Insurance and Pension Sector: IRDAI, PFRDA and NPS Notes

The correct answer is C, Hyderabad. The Insurance Regulatory and Development Authority of India was constituted under the Act of 1999, became a statutory body in April 2000 and has its head office at Hyderabad, having moved there from Delhi in its early years. Option A is wrong because Mumbai is the head office of the Life Insurance Corporation of India, of the General Insurance Corporation and of the Securities and Exchange Board of India, which makes it a natural but incorrect choice here. Option B is wrong because New Delhi is where the Pension Fund Regulatory and Development Authority sits, so the two regulators in this topic have different cities and are frequently interchanged in questions. Option D is wrong because Bengaluru hosts no financial sector regulator of this kind. The pairing to memorise is insurance regulator at Hyderabad and pension regulator at New Delhi.

The correct answer is A, R. N. Malhotra. The committee on insurance sector reforms was appointed in 1993 under R. N. Malhotra, a former Governor of the Reserve Bank of India. It recommended allowing private and foreign participation, raising the capital requirement for insurers and setting up an independent regulatory authority, and from it came the Insurance Regulatory and Development Authority Act of 1999. Option B is wrong because the Narasimham committees of 1991 and 1998 dealt with banking sector reform, prudential norms and the structure of the banking system, not insurance. Option C is wrong because Raghuram Rajan chaired a committee on financial sector reforms in 2008 and later served as Governor of the Reserve Bank, but the insurance regulator predates that work. Option D is wrong because Y. V. Reddy was a Governor of the Reserve Bank and is associated with the finance commission and monetary policy, not this committee.

The correct answer is B, 1956. The Life Insurance Corporation of India came into being on 1 September 1956 under the Life Insurance Corporation Act, which nationalised life insurance in India and took over the business of about two hundred and forty-five insurers; its head office is at Mumbai. Option A is wrong because 1938 is the year of the Insurance Act, which remains the principal law governing the sector but did not create the Corporation. Option C is wrong because 1972 is the year of the General Insurance Business Nationalisation Act, which nationalised general insurance and created the General Insurance Corporation with its four subsidiaries. Option D is wrong because 1999 is the year of the Act that set up the insurance regulator, which became a statutory body in April 2000. The sequence 1938, 1956, 1972, 1999 is worth memorising as a chain.

The correct answer is C, 2013. The authority first worked as an interim body set up by a government resolution in October 2003, and it was given statutory status by the Pension Fund Regulatory and Development Authority Act of 2013, which came into force on 1 February 2014. Option A is wrong because 2003 is the year of the interim body, a date examiners often offer as a near miss; the authority had no statutory backing then. Option B is wrong because 1 May 2009 is the date from which the National Pension System was opened to all citizens of India on a voluntary basis, not the date of the Act. Option D is wrong because 2015 is the year of the Insurance Laws Amendment Act, which renamed the insurance regulator and raised foreign investment to forty-nine per cent, and also the year the Atal Pension Yojana was launched.

The correct answer is B, 1 January 2004. The National Pension System, a defined contribution arrangement, applies compulsorily to central government employees who joined service on or after 1 January 2004, with the armed forces excluded; employees recruited before that date remain under the older defined benefit pension. Option A is wrong because April 2000 is when the insurance regulator became a statutory body, not a pension milestone. Option C is wrong because 1 May 2009 is the date from which the system was extended to all citizens of India on a voluntary basis, which is a different and equally examinable date. Option D is wrong because 1 February 2014 is the date the Pension Fund Regulatory and Development Authority Act of 2013 came into force. Hold the three dates together: 2004 for government employees, 2009 for all citizens, 2014 for the statute.

The correct answer is B. Under the National Pension System a subscriber holds a Permanent Retirement Account Number and a Tier I account, which is the pension account proper and permits only restricted withdrawal before retirement, and may additionally open a Tier II account, which is a voluntary savings account from which money can be withdrawn freely. Option A is wrong because it reverses the two, the commonest error in this question. Option C is wrong because free withdrawal is the feature of Tier II alone; if Tier I allowed it, the scheme would cease to be a pension arrangement. Option D is wrong because Tier II is an add-on and cannot exist on its own: an active Tier I account is a precondition for opening it. The architecture around these accounts, the trust, the recordkeeping agency, the pension funds and the points of presence, is also asked.

The correct answer is A, 18 to 40 years. The Atal Pension Yojana was launched in 2015 in place of the earlier Swavalamban scheme and is aimed at workers of the unorganised sector. A subscriber must be between eighteen and forty years of age when joining, so that at least twenty years of contribution are made before the guaranteed monthly pension of one thousand to five thousand rupees begins at the age of sixty. It is administered by the Pension Fund Regulatory and Development Authority. Option B is wrong because eighteen to fifty is the eligible age band for the Pradhan Mantri Jeevan Jyoti Bima Yojana, a life insurance cover. Option C is wrong because there is no such band in this scheme. Option D is wrong because joining at fifty-nine would leave no accumulation period, which is why the upper limit is forty.

The correct answer is B, indemnity. The principle of indemnity means a general insurance claim restores the insured to the position held before the loss but never pays more than the loss actually suffered, which is why a motor or fire claim is settled on the value of the damage. It does not apply to life insurance, because a human life has no measurable money value and the sum assured is fixed in advance. Option A is wrong because utmost good faith requires both parties to disclose all material facts, and it applies to every insurance contract including life. Option C is wrong because subrogation means that once the insurer has paid a claim it takes over the insured rights against any third party responsible for the loss. Option D is wrong because insurable interest means the insured must stand to suffer from the event insured against, and it too applies to life insurance.

The correct answer is A, the Employees Provident Fund Organisation. It functions under the Ministry of Labour and Employment and administers three schemes under the Employees Provident Funds and Miscellaneous Provisions Act of 1952: the Employees Provident Fund Scheme of 1952, the Employees Pension Scheme of 1995 and the Employees Deposit Linked Insurance Scheme of 1976. Because these are covered by their own enactment, they fall outside the remit of the Pension Fund Regulatory and Development Authority, which regulates the National Pension System and pension schemes not covered by any other law. Option B is wrong because the Life Insurance Corporation is an insurer regulated by the insurance authority. Option C is wrong because the National Pension System Trust holds the assets of that system and is under the pension regulator. Option D is wrong because the General Insurance Corporation is the national reinsurer.

The correct answer is C, 74 per cent. The Insurance Amendment Act of 2021 amended the Insurance Act of 1938 to raise the permissible foreign direct investment in an Indian insurance company to seventy-four per cent, subject to conditions designed to keep management and control in Indian hands. Option A is wrong because twenty-six per cent was the original ceiling fixed when the sector was opened to private participation under the Act of 1999. Option B is wrong because forty-nine per cent was the intermediate ceiling set by the Insurance Laws Amendment Act of 2015, the same Act that renamed the regulator the Insurance Regulatory and Development Authority of India. Option D is wrong as a description of the 2021 Act, which stopped at seventy-four per cent. Learn the ladder as a sequence: 26 in 1999, 49 in 2015 and 74 in 2021.

The correct answer is B, 2 per cent. The Pradhan Mantri Fasal Bima Yojana, launched in 2016, fixes the farmer share of the premium at two per cent of the sum insured for kharif food and oilseed crops, with the rest of the actuarial premium shared by the central and state governments. Option A is wrong because one and a half per cent is the farmer share for rabi crops, the figure most often swapped with the kharif rate. Option C is wrong because five per cent applies to annual commercial and horticultural crops, which carry a higher risk. Option D is wrong because ten per cent is not a rate under this scheme at all. The three rates, two for kharif, one and a half for rabi and five for commercial and horticultural crops, are a standard one-mark question.

The correct answer is B, the General Insurance Corporation of India. It was created under the General Insurance Business Nationalisation Act of 1972 as a holding company with four subsidiaries, namely National Insurance, New India Assurance, Oriental Insurance and United India Insurance. When the sector was opened to private insurers, the four subsidiaries were detached in 2000 and the Corporation was reconstituted as the national reinsurer, so it now insures insurers rather than the public. Option A is wrong because the Life Insurance Corporation is a life insurer created in 1956 and has no reinsurance mandate. Option C is wrong because New India Assurance is one of the four detached subsidiaries and writes ordinary general insurance. Option D is wrong because the Export Credit Guarantee Corporation covers exporters against payment risk and is not the national reinsurer.