Risk Management in Banking and Insurance · General Insurance

Overview of General Insurance and Its Classes for CMA Final

Updated 11 October 2026 · Fact-checked

General insurance covers losses to property, liability, health and other risks, usually through contracts of one year or less, where the insurer pays only for actual loss. Section 10 names four classes: life, fire, marine and miscellaneous; motor and health are commonly treated as miscellaneous. To answer questions, define the business, name the class, and apply the Act's rule.

Understand Overview of General Insurance and Its Classes

General insurance is insurance other than life insurance. You pay a premium. The insurer promises to pay if a specified loss happens, such as a fire, a road accident, a lost cargo or a hospital bill. Most policies run for a year and are renewed. Life insurance, by contrast, is a long-term contract that pays a sum on death or maturity.

The Insurance Act, 1938 recognises the classes of life insurance, fire insurance, marine insurance and miscellaneous insurance. Section 10 says that an insurer carrying on business in more than one of these classes must keep a separate account of all receipts and payments for each class. This is the legal root of the class-wise structure you must know.

The Act also refers to health insurance and re-insurance business alongside general insurance. Section 64C describes the General Insurance Council as representing insurers carrying on general, health insurance business and re-insurance. Section 32D allows exemption for insurers primarily engaged in health or re-insurance business. So do not say the Act places health wholly within miscellaneous.

Fire insurance covers loss or damage to property by fire and allied perils named in the policy. Marine insurance covers ships, cargo and freight against perils of the sea and transit. Miscellaneous insurance is the remaining class. In market and regulatory practice it commonly includes motor (own damage and third party liability), health, personal accident, engineering, liability, crop and similar covers. The Act itself does not list these as sub-classes.

Section 10 goes further for miscellaneous business. Unless the Authority waives it in writing, the insurer must keep separate accounts for each sub-class of miscellaneous business specified by the regulations. Under section 10(2AA), receipts of each sub-class form a separate fund. Its assets must be kept separate and distinct from the insurer's other assets, and the fund cannot be applied directly or indirectly except as the Act or regulations expressly permit.

Motor third party cover has a special rule. Under section 32D, every insurer carrying on general insurance business must underwrite the minimum percentage of third party motor risks that the regulations specify. The Authority may, by regulations, exempt insurers primarily engaged in health, re-insurance, agriculture or export credit guarantee business.

Key rules to remember

Classes of insurance business (s.10(1)): Life | Fire | Marine | Miscellaneous; An insurer in more than one class must keep a separate account of receipts and payments for each class.
Sub-class accounts in miscellaneous business (s.10(1)): Separate account per sub-class specified by regulations, unless the Authority waives in writing; No sub-class is prescribed if its contracts are terminable by the insurer at intervals of at most twelve months and the insurer's liability to pay benefit ceases within one year of the claim arising.
Sub-class funds (s.10(2AA)): Receipts of each sub-class → separate fund; assets kept separate and distinct; Funds cannot be applied directly or indirectly except as the Act or regulations expressly permit.
Life insurance fund (s.10(2) and (3)): All life receipts → life insurance fund, kept distinct from other assets; It is security for life policy-holders and cannot be used for any purpose other than the insurer's life insurance business.
Motor third party obligation (s.32D): Every general insurer must underwrite the minimum percentage specified by regulations; The Authority may exempt insurers primarily in health, re-insurance, agriculture or export credit guarantee.
Councils (s.64C): Life Insurance Council and General Insurance Council; The General Insurance Council represents insurers carrying on general, health insurance business and re-insurance. The section names health and re-insurance alongside general insurance.

How to solve Overview of General Insurance and Its Classes questions

Use this method for any question on the nature or classes of general insurance.

1Read the question and decide whether it asks for definition, classification, legal rule or a case application.
2Define general insurance first: insurance other than life, usually short-term, indemnity-based.
3Name the class involved: fire, marine or miscellaneous. Mention motor or health as commonly treated as miscellaneous business, without calling them statutory sub-classes.
4State what the class covers and what it excludes, using the facts in the case.
5Apply the Insurance Act, 1938 rule: section 10 for accounts and funds, section 32D for motor third party, section 64C for councils.
6Quote the rule's conditions exactly, such as the Authority's waiver or the exemption list.
7Close with a one-line conclusion that answers the exact question asked.

Quickest way: Class-and-section match

When to use it: For MCQs and short case scenario questions where you have under two minutes.

Spot the keyword: property fire, cargo or ship, vehicle, hospital, separate account, fund, minimum percentage.
Map it: property fire means fire class; cargo means marine; vehicle or hospital is commonly treated as miscellaneous.
Map the legal hook: separate accounts means section 10; third party motor quota means section 32D; Councils means section 64C.
Eliminate options that mix life features, such as a long-term maturity benefit, into a general insurance answer.

Common mistakes in Overview of General Insurance and Its Classes

Treating motor and health as separate main classes under the Act
Market practice lists motor and health as products, so students assume they are statutory classes.
Fix: Remember section 10(1) names four classes: life, fire, marine and miscellaneous. The sub-classes of miscellaneous business are those specified by the regulations. Motor and health are commonly treated as miscellaneous business in practice, but the Act text does not name them as sub-classes.
Saying section 32D applies to all insurers including life insurers
The word 'every insurer' is read loosely.
Fix: The section says every insurer carrying on general insurance business. Life insurers are not covered.
Stating a fixed percentage for motor third party business
Students recall a figure from practice or news.
Fix: Write that the minimum percentage is as specified by the regulations. The Act does not fix it.
Forgetting the waiver and the one-year proviso for sub-class accounts
Students remember only that separate accounts are required.
Fix: Add that the Authority may waive the requirement in writing, and that no sub-class is prescribed for contracts terminable by the insurer within twelve-month intervals with liability ceasing within one year of the claim.
Confusing life and general insurance on the principle of payment
Both are called insurance, so students apply the same logic.
Fix: General insurance mostly pays actual loss up to the sum insured, on short contracts. Life insurance pays a sum on a stated event and is long-term.

Worked examples

Example 1

Surya General Insurance Ltd carries on fire, marine and motor business. Explain what accounts and funds it must keep under the Insurance Act, 1938.

Show the solution

Identify the classes: fire and marine are separate classes; motor is commonly treated as miscellaneous insurance.
Section 10(1): as the insurer carries on more than one class, it must keep a separate account of receipts and payments for each class.
For miscellaneous business, it must also keep a separate account for each sub-class specified by the regulations, unless the Authority waives this in writing. Motor is such a sub-class only if the regulations so specify.
Section 10(2AA): receipts of each sub-class form a separate fund, with assets kept separate and distinct from the insurer's other assets.
These funds cannot be applied directly or indirectly except as the Act or regulations expressly permit.

Answer: Surya must keep separate accounts for its fire, marine and miscellaneous classes. For miscellaneous business it must keep separate accounts and a separate fund with segregated assets for each sub-class specified by the regulations (motor being one only if so specified), unless the Authority waives the account requirement in writing.

Example 2

Which of the following is correct under section 32D of the Insurance Act, 1938? (A) Every life insurer must underwrite third party motor risks. (B) Every general insurer must underwrite the minimum percentage of third party motor risks specified by regulations. (C) Every general insurer must underwrite exactly 10% of motor business. (D) Only health insurers must underwrite third party motor risks.

Show the solution

Section 32D applies to every insurer carrying on general insurance business, so (A) is wrong because life insurers are not covered.
The obligation is a minimum percentage as specified by the regulations, not a figure fixed in the Act, so (C) is wrong.
Health insurers are among those the Authority may exempt by regulations, so (D) is the reverse of the rule.
Option (B) matches the text.

Answer: (B)

Exam tips

Learn the four classes in section 10(1) by heart. Say that motor and health are commonly treated as miscellaneous business, but do not claim the Act names them as sub-classes.
In case scenarios, name the class before you cite any section. Examiners reward the link between facts and class.
For section 32D, always write 'as specified by the regulations' and mention the exemption list.
Use a short life versus general comparison (term, payment basis, fund rules) as a ready paragraph for descriptive answers.
No negative marking applies in Section A, so attempt every MCQ.

Practice questions from General Insurance

Overview of General Insurance and Its Classes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalGeneral Insurance Business: Nature and Classes

Overview of General Insurance and Its Classes: frequently asked questions

What is general insurance business under the Insurance Act, 1938?

Section 10(1) names four classes: life, fire, marine and miscellaneous. General insurance is business other than life insurance. Sections 32D and 64C also refer to health and re-insurance business alongside general insurance, so do not say the Act places health wholly within miscellaneous.

What is the difference between life insurance and general insurance?

Life insurance is a long-term contract paying a sum on death or maturity, with its receipts held in a life insurance fund under section 10. General insurance is mostly short-term and pays for actual loss from insured perils. Their accounts are kept separately.

Are motor and health insurance separate classes under the Act?

No. Section 10(1) lists only life, fire, marine and miscellaneous, and the sub-classes of miscellaneous business are those specified by the regulations. Motor and health are commonly treated as miscellaneous business in practice, but the Act text does not name them as sub-classes. Sections 32D and 64C also refer to health business alongside general insurance, and section 32D separately deals with third party motor risks.

What does section 32D require?

Every insurer carrying on general insurance business must underwrite the minimum percentage of third party motor risks specified by the regulations. The Authority may exempt insurers primarily engaged in health, re-insurance, agriculture or export credit guarantee business.