and re-insurance business. This is the line to remember.

What can you do if a claim is refused?

You can go to the Insurance Ombudsman. File the complaint within one year of the insurer’s rejection. You may also file one month after your complaint if the insurer gives no reply. You cannot use this route if a court, consumer forum or arbitrator is already handling the same matter. The compensation sought must not exceed ₹50 lakh.

What is Bima Sugam?

Bima Sugam is an online marketplace for insurance. IRDAI issued its Bima Sugam (Insurance Electronic Marketplace) Regulations in 2024.

This is the trap most likely to catch you. Many learners think Parliament passed an Act first. The first step was an Ordinance.

What happened in December 2014?

The President promulgated the Insurance Laws (Amendment) Ordinance, 2014 on 26 December 2014. An Ordinance is issued when Parliament is not in session. It has the force of law at once. This Ordinance amended the IRDA Act.

How did the Act come in?

Parliament later replaced the Ordinance with the Insurance Laws (Amendment) Act, 2015. The Act says it is deemed to have come into force on 26 December 2014. It added the words “of India” to the Authority’s name in the IRDA Act. So the name IRDAI dates from December 2014.

Remember: Ordinance first, on 26 December 2014. Act second, in 2015. A question that offers “an Act of Parliament” as the first instrument is testing this gap.

India’s insurance law got a major overhaul in December 2025. Foreign ownership was the headline change.

What did the Act do?

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 is Act No. 40 of 2025. It received the President’s assent on 20 December 2025. Parliament had passed the Bill on 17 December 2025. The Act amends three laws: the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the IRDA Act, 1999.

Which changes matter most?

• The foreign investment limit in Indian insurers rose from 74% to 100%.
• The net owned fund needed by foreign reinsurance branches fell from ₹5,000 crore to ₹1,000 crore.
• Intermediaries get one-time licensing. A licence can be suspended instead of cancelled straight away.
• The limit for seeking prior approval of a share-capital transfer rose from 1% to 5%.
• A Policyholders’ Education and Protection Fund will spread awareness about insurance.

The cap on foreign money in insurers rose in four steps. Each step needed a change in law.

What were the four steps?

At the start in 2000, the cap was 26%. The Insurance Laws (Amendment) Act, 2015 raised it to 49%. A 2021 amendment raised it from 49% to 74%. The Act of December 2025 raised it from 74% to 100%.

Why does the 2015 step matter?

The 2015 limit was a composite limit of 49%. It came with a safeguard of Indian ownership and control. The 2021 amendment also removed some limits on ownership and control.

Yes, IRDAI also guides cyber insurance. A past UPSC question tested exactly what it covers. Three costs are covered. One common cost is not.

What did IRDAI issue in 2021?

On 8 September 2021, IRDAI issued a guidance document on cyber insurance for individuals. It lets insurers design policies for hacking, phishing, identity theft, extortion and data breaches.

What is covered, and what is not?

• Covered: the cost of restoring your computer system after a malware attack.
• Covered: the cost of a specialist consultant during a cyber extortion attempt, such as ransomware.
• Covered: your legal defence costs if a third party sues you over a cyber incident.
• Not covered: a brand-new computer, even if someone wilfully damaged the old one. The sample policy wording lists no cover for replacing a computer.

IRDAI is not done reforming. A fresh consultation paper wants to rework how insurance gets sold. The news broke on 23 September 2026.

What would change?

• Fixed commission caps for distributors would return. The 2023 policy had removed hard caps.
• The Expense of Management cap for general insurers would fall from 30% to 25% in two years, then 20% in five years.
• For life insurers, the cap would be 15% in two years and 12.5% in five years.

What happens to distributor licences?

The paper proposes to restructure eight categories of distributors into three types. They are the Insurance Distribution Entity (IDE), the insurance distribution person (IDP) and the market infrastructure institution (MII). One IDE licence would not replace eight licences. It is one of three types. Comments are open until 25 October 2026.

Keep these facts together. Most questions on IRDAI use one of them.

What are the key dates?

• 1993: Malhotra Committee set up. 1994: its report.
• 1999: IRDA Act. 19 April 2000: IRDAI starts.
• 26 December 2014: Ordinance. 2015: Act.
• 20 December 2025: assent to the Sabka Bima Sabki Raksha Act.

What are the key limits?

• Board: at most 10 members, with a Chairperson, up to five whole-time and up to four part-time members.
• Foreign investment: 26%, then 49%, then 74%, then 100%.
• Vision: “Insurance for All by 2047” is IRDAI’s vision, not a clause of the 2025 Act.

Where does the 2047 target come from?

IRDAI committed to the vision of “Insurance for All by 2047”. It aims to give every citizen adequate life, health and property cover. PIB describes it as matching the national goal of Viksit Bharat 2047.