Think of an insurance company like a business that collects money (premiums) today and promises to pay out later (claims). Their accounts are special because the timing mismatch between income and outgo is huge — that's why they follow IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 along with the Insurance Act, 1938.
There are two distinct types: Life Insurance and General (Non-Life) Insurance. Their financial statements look different because the business model differs. A Life insurer deals with long-term contracts (10–30 years), while a General insurer (fire, marine, motor) deals with short-term annual policies. Both must prepare: (1) a Revenue Account (also called Form A-RA for Life, Form B-RA for General), (2) a Profit & Loss Account, and (3) a Balance Sheet. The Revenue Account is unique to insurance — it captures all policyholder-related income and expense.
The most exam-critical concept in General Insurance is the Unexpired Risk Reserve (URR) — a provision for the portion of premium that relates to the unexpired period of the policy. Under IRDA Regulations, URR is maintained at 50% of net written premium for Fire and Miscellaneous classes, and 100% for Marine Cargo. Net premium = Premium written − Reinsurance ceded. The logic: if you collect ₹1 lakh premium for a 1-year fire policy on 1 October, by 31 March (year-end) only 6 months have elapsed — so ₹50,000 is 'unearned' and must be reserved. Claims in the Revenue Account include claims paid + closing outstanding claims − opening outstanding claims. Watch out for IBNR (Incurred But Not Reported) claims — these are estimated and added to outstanding claims.
For Life Insurance, the key item is the Actuarial Valuation — an actuary determines the Net Liability (present value of future claims minus future premiums). The surplus or deficit from this valuation determines how much can be transferred to shareholders. Commission is shown separately; management expenses are capped under IRDA norms. This is asked frequently as a 6–8 mark preparation question — especially treatment of URR, outstanding claims, and the format of the Revenue Account.