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Insurance law notes by Praveen B S

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INSURANCE
Insurance law notes by Praveen B S ([Link] NOTES
Prof . ABBS college)

ABBS law college

[Link]. Praveen B.S.
Under guidenc of principal
Dr. Shobharani

UNIT I
1. Explain the history and growth of Insurance in India.12, 13(2022) (D 2022)(D

2021 6 marks)
Introduction
The concept of insurance has been prevalent in India since ancient times
amongst Hindus. Overseas traders practiced a system of marine insurance. The
joint family system, peculiar to India, was a method of social insurance of every
member of the family on his life. The law relating to insurance has gradually
developed, undergoing several phases from nationalization of the insurance
industry to the recent reforms permitting entry of private players and foreign
investment in the insurance industry. The Constitution of India is federal in
nature in as much there is division of powers between the Centre and the States.
Insurance is included in the Union List, wherein the subjects included in this list
are of the exclusive legislative competence of the Centre. The Central Legislature
is empowered to regulate the insurance industry in India and hence the law in this
regard is uniform throughout the territories of India. The development and growth
of the insurance industry in India has gone through three distinct stages.
Ancient of Insurance
Even before the British invasion of India, few of the Indian scriptures and
writings such as Manusmirithi, Arthasasthra, and Dharmasastra had talked about
the concept of insurance in essence. As mentioned, the way they followed looks
similar to the modern concept of insurance. As per those writings, there was a
pooling of resources made to any particular person, such as the king and the same

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has been re-distributed during various calamities that were caused over the course
of time due to floods, fire, famine, etc. Early southern India, with the rulers such
as King Pandian, followed by the Mughals, had a history of trading through sea
waters and using marine trade loans. These incidents show that the early history
of India had traces of insurance even before the English traders invaded.
Insurance in British Rule:As part of British rule, different three main
presidencies in India saw the development of the insurance business, especially
life insurance. As per IRDAI, 1818 was marked to be the first step in British India
which saw the incorporation of the Oriental life insurance Company in Calcutta.
In Southern India, Madras Equitable was noted to have started life insurance in
the Madras Presidency. The Oriental Life Insurance, established in 1818, saw its
failure in 1834.
Following this, the British enacted legislation called the British Insurance
act of 1870, and Bombay was the next presidency to see growth in the Insurance
sector in the latter part of the 19th century. During this time, competition between
the Indian companies and foreign insurers such as Liverpool, etc. was witnessed,
leading to further development of the sector in India. This growth even continued
in the first part of the 20th century, where the number of insurers in the life
insurance business also saw a steep high from a mere 40 to around 180
companies, with capital increasing from 22 crores to 298 crores in the market in
the 1930s. In 1912, the Indian Life assurance companies act was enacted, which
was followed by the Indian Life Insurance Companies act of 1928. As the market
also witnessed a few uncertainties, new legislation was felt during the reign of
the Government of India act, 1935. This demand saw a structural form through
the enactment of the Insurance act of 1938 – which was nothing but a
consolidation of laws relating to the life insurance business in India. There are
other crucial things to be noted as part of this act. It is important to note that the
Insurance act of 1938 was the first legislation that dealt with the provisions not
only relating to the Life insurance sector but also to the non-life insurance sectors

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as well. Along with this enactment and introduction, various entities also put forth
proposals to nationalize life Insurance companies. However, the same did not get
into a structured form on or before independence.
Insurance in the Indian Constitution:The purpose of referring Indian
Constitution is to know who has the power over the regulation, and incorporation
of the Insurance sector in India as our quasi-federal constitution provided three
lists under article 246, thereby enlisting the legislative powers over certain
subjects between the states and the union government. Looking into the seventh
schedule provides us that the subject of insurance was enlisted under entry 43 of
the Union list. It gives the power of incorporation, regulation, and winding up of
insurance companies to the union government, excluding the state governments
from legislative power over insurance other than social insurance matters which
are mentioned under entry 23 of the Concurrent list. However, what was the
reason behind such a decision is not what we will be discussing, and the same
may or may not be questioned anywhere.
Development post-Independence:
Let us look into the importance of the Insurance act of 1938, which is being
followed even today, and the reasons for the nationalization of life insurance in
India as part of this post-independence development. The first amendment post-
independence came in the year 1959 when the agencies were abolished, and
further, the issues of unfair trade practices popped up in the life insurance sector.
In order to avoid such practices and also to initiate a socialistic approach in
society, these life insurance companies were nationalized to form one unit as Life
Insurance Corporation in India. Other purposes of such nationalization were to
improve the service in the life insurance business, reduce expenses and increase
the intensity and sense of business in India. Life Insurance Corporation Act was
enacted in 1956, followed by the General Insurance Business (Business) act of
1973.

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The liberalization, Globalization, and Privatization in the year 1991 also

had an impact on the insurance sector, where foreign investments increased in the
India Insurance sector. Post-liberalization saw the recommendations from the
Malhotra Committee report in 1994 to bring reforms in the insurance industry,
that are in line with the developments being made along with economic
developments. It recommended the establishment of the first regulatory authority
called Insurance Regulatory and Development Authority in India (IRDAI) in
1999. Foreign investments were also introduced with 26% in 2000 in the
Insurance sector, and the re-insurance sector was also nationalized. Apart from
these, other recommendations include allowing private entities in the insurance
sector.
2. Explain the provision of insurance act 1938? 14 (2022)

Introduction:
The Insurance Act, 1938, broadly provides the ground rules for the
operating insurance companies in India. The Act provides for the following: The
Insurance Act is the parent legislation which aimed at consolidating and
amending the law relating to the business of insurance in February 1938, when,
during the British Rule in India, there were many insurance companies which
were operating. The Insurance Act, 1938, broadly provides the ground rules for
the operating insurance companies in India.
Incorporation of insurance companies, issue of licence and renewal of licence
(Sections 2C to 5)
Every insurer who proposes to do insurance business has to register with
IRDA and obtain a license before they start doing insurance business. Three lines
of businesses recognized within insurance – Life insurance, Non-life insurance
and Standalone Health [Link] only one Reinsurer GIC is licensed in
India as the National Reinsurer. Separate companies will have to be formed for
doing Life, Non-Life and Standalone Health insurance business. Such companies
cannot transact any business other than the insurance business for which the

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licence is issued. All companies formed for the purpose of doing insurance
business shall carry the suffix “Assurance” or “Insurance” in their names to
enable anyone to recognise that they are engaged in insurance business.
A Public company is first incorporated under the Companies Act, 1956,
with the primary object of engaging in the business of life or non-life or
standalone health insurance business. Applicants for insurance licence will have
to submit, among other things, certified true copy of memorandum and articles of
association, list of directors, certain affidavits and undertakings from Promoters
and the fees required for registration. I
IRDA is vested with powers under the Act to cancel the registration of
insurers on certain grounds such as default in complying with the provisions of
the Act or Regulations passed thereunder, carrying on business other than
insurance business etc.
The Act also provides for restrictions on transfer of shares in an insurance
company. Before an insurance company can put through transfer of shares in
excess of the following limits, prior approval of IRDA is required:
Deposits with Reserve Bank of India (Sections 7 to 9)
Section 7 mandates that every life insurance company shall maintain a sum
equivalent to 1% of the total gross premium written in India in any financial year
commending after 31 day of March 2000, but not exceeding `10 Crores with the
Reserve Bank of India in the form of Cash or approved securities. In respect of
general insurance business, a sum equivalent to 3% of the total gross premium
written in India in any financial year commencing after 31 day of March 2000,
but not exceeding `10 Crores is required to be maintained. For reinsurance
companies, a flat sum of `20 Crores has been prescribed.
Accounts, Audit and Actuarial report and Abstract (Sections 10, 11, 12)

Separate books of account are required to be maintained for each class of

business. Since separate companies will have to be formed for Life, Non-Life or

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Reinsurance, this provision is automatically taken care for formation of separate

companies and consequent maintenance of separate books of account. Further a
separate fund called Life insurance fund shall be formed, the assets of which shall
be separate and distinct from all other assets of the insurer. By virtue of the
powers given under Section 11, IRDA have framed Regulations for Financial
Statements which provides for forms of Revenue Account, Profit and Loss
Account and Balance Sheet alongwith the form of Management Report and some
of the documents annexed to the financial statements.
The accounts and the statements referred to in Section 11 shall be signed by
the Chairman of the Board of the Insurance company and two other Directors,
Section 12 provides for audit of the financial statements shall be audited by an
auditor. Detailed guidelines have been framed by IRDA on the qualifications of
persons who can be appointed as Statutory Auditors of the Company.

Provisions Relating to Investments (Sections 27, 27A, 27B, 27E)

The manner in which the investment is required to be made is – not less than 50%
in Government and Approved securities (out of which 25% only in Government
securities) and the balance in Approved investments as specified in Section 27A.
The deposits made with Reserve Bank of India under Section 7 are deemed to be
Government Securities for this purpose.
Investment in “Other investments”
Any investment in other than Approved Investments as above is allowed
upto 15% of the sum specified in Section 27, provided such investments are made
with the consent of all the directors present at a Board meeting and eligible to
vote, in respect of which a special notice has been given to all the Directors in
India.
Prohibited Investments (Section 27A(5) and 27C)
Investments in the shares or debentures of a Private Limited Company and

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investments out of Policyholders funds outside India are prohibited.

Prohibition of Loans
Section 29 prohibits grant of any loans or temporary advances to any
Director, Actuary or Auditor of the insurance company or to any company or firm
in which any such Director, Actuary or Auditor holds the position of a Director,
Actuary or partner. This prohibition is not applicable to:

Minimum insurance business under Rural and Social Sectors

Section 32B and 32C requires every insurer to undertake such minimum
percentage of the insurance business for covering risks associated with persons
forming part of rural or social sector, workers in the unorganized or informal
sector or economically vulnerable or backward classes of society or such classes
as prescribed by IRDA.
Conclusion
Life insurance in India has a history of more than 100 years. It has grown
significantly after independence under control of Central Government. Various
acts were passed to ensure safety of the insured as well as insurer. LIC has
provided with various plans to suit the needs of each and every individual.
Insurance may play a vital role in helping growth of individual and economy. As
there is no guarantee of life, life insurance would provide a moral as well as
financial support for the family.

3. Discuss the powers and functions of Insurance Regulatory and Development

Authority. (D 2022 6 marks) (D 2022)(D 2021 6M)

Introduction: The Insurance Regulatory and Development Authority of India

(IRDAI) is a statutory body under the jurisdiction of Ministry of Finance ,
Government of India and is tasked with regulating and licensing the insurance
and re-insurance industries in India. It was constituted by the Insurance

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Regulatory and Development Authority Act, 1999, an Act of Parliament passed

by the Government of India. The agency's headquarters are in Hyderabad,
Telangana, where it moved from Delhi in 2001.

After 1991 due to liberalization in the economic policy, many private players
started their business in India which has brought with it their own evil of
unhealthy competition. Hence a Malhotra committee was formed to effectively
regulate insurance companies. Following the recommendations of the Malhotra
Committee, in 1999 the Insurance Regulatory and Development Authority
(IRDA) was constituted to regulate and develop the insurance industry and was
incorporated in April 2000. Objectives of the IRDA include promoting
competition, to enhance customer satisfaction with increased consumer choice
and lower premiums while ensuring the financial security of the insurance market.
The IRDA opened up the market in August 2000 with an invitation for
registration applications; foreign companies were allowed ownership up to 26
percent. The authority, with the power to frame regulations under Section 114A
of the Insurance Act, 1938, has framed regulations ranging from company
registrations to the protection of policyholder interests since 2000.

In December 2000, the subsidiaries of the General Insurance Corporation of India

were restructured as independent companies and the GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four subsidiaries from
the GIC in July 2002. There are 28 general insurance companies, including the
Export Credit Guarantee Corporation of India and the Agriculture Insurance
Corporation of India, and 24 life-insurance companies operating in the country.
With banking services, insurance services add about seven percent to India’s
GDP.[

Composition: Section 4 of the IRDAI Act 1999 specifies the authority's

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composition. It is a ten member body consisting of a chairman, five full-time and

four part-time members appointed by the government of India.

the functions of IRDA

As discussed above, the primary objective of the Insurance Regulatory and
Development Authority of India is to ensure the implementation of provisions as
mentioned in the Insurance Act. This can be further understood by its mission
statement which is as follows-
 To safeguard the policyholder’s interest while ensuring a fair and just treatment.
 To have a fair regulation of the insurance industry while ensuring financial
soundness of the applicable laws and regulations.
 To frame regulations periodically so that there is no ambiguity in the insurance
industry.
 Issuing, renewing, modifying, withdrawing, suspending or cancelling
registrations
 Protecting policyholder interests
 Specifying qualifications, the code of conduct and training for intermediaries and
agents
 Specifying the code of conduct for surveyors and loss assessors
 Promoting efficiency in the conduct of insurance businesses
 Promoting and regulating professional organisations connected with the
insurance and re-insurance industry
 Levying fees and other charges
 Inspecting and investigating insurers, intermediaries and other relevant
organisations
 Regulating rates, advantages, terms and conditions which may be offered by
insurers not covered by the Tariff Advisory Committee under section 64U of the
Insurance Act, 1938 (4 of 1938)
 Specifying how books should be kept

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 Regulating company investment of funds

 Regulating a margin of solvency
 Adjudicating disputes between insurers and intermediaries or insurance
intermediaries
 Supervising the Tariff Advisory Committee
 Specifying the percentage of premium income to finance schemes for promoting
and regulating professional organisations
 Specifying the percentage of life- and general insurance business undertaken in
the rural or social sector
 Specifying the form and the manner in which books of accounts shall be
maintained, and statement of accounts shall be rendered by insurers and other
insurer intermediaries.
the role and importance of IRDA in the insurance sector
India began to witness the concept of insurance through a formal channel back in
the 1800s and has seen a positive improvement ever since. This was further
supported by the regulatory body that streamlined various laws and brought about
the necessary amendment in the interest of the policyholders. Below mentioned
are the important roles of IRDA -
 First and foremost is safeguarding the policyholder’s interest.
 Improve the rate at which the insurance industry is growing in an organised
manner to benefit the common man.
 To ensure the dealing are carried on in a fair, integral manner along with financial
soundness keeping in mind the competence of the insurance company.
 To ensure faster and a hassle-free settlement of genuine insurance claims.
 To address the grievances of the policyholder through a proper channel.
 To avoid malpractices and prevent fraud.
 To promote fairness, transparency and oversee the conduct of insurance
companies in the financial markets.
 To form a reliable management system with high standards of financial stability.

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4. What is Insurance? What are the elements of contract of Insurance? (D 2021)

Or
5. Contract insurance. (2022)

OR
6. "Contract of insurance is a contract of utmost good faith" Elucidate.

(2022)(D 2021)
Insurance may be defined as a contract between two parties whereby one
party called insurer undertakes, in exchange for a fixed sum called premiums, to
pay the other party called insured a fixed amount of money on the happening of
a certain event.
The insurance, thus, is a contract whereby
1. Certain sum. called premium, is charged in consideration
2. Against the said consideration, a large sum is guaranteed to be paid by the insurer
who received the premium
3. The payment will be made in a certain definite sum. I.e., I lose or the policy
amount whichever may be, and
4. The payment is made only upon a contingency
Since Insurance is a contract, certain sections of the Contract Act are applicable.
ll agreements are contracts if they are made by the free consent of the parties,
competent to contract, for a lawful consideration and with a lawful object and
which are not hereby declared to be void.
Elements of Insurance Contract can be classified into two sections;
1. The elements of general contract and
2. The elements of special contract relating to insurance: the special contract of
insurance involves principles: insurable interest, utmost good faith, indemnity,
subrogation, warranties. Proximate cause, assignment, and nomination, the return
of premium.

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Elements of Insurance Contract

This Act says that all agreements are the contract if they are made by the free
consent of the parties, competent to contract, for a lawful consideration and with
a lawful object and which are not at this moment declared to be void”.
e insurance contract involves—(A) the elements of the general contract, and (B)
the element of special contract relating to insurance.
The special contract of insurance involves principles:
1. Utmost Good Faith
2. Insurable Interest
3. Proximate Cause
4. Indemnity
5. Subrogation
6. Contribution
7. Loss Minimization
[Link] Principle of Utmost Good Faith
 Both parties involved in an insurance contract—the insured (policy holder) and
the insurer (the company)—should act in good faith towards each other.
 The insurer and the insured must provide clear and concise information regarding
the terms and conditions of the contract
This is a very basic and primary principle of insurance contracts because the
nature of the service is for the insurance company to provide a certain level of
security and solidarity to the insured person’s life. However, the insurance
company must also watch out for anyone looking for a way to scam them into
free money. So each party is expected to act in good faith towards each other.
If the insurance company provides you with falsified or misrepresented
information, then they are liable in situations where this misrepresentation or
falsification has caused you loss. If you have misrepresented information
regarding subject matter or your own personal history, then the insurance
company’s liability becomes void.

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[Link] Principle of Insurable Interest

Insurable interest just means that the subject matter of the contract must provide
some financial gain by existing for the insured (or policyholder) and would lead
to a financial loss if damaged, destroyed, stolen, or lost.
 The insured must have an insurable interest in the subject matter of the insurance
contract.
 The owner of the subject is said to have an insurable interest until s/he is no longer
the owner.
In auto insurance, this will most times be a no brainer, but it does lead to issues
when the person driving a vehicle doesn’t own it. For instance, if you are hit by a
person who isn’t on the insurance policy of the vehicle, do you file a claim with
the owner’s insurance company or the driver’s insurance company? This is a
simple but crucial element for an insurance contract to exist.
[Link] Principle of Indemnity
 Indemnity is a guarantee to restore the insured to the position he or she was in
before the uncertain incident that caused a loss for the insured. The insurer
(provider) compensates the insured (policyholder).
 The insurance company promises to compensate the policyholder for the amount
of the loss up to the amount agreed upon in the contract.
Essentially, this is the part of the contract that matters the most for the insurance
policyholder because this is the part of the contract that says she or he has the
right to be compensated or, in other words, indemnified for his or her loss.
The amount of compensation is in direct proportion with the incurred loss. The
insurance company will pay up to the amount of the incurred loss or the insured
amount agreed on in the contract, whichever is less. For instance, if your car is
inured for $10,000 but damages are only $3,000. You get $3,000 not the full
amount.
Compensation is not paid when the incident that caused the loss doesn’t happen
during the time allotted in the contract or from the specific agreed upon causes of

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loss (as you will see in The Principle of Proximate Cause). Insurance contracts
are created solely as a means to provide protection from unexpected events,
not as a means to make a profit from a loss. Therefore, the insured is protected
from losses by the principle of indemnity, but through stipulations that keep him
or her from being able to scam and make a profit.
[Link] Principle of Contribution
 Contribution establishes a corollary among all the insurance contracts involved
in an incident or with the same subject.
 Contribution allows for the insured to claim indemnity to the extent of actual loss
from all the insurance contracts involved in his or her claim.
For instance, imagine that you have taken out two insurance contracts on your
used Lamborghini so that you are covered fully in any situation. Let’s say you
have a policy with Allstate that covers $30,000 in property damage and a policy
with State Farm that cover $50,000 in property damage. If you end up in a wreck
that causes $50,000 worth of damage to your vehicle. Then about $19,000 will be
covered by Allstate and $31,000 by State Farm.
This is the principle of contribution. Each policy you have on the same subject
matter pays their proportion of the loss incurred by the policyholder. It’s an
extension of the principle of indemnity that allows proportional responsibility for
all insurance coverage on the same subject matter.
5. The Principle of Subrogation
This principle can be a little confusing, but the example should help make it clear.
Subrogation is substituting one creditor (the insurance company) for another
(another insurance company representing the person responsible for the loss).
 After the insured (policyholder) has been compensated for the incurred loss on a
piece of property that was insured, the rights of ownership of this property go to
the insurer.
So lets say you are in a car wreck caused by a third party and your file a claim
with your insurance company to pay for the damages on your car and your

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medical expenses. Your insurance company will assume ownership of your car
and medical expenses in order to step in and file a claim or lawsuit with the person
who is actually responsible for the accident (i.e. the person who should have paid
for your losses).
The insurance company can only benefit from subrogation by winning back the
money it paid to its policyholder and the costs of acquiring this money. Anything
paid extra from the third party, is given to the policyholder. So lets say your
insurance company filed a lawsuit with the negligent third party after the
insurance company had already compensated you for the full amount of your
damages. If their lawsuit ends up winning more money from the negligent third
party than they paid you, they’ll use that to cover court costs and the remaining
balance will go to you.
6. The Principle of Proximate Cause
 The loss of insured property can be caused by more than one incident even in
succession to each other.
 Property may be insured against some but not all causes of loss.
 When a property is not insured against all causes, the nearest cause is to be found
out.
 If the proximate cause is one in which the property is insured against, then the
insurer must pay compensation. If it is not a cause the property is insured against,
then the insurer doesn’t have to pay.
When buying your insurance policies, you will most likely go through a process
where you select which instances you and your property will be covered for and
which ones they will not. This is where you are selecting which proximate causes
are covered. If you end up in an incident, then the proximate cause will have to
be investigated so that the insurance company validates that you are covered for
the incident.
This can lead to disputes when you have suffered an incident you thought was
covered but your insurance provider says it’s not. Insurance companies want to

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make sure they are protecting themselves but sometimes they can use this to get
out of being liable for a situation. This might be a dispute where you’ll need a
lawyer to help argue for you.
7. The Principle of Loss Minimization
This is our final principle that creates an insurance contract and the most simple
one probably.
 In an uncertain event, it is the insured’s responsibility to take all precautions to
minimize the loss on the insured property.
Insurance contracts shouldn’t be about getting free stuff every time something
bad happens. Therefore, a little responsibility is bestowed upon the insured to
take all measures possible to minimize the loss on the property. This principle can
be debatable, so call a lawyer if you think you are being unfairly judged under
this principle.
And That, Ladies and Gentlemen, is What Makes Up an Insurance Contract
If you think you’ve been the victim of a breech of contract or that your provider
has failed to maintain their duty to you, call us for a free consultation. We can
help you work the ins and outs of insurance company jargon and combat their
track record of unfair treatment towards policy holders.

8. Explain the appointment and the power of Controller of Insurance under the
Insurance act? (D 2021)
Power of Central Government to issue directions
(1) Without prejudice to the foregoing provisions of this Act, the Authority shall,
in exercise of its powers or the performance of its functions under this Act, be
bound by such directions on questions of policy, other than those relating to
technical and administrative matters, as the Central Government may give in
writing to it from time to time:
PROVIDED that the Authority shall, as far as practicable, be given an opportunity

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to express its views before any direction is given under this sub-section.
(2) The decision of the Central Government, whether a question is one of policy
or not, shall be final.

19. Power of Central Government to supersede Authority

(1) If at any time the Central Government is of the opinion--
(a) that, on account of circumstances beyond the control of the Authority, it
is unable to discharge the functions or perform the duties imposed on it by or
under the provisions of this Act; or
(b) that the Authority has persistently defaulted in complying with any
direction given by the Central Government under this Act or in the discharge of
the functions or performance of the duties imposed on it by or under the
provisions of this Act and as a result of such default the financial position of the
Authority or the administration of the Authority has suffered; or
(c) that circumstances exist which render it necessary in the public interest
so to do,
the Central Government may, by notification and for reasons to be specified
therein, supersede the Authority for such period, not exceeding six months, as
may be specified in the notification and appoint a person to be the Controller of
Insurance under section 2B of the Insurance Act, 1938, if not already done:
PROVIDED that before issuing any such notification, the Central Government
shall give a reasonable opportunity to the Authority to make representations
against the proposed supersession and shall consider the representations, if any,
of the Authority.
(2) Upon the publication of a notification under sub-section (1) superseding the
Authority,--
(a) the Chairperson and other members shall, as from the date of
supersession, vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions

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of this Act, be exercised or discharged by or on behalf of the Authority shall, until

the Authority is reconstituted under sub-section (3), be exercised and discharged
by the Controller of Insurance; and
(c) all properties owned or controlled by the Authority shall, until the
Authority is reconstituted under sub-sections (3), vest in the Central Government.
(3) On or before the expiration of period of supersession specified in the
notification issued under sub-section (1), the Central Government shall
reconstitute the Authority by a fresh appointment of its Chairperson and other
members and in such case any person who had vacated his office under clause (a)
of sub-section (2) shall not be deemed to be disqualified for reappointment.
(4) The Central Government shall cause a copy of the notification issued under
sub-section (1) and a full report of any action taken under this section and the
circumstances leading to such action to be laid before each House of Parliament
at the earliest.

COMMENTS
Sec. 2B of the Insurance Act, 1938 provides for the appointment of Controller of
Insurance. Under that section the Central Government may by notification in the
Official Gazette, appoint a person to be the Controller of Insurance under this
Act.
In making any appointment under this section, the Central Government shall have
due regard to the following considerations, namely, whether the person to be
appointed has had experience in industrial, commercial or insurance matters and
whether such person has actuarial qualification.

20. Furnishing of returns, etc., to Central Government

(1) The Authority shall furnish to the Central Government at such time and in
such form and manner as may be prescribed, or as the Central Government may
direct to furnish such returns, statements and other particulars in regard to any

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proposed or existing programme for the promotion and development of the

insurance industry as the Central Government may, from time to time, require.
(2) Without prejudice to the provisions of sub-section (1), the Authority shall,
within nine months after the close of each financial year, submit to the Central
Government a report giving a true and full account of its activities including the
activities for promotion and development of the insurance business during the
previous financial year.
(3) Copies of the reports received under sub-section (2) shall be laid, as soon as
may be after they are received, before each House of Parliament.

21. Chairperson, members, officers and other employees of Authority to be

public servants
The Chairperson, members, officers and other employees of the Authority shall
be deemed, when acting or purporting to act in pursuance of any of the provisions
of this Act, to be public servants within the meaning of section 21 of the Indian
Penal Code.
COMMENTS
Sec. 21 of the Indian Penal Code, 1860 defines the term "public servant". Under
that section "public servant" denotes a person falling under any of the descriptions
hereinafter following, namely--
(1) Every Commissioned Officer in the Military, Naval or Air Forces of
India;
(2) Every Judges including any person empowered by law to discharge,
whether by himself or as a member of any body of persons, any adjudicatory
functions;
(3) Every officer of a Court of Justice including a liquidator, receiver or
commissioner whose duty it is, as such officer, to investigate or report on any
matter of law or fact, or to make, authenticate or keep any document, or take
charge or dispose of any property or to execute any judicial process or to

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administer any oath, or to interpret, or to preserve order in the court; and every
person specially authorised by a Court of Justice to perform any of such duties;
(4) Every juryman, assessor or member of a panchayat assisting a Court of
Justice or public servant;
(5) Every arbitrator or other person to whom any cause or matter has been
referred for decision or report by any Court of Justice or by any other competent
public authority;
(6) Every person who holds any office by virtue of which he is empowered
to place or keep any person in confinement;
(7) Every officer of the government whose duty it is, as such officer, to
prevent offences, to give information of offences, to bring offenders to justice, or
to protect the public health, safety or convenience;
(8) Every officer whose duty it is, as such officer, to take, receive, keep or
expend any property on behalf of the government, or to make any survey,
assessment or contract on behalf of the government or to execute any revenue
process, or to investigate, or to report on any matter affecting the pecuniary
interests of the government, or to make, authenticate or keep any document
relating to the pecuniary interests of the government, or to prevent the infraction
of any law for the protection of the pecuniary interests of the government;
(9) Every officer whose duty it is, as such officer, to take, receive, keep or,
expend any property, to make any survey or assessment or to levy any rate or tax
for any secular common purpose of any village, town or district, or to make,
authenticate or keep any document for the ascertaining of the rights of the people
of any village, town or district.
(10) Every person who holds any office by virtue of which he is empowered
to prepare, publish, maintain or revise an electoral roll or to conduct an election
or part of an election; and
(11) Every person--
(a) in the service or pay of the government or remunerated by fees or

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commission for the performance of any

public duty by the government;
(b) in the service or pay of a local authority, a corporation established by
or under a Central, Provincial or
State Act or a Government company as defined in s. 617 of the
Companies Act, 1956 (1 of 1956).
`Public servant' includes any public servant as defined in the Indian Penal Code
(45 of 1860) and any servant of any local authority and any person engaged in
any employment or class of employment which the State Government may, from
time to time, declare to be employment or class of employment essential to the
life of the community.
A pubic servant is one who is to discharge some public duty. The absence of
formal appointment is immaterial where a person is in actual possession of a
situation as a public servant.--S.C. Pal v. J. Sharma Sarkar (1978) 2 Cal LJ 245
Public servants are following : Chief Minister, Minister of a State, Officer in
charge of a Police Station, Pradhan of Gram Sabha, Members of Panchayat
Adalat, Chief Officer of Panchayat, and the Public Prosecutors.
Following are not public servants : Headmaster, teachers, principals of aided
schools, civil servants working on deputation with co-operative society, President
and Secretary of Co-operative Society, an M.L.A's. and the Mukhias.

22. Protection of action taken in good faith

No suit, prosecution or other legal proceedings shall lie against the Central
Government or any officer of the Central Government or any member, officer or
other employee of the Authority for anything which is in good faith done or
intended to be done under this Act or the rules or regulations made thereunder:
PROVIDED that nothing in this Act shall exempt any person from any suit or
other proceedings which might, apart from this Act, be brought against him.

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23. Delegation of powers

(1) The authority may, by general or special order in writing, delegate to the
Chairperson or any other member or officer or the Authority subject to such
conditions, if any, as may be specified in the order such of its powers and
functions under this Act as it may deem necessary.
(2) The Authority may, by a general or special order in writing, also form
committees of the members and delegate to them the powers and functions of the
Authority as may be specified by the regulations.

24. Power to make rules

(1) The Central Government may, by notification, make rules for carrying out the
provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power,
such rules may provide for all or any of the following matters, namely:--
(a) the salary and allowances payable to, and other terms and conditions of
service of, the members other than part-time members under sub-section (1) of
section 7;
(b) the allowances to be paid to the part-time members under sub-section (2)
of section 7;
(c) such other powers that may be exercised by the Authority under clause
(q) of sub-section (2) of section 14;
(d) the form of annual statement of accounts to be maintained by the
Authority under sub-section (1) of section 17;
(e) the form and the manner in which and the time within which returns and
statements and particulars are to be furnished to the Central Government under
sub-section (1) of section 20;
(f) the matters under sub-section (5) of section 25 on which the Insurance
Advisory Committee shall advise the Authority;
(g) any other matter which is required to be, or may be, prescribed, or in

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respect of which provision is to be or may be made by rules.

COMMENTS
Sec. 7(1) provides for the salary and allowances payable to, and other terms and
conditions of service of, the members other than part-time members, and s. 7(2)
deals with the allowances to be received by part-time members.
Under s. 17(1), the authority shall maintain proper accounts and other relevant
records and prepare an annual statement of accounts in such form as may be
prescribed by the Central Government in consultation with the Comptroller and
Auditor-General of India.

25. Establishment of Insurance Advisory Committee

(1) The Authority may, by notification, establish with effect from such date as it
may specify in such notification, a Committee to be known as the Insurance
Advisory Committee.
(2) The Insurance Advisory Committee shall consist of not more than twenty-five
members excluding ex officio members to represent the interests of commerce,
industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries,
organisations engaged in safety and loss prevention, research bodies and
employees' association in the insurance sector.
(3) The Chairperson and the members of the Authority shall be the ex officio
Chairperson and ex officio members of the Insurance Advisory Committee.
(4) The objects of the Insurance Advisory Committee shall be to advise the
Authority on matters relating to the making of the regulations under section 26.
(5) Without prejudice to the provisions of sub-section (4), the Insurance Advisory
Committee may advise the Authority on such other matters as may be prescribed.

26. Power to make regulations

(1) The Authority may, in consultation with the Insurance Advisory Committee,

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by notification, make regulations consistent with this Act and the rules made
thereunder to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power,
such regulations may provide for all or any of the following matters, namely:--
(a) the times and places of meetings of the Authority and the procedure to be
followed at such meetings including the quorum necessary for the transaction of
business under sub-section (1) of section 10;
(b) the transactions of business at its meetings under sub-section (4) of
section 10;
(c) the terms and other conditions of service of officers and other employees
of the Authority under sub-section (2) of section 12;
(d) the powers and functions which may be delegated to Committees of the
members under sub-section (2) of section 23; and
(e) any other matter which is required to be, or may be, specified by
regulations or in respect of which provision is to be or may be made by
regulations.

27. Rules and regulations to be laid before Parliament

Every rule and every regulation made under this Act shall be laid, as soon as may
be after it is made, before each House of Parliament, while it is in session, for a
total period of thirty days which may be comprised in one session or in two or
more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both Houses agree in
making any modification in the rule or regulation or both Houses agree that the
rule or regulation should not be made, the rule or regulation shall thereafter have
effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without prejudice to
the validity of anything previously done under that rule or regulation.

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Write short note on :

[Link] market. (D 2021)
Indian Insurance Market
Indian Insurance in the Global Scenario
1In life insurance business, India is ranked tenth in the world. India's share in
global life insurance market was 2.73 per cent during 2019. Compared to the
previous year, the life insurance premium in India increased by 9.63 per cent
whereas global life insurance premium increased by 1.18 per cent.
2In non-life insurance business, India is ranked 15 in the world. India's share in
global non-life insurance market was 0.79 per cent during 2019. Compared to the
previous year, the non-life insurance premium in India increased by 7.98 per cent
whereas global non-life insurance premium increased by 3.35 per cent.
3Globally, the share of life insurance business in total premium was 46.34 per
cent and the share of non-life insurance premium was 53.66 per cent during 2019.
However, the share of life insurance business for India was high at 74.94 per cent
while the share of non-life insurance business was at 25.06 percent.

Insurance Penetration and Density

1Insurance penetration and density are two metrics, among others, often used to
assess the level of development of the insurance sector in a country. While
insurance penetration is measured as the percentage of insurance premiums to
GDP, insurance density is calculated as the ratio of premiums to population (per
capita premium).
2Insurance penetration which was 2.71 percent in 2001 has steadily increased to
3.76 percent in 2019 (Life 2.82 percent and Non-Life 0.94 percent). Insurance
penetration in some of the emerging economies in Asia, i.e., Malaysia, Thailand
and China during the same year were 4.72, 4.99 and 4.30 percent respectively.
The insurance density in India which was USD 11.5 in 2001, reached to USD 78
in 2019 (Life- USD 58 and Non-Life - USD 20). The comparative figures for

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Malaysia, Thailand and China during the same period were USD 536, USD 389
and USD 430 respectively. Globally insurance penetration and density were 3.35
percent and USD 379 for the life segment and 3.88 percent and USD 439 for the
non-life segment respectively in 2019.
(Source: SwissRe Sigma various issues)
Insurance Premium
1During the fiscal 2019-20, the gross direct premium of Non-Life insurers was
₹1,88,916 crores as against ₹1,69,448 crores, in the previous financial year 2018-
19 registering a growth of 11.49 percent. Motor and health segments primarily
helped the industry to report this growth.
During the fiscal 2019-20, Life insurance industry recorded a premium income
of ₹5,72,910 as against ₹5,08,132 crores in the previous financial year, registering
a growth of 12.75 percent. While renewal premium accounted for 54.75 percent
of the total premium received by the life insurers, new business contributed the
remaining 45.25 percent.
India is one of the fastest-growing economies in the world and is home to a large
population of over 1.3 billion people. The country’s insurance industry is rapidly
growing, with an expected market size of $280 billion by 2025, a compound
annual growth rate (CAGR) of 12%-15%, primarily attributable to rising
awareness about the importance of insurance and increasing disposable incomes.
The Indian government has implemented various policies to promote growth and
innovation in the insurance sector. This report will explore the opportunities for
U.S. businesses in India’s insurance sector.
Sector Composition:
India’s insurance sector is dominated by two types of insurance providers: public
sector companies and private sector companies. The public sector companies are
owned by the Indian government and have been in operation for several decades.
There are seven public sector insurers (Life Insurance Corporation of India;
General Insurance Corporation of India Limited; New India Assurance; United

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India Insurance Company Limited; The Oriental Insurance Company Limited;

National Insurance Company Limited; and the Agriculture Insurance Company
of India Limited). The private sector companies have been allowed to operate in
India since 2000, resulting in increased competition and innovation in the
sector. There is a sole national re-insurer, the General Insurance Corporation of
India (GIC Re). Other stakeholders include individual and corporate agents,
brokers, surveyors, and third-party administrators servicing health insurance
claims.
Life insurance is the most significant segment of the Indian insurance market,
accounting for approximately 75% of the total market share, although life
insurance coverage among Indians is relatively low, covering just 3% of the
population. Health insurance is the second-largest segment, followed by motor
insurance. Currently, only 10% of Indians have some form of health insurance.
With 55% of India’s population in the working age range of 20-59, insurance
companies have a young, insurable population to work with.
The sector is regulated by the Insurance Regulatory and Development Authority
of India (IRDAI), established in 1999.
Government Initiatives:
Pradhan Mantri Fasal Bima Yojana (PMFBY) is a crop insurance scheme
launched by the Indian government in 2016, aimed at providing financial support
to farmers in the event of crop damage due to natural calamities, pests and
diseases. Under this scheme, farmers pay a nominal premium, and the
government provides the remaining premium amount. The coverage is available
for all crops and compensation is based on the extent of crop loss. The scheme is
implemented by the Ministry of Agriculture and Farmers’ Welfare and is
administered by the Agriculture Insurance Company of India (AIC). The primary
objective of PMFBY is to provide affordable crop insurance to farmers and
protect them from the risks associated with crop failure. PMFBY now covers over
55 million farmer loan applications per year.

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Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) is an

entitlement-based healthcare scheme launched in 2018 and fully funded by the
Government of India. AB-PMJAY aims to provide financial protection to over
107million families (approximately 500million individual beneficiaries). AB-
PMJAY is the world’s largest health insurance scheme and aims to make
healthcare accessible and affordable for the poor and vulnerable sections of
society. The scheme also focuses on the development of a robust healthcare
infrastructure in the country, which can cater to the needs of the people.
The Insurtech Opportunity:
India is currently one of the fastest-growing markets for insurance technology, or
insurtech, and presents many opportunities for U.S. businesses looking to expand
into this sector. Insurtech powers the creation, distribution, and administration of
the insurance business. The country’s large population, increasing internet and
smartphone usage, and growing middle class make it an attractive market for
insurtech companies looking to provide innovative insurance solutions. Estimates
value India’s insurtech market opportunity as high as $339 billion. Some key
trends and developments in the insurtech sector in India include:
 Digital distribution channels
 Data analytics and AI
 Internet of Things (IoT) and telematics
 Healthtech and wellness programs
 Peer-to-peer (P2P) insurance
 Regulatory sandboxes
The insurtech sector in India is witnessing significant growth and innovation,
disrupting traditional insurance models and offering new solutions to meet the
evolving needs of consumers. One of the main areas of opportunity for U.S.
insurtech companies in India is the provision of digital insurance solutions. With
a large portion of the Indian population still lacking access to traditional insurance
products, there is a significant potential for insurtech firms to offer low-cost, easy-

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to-use digital insurance products. Another area of opportunity is in the

development of innovative products tailored to the Indian market. For example,
there is a growing demand for microinsurance, which provides coverage for low-
income individuals and families. U.S. insurtech companies that can provide
affordable, accessible microinsurance products could tap into this market and
potentially make a significant impact on the lives of millions of
people. Challenges remain, however, including regulatory compliance, data
privacy issues, and consumer trust.
Insurance Advisory committee (2022)

Insurance Regulatory and Development Authority Act, 1999

25. Establishment of Insurance Advisory Committee

(1) The Authority may, by notification, establish with effect from such date as it
may specify in such notification, a Committee to be known as the Insurance
Advisory Committee.

(2) The Insurance Advisory Committee shall consist of not more than twenty-five
members excluding ex officio members to represent the interests of commerce,
industry, transport, agriculture, consumer fora , surveyors, agents, intermediaries,
organizations engaged in safety and loss prevention, research bodies and
employees' association in the insurance sector.

(3) The Chairperson and the members of the Authority shall be the ex officio
Chairperson and ex officio members of the Insurance Advisory Committee.

(4) The objects of the Insurance Advisory Committee shall be to advise the
Authority on matters relating to the making of the regulations under section 26.

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(5) Without prejudice to the provisions of sub-section (4), the Insurance Advisory
Committee may advise the Authority on such other matters as may be prescribed.

UNIT II
[Link] is Premium ? What is the effect of non payment of premium on the
policy ? What reliefs are provided against the forfeiture of the policy for non-
payment of premium. 12. 13 (D 2021)

Meaning of Insurance Premium

Life insurance premium refers to a specific amount to be paid periodically
by the insured individual to maintain their insurance coverage, as calculated by
the insurance company. For deciding the premium amount, an insurance company
examines the type of coverage being opted, the lifestyle and health conditions,
and the likelihood of a claim being made, among other factors. You may pay an
insurance premium in a lump sum or as a regular sum.
How does Life Insurance Premium Work?
For the insurer, the insurance premium can consist of risk premium, investment
premium, office premium and loadings, if any. The risk premium is the premium
insurer must keep safe as it also increases the insurer’s liability to meet the
demands for contingency claims from the policyholders.
Insurers will invest the investment premium to generate income for the
policyholder. Office premium refers to the premium charged to cover
administrative expenses for providing the Insurance policy. For the purpose of
accurate analysis of a person’s life and insurance premium calculation, companies
employ actuaries. They are responsible for analysing the risks associated with an
event or claim, and then greater the risk, higher will be the insurance premium.
Calculation of Life Insurance Premium
If you are planning to buy a life insurance policy, you must know the factors

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affecting your insurance premium. As a rule, the earlier you buy a life insurance
policy, the lower the premiums you pay. In addition, you may also be offered a
better coverage duration and benefits. The following are the major factors that
may affect your premium amount:
1. Age
This is the most important factor while estimating your life insurance premium.
The base mortality premium is entirely based on your age.
2. Occupation
Different professions have different levels of health and life risks. Jobs like
mechanical and civil engineering are more risky as compared to office jobs. Thus,
such professions attract a higher life insurance premium.
3. Lifestyle Habits
Lifestyle habits like smoking and drinking are linked to a higher risk of diseases,
which might require you to pay higher life insurance premiums. So, adapting to
a healthier lifestyle may not only keep you safe in the long run but also get you
better rates with life insurance companies.
4. Present & Past Health
Present health conditions and past medical records are required to assess your
future health and the possibility of future diagnosis. In case of serious illnesses,
your policy may attract a higher premium.
5. Sum Assured Amount
The higher your sum assured. the higher your premiums will be. However, with
high premiums, you can attract discounts on the premium rates. Higher sum
assured means that your coverage is high and for a high coverage, you will have
to pay a higher life insurance premium.
6. Policy Term & Premium Payment Term
The premium payment term (PPT) cannot be higher than the policy term (PT).
The lower your PT the lower your premium will be.
7. Hobbies

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Hobbies like adventure sports can increase the risk of serious injury or death.
Thus, your life insurance premium will be higher if your hobbies include
activities that pose a threat to your life.
8. Marital Status & Dependents
Marital status and number of dependents may define your maximum life cover
eligibility and capacity for premium payment. If you have several dependents, the
insurer may try to offer a lower premium and lower sum assured cover.
9. Loans & Liabilities
Loans and liabilities assessment is a part of your financial underwriting. The
insurer would want to assess that you will keep the commitment to regular
premium payments. However, if you have multiple loans running, the insurer
might want to reduce the risk of policy lapse and ask for a lower PPT or premium
amount.
Non-payment of premiums
If you default on your insurance premium payments, your health insurer will offer
you a payment scheme. If you have not paid premiums for six months, the insurer
will report you to the Central Administration Office (CAK). The premiums will
then be withheld from your pay and remitted to the CAK.

Here are a few things you can try to do if you find yourself in a situation where
you will not be able to pay your insurance premiums and continue the insurance
policy.
 Try to cash out the policy
Check with your insurance company and the terms and conditions of your
insurance policy whether or not you can cash out the premiums that you have paid
till now. In this case, your insurance company will no longer provide you with
the life insurance benefits and you may also have to pay some tax depending upon
the amount that you cash out.
 Non-forfeiture Options

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Some insurance companies offer what is called a ‘reduced paid-up’ option to the
ones who are unable to continue their insurance policy. Here, you can stop paying
the premiums without having your policy terminated but your benefits will be
reduced depending upon the premiums you have paid till that time.
 Reinstate the policy
In case you didn’t opt for the two options mentioned above, your policy will be
terminated after the grace period. However, insurance companies allow their
users to reinstate their policy but with some late fees, renewal fees or penalties.
Buy a new policy or Reinstate the previous policy
If you are worried about the late fees, renewal fees or the penalties that will come
with reinstating the terminated life insurance policy and think that buying a new
insurance policy could be a better idea, here are a few things you should consider.
 If you buy a new policy, then you will lose all the premiums you paid for the
previous policy
 Premium amount increases with the increase in the age of insurance holders. This
implies that the premium that you will have to pay for a new insurance policy can
be higher than that of your previous policy; which, in the long run, can make it
much more expensive than just reinstating the previous policy
So as a general rule, it is better to reinstate the previous policy as compared to
buying a new policy. However, you should compare both and think thoroughly
before you finally decide on whether you want to buy a new life insurance policy
or just go with reinstating the older one.

Conclusion
An insurance company is responsible to pay for the losses of the insurance holder
as per the insurance policy. However, when the insurance holder fails to pay their
insurance premiums on due time and then in the grace period, their insurance
policy will terminate. Now, they can reinstate the insurance policy but can come
with late fees, renewal fees, penalties, etc. or they can buy a new insurance policy.

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What is assignment of an insurance policy ? State the rules relating to assignment

of policies in contract of Insurance.(2022)
[Link] the principle of “Causa-Proxima”. (D 2022) (D 2021 6 marks)(J
2021)
INTRODUCTION
The doctrine of Proximate cause or causa poxima is one of the principles of
insurance. In insurance law ‘causa proxima et Non Remota Spectrum’ means the
immediate and not the remote cause is to be considered. For the purpose of
claiming any insurance policy the loss or injury caused must be as a result of any
one of the insured perils. Peril is basically the cause of loss or the prime cause of
what will give rise to a loss.. The immediate and not the remote cause is to be
regarded as proximate cause, the insurer always considers the proximate cause
while paying the claim.
Pawsey & Co, V. Scottish Union & N ational Insurance Co: The term
proximate cause was first defined in this case as: “the doctrine of ‘proximate
causa’ indicates “the active and efficient cause that sets in motion a train of events
which brings about a result , without the intervention of any force started and
working actively from a new and independent source.”
In Reynold v. Accidental Insurance Co.a question was raised as to whether the
last cause is a mere consequence of the preceding cause of the peril insured
against or was there a break in the causation? “it was observed that if the last
cause is a mere probable and reasonable consequence of the peril insured against
without any novus actus interveniens, the peril insured against will have to be
treated as the real and efficient cause and the insurer will be liable, on the other
hand, if the connection between the preceding cause and the last cause is
interrupted by the intervention of a fresh cause, which is not a mere reasonable
and probable consequence directly and naturally resulting in the ordinary course
of events from the peril insured against the insurer will not be liable.”

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APPLICATION OF THE RULE OF ‘CAUSA PROXIMA’ :

 Life Insurance: Under life insurance, the insurance policy is taken against the
risk of death and any natural causes which may probably result in death, makes
the party eligible to claim the cover except in the cases suicides.
 Accident Insurance: If cause of death is direct i.e ; caused by accident then
there is no question of proximate cause. The doctrine is directly satisfied and the
money can be recovered. In Issit v. Railway Passengers Assurance Co., a railway
passenger was insured against death from the effect of an injury caused by
accident. He fell down from the train and was hospitalized. He was undergoing
treatment in the hospital and died due to attack of pneumonia. “The court held
that the death was a result of the accident by applying the maxim ‘causa
Sproxima’ and the insurer was liable.”
 Fire Insurance: The principle of causa proxima is applicable in the case of
Fire Insurance. It has been observed in
Stanley v. Western Insurance Co., that “any loss resulting from the fire and
resulting from the necessary and bona fide efforts to put out the fire whether by
the spoiling of goods by water or throwing the articles out the window or pulling
down a house for the purpose of preventing the spreading of the flames are within
the policy of fire insurance.”
 Marine Insurance: When the loss is caused by the perils of the sea the maxim
‘causaproxima ‘ is applicable to the case of Marine Insurance. Perils of the sea is
defined in The Hague Visby Rules12which under Article 4(2) (c) defines ‘perils’
as ‘perils’ , dangers and accidents of the sea or other navigable waters, and
provides a defence for the carrier from liability for loss or damage. In Dudgeon
v. Permbroke14, a ship was insured with a time policy and it was lost due to the
violent action of the winds and the waves. The insurer argued that they were not
liable as the ship was not fit for voyage. The House of Lords held by applying the
maxim causa Sproxima that the immediate cause for the loss was the violent

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action of the wind and the waves and therefore, the insurance company was liable
even though the loss could not have happened but for the concurrent action of
some other cause not within the policy i.e, unseaworthiness of ship.
IV. ANALYSIS In general, what I understood about the theory of proximate
cause is that it is that cause which triggers a chain of events resulting in the actual
loss. For example, due to a storm if the wall collapses and as a result of this there
is short circuit and due to the spark there is damage resulting from fire(insured
peril). Thus herein in the present example there is a train of events which resulted
in the actual damage. Even though fire is the insured peril the proximate cause is
storm and thus the insurer is liable to pay the damage. However, the insurer in no
case is liable to compensate if the loss is from excepted perils or uninsured perils
or if it is caused by the misconduct or fault of the assured. The main point to note
in the principle of proximate cause is that it is not applicable in the case of life
Insurance as in the case of death the insurer is liable to pay whatever may be the
cause of death whether natural or unnatural except in the case of suicide. There
are certain exceptions to this as well
CONCLUSION: The insurer or the company is liable if one of the cause of loss
is an insured peril and none of them is an excepted peril or the loss is caused by
the insured and the excepted perils can be distinguished. Thus there must be
insured peril and the relationship between the causation and the actual event must
be ascertained ,the principal of proximate cause identifies the nearest or direct
cause which resulted in the damage, when there exist a chain of events. In this
case the most influential cause is to be determined inorder to settle the claim.
Once the predominant cause is determined and it becomes clear that the causa
proxima is covered under the ‘insured peril’, the insurer is liable to compensate
and at that point the principle of Indemnity will take place. However, the insurer
is not liable if the losses caused by the insured and the excepted perils cannot be
separated or distinguished and also if it is caused by the negligent act of the
insured . As an insurer must always take reasonable care to the insured property

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like how a rational or prudent man would do. In all the contract of insurance the
principle of Loss Minimization is applicable and the insured must always try to
reduce the risk and loss attached with the property. Keeping all this principles and
exceptions the court decides what the proximate cause is in each case and the full
discretion is with the court to interpret this doctrine; this is done by the mere
application of the court’s common sense.

[Link] the doctrine of “Subrogation” and “Contribution”. (D 2022)(D

2021)
insurance is a contract, a legal agreement between two parties, i.e., the individual
named insured and the insurance company called insurer. In this agreement, the
insurer promises to help with the losses of the insured on the happening
contingency. The insured, on the other hand, pays a premium in return for the
promise made by the insurer.
The contract of insurance between an insurer and insured is based on certain
principles, let us know the principles of insurance in detail.
Principles of Insurance
The concept of insurance is risk distribution among a group of people. Hence,
cooperation becomes the basic principle of insurance.
To ensure the proper functioning of an insurance contract, the insurer and the
insured have to uphold the 7 principles of Insurances mentioned below:
1. Utmost Good Faith
2. Proximate Cause
3. Insurable Interest
4. Indemnity
5. Subrogation
6. Contribution
7. Loss Minimization
Subrogation and contribution in important principles of insurance

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SUBROGATION
It will arise when the assured must have concurrent remedies against the
person causing the loss or damage and against the insurer. All that is necessary is
that there should be besides the insurer, another person liable to the insured or
some other means of indemnity open to the assured other than and besides
recourse to the insurer. This an assured has a claim against bailee of his goods by
law, custom or contract, and also a claim against his insurers, but the insurer can
in satisfaction of loss claim against the bailee who is primarily liable and stands
in a position analogous to that of a principal debtor whose debt is guaranteed. In
above cases Principle of Subrogation will apply. In subrogation the aim is to shift
the loss on those which would have been liable if there had been no insurance.
The one thing which contribution has in common with subrogation is to reduce
the indemnification of the assured within the bounds of real indemnity.
AVERAGE CLAUSE IN INSURANCE POLICY; In absence of a
contract to the contrary, an assured is entitled to have the full amount of loss made
good at the hands of the insurers. But now days in many insurance policies of
different insurers contains a condition called the average clause by which the
assured is called upon to bear a portion of the loss himself. One of such conditions
is that if the property covered by the policy is, at the time of the fire, of greater
value than the amount of insurance specified in the policy, the insured must be
considered to be his own insurer for the different and bear a rate able proportion
of loss. This condition is called the pro-rata condition of average.
The portion of the loss is ascertained by a rule-of-three sums as follows; i)
Value of property covered; ii) Insured amount; and iii) Damages payable.
LET’S US CONSIDER AN EXAMPLE: Mr. A has insured his house property
values at Rs. 5.00 Lakhs and he has taken an insurance policy of sum assured Rs.
4.00 Lakhs and the damage done to his house due to fire is Rs. 1.00 Lakhs. Now
in this case the insurance company will pay him Rs. 0.80 Lakh as insurance claim
and he has to bear Rs. 0.20 Lakh as his own.

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The Rationale is from the case law Rayner v. Preston, The American Courts
after several vendor-purchaser contract cases state that insurance was not a
personal contract. The field of insurance law is dominated by the third and first
legally permissible approaches. Each of these approaches have their own
drawbacks as the first has the drawback wherein the insured is over compensated,
while in the third option usually insurance rates are not fixed to anticipate such
recoveries by the way of subrogation. The Second Option has a major drawback
if insurance contracts are considered to be personal contracts between the insured
and the insurer.
In Padmanabha Pillai Case (Krishna Pillai Rajasekharan Nair v.
Padmanabha Pillai, 2004), the Supreme Court has held that Subrogation arises
out of doctrine of equity and the principles of natural justice but not out of the
privity of contract. The principles of Subrogation as applicable under the Indian
Insurance
Contribution
Common Law allows the insured to recover full amount from any one of the
insurers and the insurers can then later claim the remaining from the other
insurers[. It is important to not here that the several conditions must be justified
for there to be contribution.
Firstly, there must be in existence two or more contracts of insurance.
Secondly, there should be a common policy covering a common peril for loss and
with a common subject matter.
Lastly, such policies should be in operation at the same time. The insurance
policies need not be identical but need to be similar in subject matter and policy.
At present to avoid law suits wherein other insurance companies suggest that one
has taken the responsibility to pay the full amount to the insured this relieving the
others to prevent unnecessary suits at present the insurance companies are only
entitled to pay their rate-able proportion of loss as regards the policy entered into

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with the insured[40]. As for the remaining claim the insured should take it to the
other insurer with whom there has been a insurance policy.
Illustration: If an insured enters into a Fire Insurance Policy with three insurance
companies A, B and C to the extent of $ 10,000, $20,000 and $30,000 and there
arises a claim of $ 6,000. As regards the rate-able proportion theorem the
insurance companies will have to pay as they would be thus liable. A would have
to compensate to the extent of $1,000, B to the extent of $ 2,000 and C to the
extent of $ 3,000
APPLICATION OF DOCTRINE OF CONTRIBUTION; Please check below
mentioned factors in the Insurance Policy of insurers for effecting Doctrine of
Contribution:
i) The subject-matter of insurance must be the same. It is not necessary that the
amount of insurance with each insurer should be the same;
ii) The event insured against must be the same;
iii) The insured must be the same person in all insurance policies;
iv) The right of contribution exists only in respect of insurance which have attached
and which are on the face of the policies subsisting insurance.
CONTRIBUTION Vs. SUBROGATION
Contribution differs Subrogation in several respects. It implies more than
one contract of insurance, each of which undertakes a similar, if not identical
liability, in respect of the same subject-matter and same interest therein. Further
the amount of insurance must exceed the value of property insured, all the
damages done to it. When above circumstances exist, the insurers by Contribution
Clause distribute the actual loss in such a way that each bears his proper share.
No one insurer is more liable than any other, no more than the whole loss can be
recovered. The aim of Contribution is to distribute the loss among the different
persons liable so as to give each and all of them a diminution of their individual
loss.

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[Link] about the classification of Contracts of Insurance.(D 2022 6 Marks)

Introduction
Insurance contracts play a vital role in managing risks and providing financial
protection in today’s unpredictable world. These contracts establish a legal
agreement between an insurance company and an individual or organization
seeking coverage against potential losses or damages. Understanding the
classification of insurance contracts is crucial for both insurers and policyholders,
as it determines the rights, obligations, and scope of coverage within the contract.
In this blog post, we will delve into the various classifications of insurance
contracts and explore their unique characteristics.
Classification of Insurance Contracts
Insurance contracts can be broadly classified into two categories based on the
nature of the insured risk: life insurance and general insurance. Let’s examine
each category in detail.
1. Life Insurance Contracts: Life insurance contracts provide coverage against the
risk of loss associated with human life. They are primarily concerned with
protecting individuals and their families against financial hardships arising from
the insured’s death, disability, or longevity. Life insurance contracts can further
be classified into the following types:
a) Whole Life Insurance: Under this type of contract, the insurer guarantees
coverage for the entire lifetime of the insured, provided premiums are paid. It
combines protection and investment features, offering a death benefit to
beneficiaries upon the insured’s demise.
b) Term Life Insurance: Term life insurance contracts provide coverage for a
specified term, typically ranging from one to thirty years. If the insured individual
passes away during the policy term, the beneficiaries receive the death benefit.
However, there is no maturity or investment component in term life insurance.
c) Endowment Policies: Endowment policies offer coverage for a specific term
but also provide a maturity benefit if the insured survives the policy term. These

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contracts combine elements of protection and savings, making them suitable for
long-term financial planning.
d) Annuities: Annuities differ from traditional life insurance policies as they
focus on providing a regular income stream to the annuitant. The insured pays a
lump sum or periodic premiums to the insurer, who, in turn, guarantees regular
payments over a specified period or for the annuitant’s lifetime.
2. General Insurance Contracts: General insurance contracts, also known as non-
life insurance contracts, cover risks other than those related to human life. These
contracts aim to provide protection against various perils, including property
damage, liability claims, motor accidents, and medical expenses. General
insurance contracts can be further classified into several types:
a) Property Insurance: Property insurance contracts safeguard physical assets
such as buildings, machinery, equipment, and personal belongings against risks
like fire, theft, natural disasters, or accidents.
b) Liability Insurance: Liability insurance provides coverage against legal
liabilities arising from personal injury, property damage, or financial losses
caused to a third party. This type of contract is crucial for individuals and
businesses to protect themselves from potential litigation and financial
obligations.
c) Motor Insurance: Motor insurance contracts protect vehicle owners against
financial losses arising from accidents, theft, or damage to their vehicles. These
policies are mandatory in many jurisdictions and can include coverage for third-
party liability, own damage, and personal accident.
d) Health Insurance: Health insurance contracts offer coverage for medical
expenses incurred by individuals or families. They can include hospitalization
costs, outpatient treatments, prescription medications, and preventive care
services.
e) Travel Insurance: Travel insurance provides coverage against risks
encountered during domestic or international travel, including trip cancellation or

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interruption, lost luggage, medical emergencies, and personal accidents.

f) Marine Insurance: Marine insurance contracts protect against risks associated
with maritime transportation, including cargo damage, vessel accidents, and
liability for shipowners and cargo owners.
Conclusion
Insurance contracts serve as crucial financial tools, providing individuals and
organizations with protection and peace of mind in the face of uncertain events.
By understanding the classification of insurance contracts, policyholders can
choose the coverage that aligns with their specific needs and circumstances.
Insurers, on the other hand, can design policies that effectively manage and
mitigate risks within their portfolios. Whether it’s life insurance or general
insurance, the diverse classifications ensure that insurance remains adaptable to
the wide-ranging risks faced by individuals, families, and businesses in our
dynamic world.

[Link] is Risk ? State the scope of risk in different kinds of insurance.

Discuss the circumstances affecting the risk in the insurance. (D 2021)
INTRODUCTION: Risk in insurance can refer to the possibility or chance that
any unexpected event or events will occur leading to the loss of life or loss or
damage to any property of the person who takes insurance by paying the
insurance premium calculated by the insurers based on the probability of an event
and its impact.
The risk is any event or happening that no one plans, but if it happens, it
eventually causes life or financial loss to any person. The risk is neither inevitable
nor predictable. In the case of risk insurance or risk in insurance, insurers assess
the policy taken by the policyholder and pay the sum of money (financial value
of damages caused) based on terms and conditions covered in the approach to
compensate for the loss suffered by the policyholder.
Types of Risk in Insurance

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3 Types of Risks in Insurance are Financial and Non-Financial Risks, Pure and
Speculative Risks, and Fundamental and Particular Risks. Financial risks can be
measured in monetary terms. Pure risks are a loss only or, at best, a break-even
situation. Fundamental risks are the risks mostly emanating from nature.
aving dealt with the meaning of risk, we shall now attempt to divert our attention
to another aspect of the nature of risk which we shall call as Classification of risk.
It is required to know the complex classification and sub-classification of risk and
also an insight into risks that can be insured and which cannot be.
We may look into this subject in the following manner:
1. Financial and Non-Financial Risks.
2. Pure and Speculative Risks.
3. Fundamental and Particular Risks.
Financial and Non-Financial Risks
Financial risks are the risks where the outcome of an event (i.e., event
giving birth to a loss) can be measured in monetary [Link] losses can be
assessed, and a proper monetary value can be given to those losses. The common
examples are:
• Material damage to property arising out of an event. We may consider the damage
to a ship due to a cyclone or even the sinking of a ship due to the cyclone. Damage
to the motor car due to a road accident may be of partial or total nature. Damage
to stock or machinery etc.
 Theft of a property which may be a motorcycle, motor car, machinery, items of
household use or even cash.
 Loss of profit of a business due to fire damage the material property.
 Personal injuries due to industrial, road, or other accidents resulting in medical
costs, Court awards, etc.
 The death of a breadwinner in a family leads to corresponding financial hardship.
All such losses, i.e., the outcome of unforeseen untoward events, can be measured
in monetary terms.

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The losses can be replaced, reinstated, or repaired, or even a corresponding

reasonable financial support (in case of death) can be thought about.
We would call all such financial risks as insurable risks and these are indeed the
main subjects of insurance.
on-Financial risks are the risks, the outcome of which cannot be measured in
monetary terms.
There may be a wrong choice or a wrong decision giving rise to possible
discomfort or disliking or embarrassment but not being capable of valuation in
money terms.
Examples can be:
 Choice of a car, its brand, color, etc.
 Selection of a restaurant menu,
 Career selection, whether to be a doctor or engineer etc.
 Choice of bride/bridegroom,
 Choice of publicity etc.
Since the outcome cannot be valued in terms of money, we shall call these non-
financial risks uninsurable.
Pure Risk and Speculative Risks
Pure risks are those risks where the outcome shall result in loss only or, at best, a
break-even situation. We cannot think about a gain-gain situation.
The result is always unfavorable, or maybe the same situation (as existed before
the event) has remained without giving birth to a profit (or loss).
As opposed to this, speculative risks are those risks where there is the possibility
of gain or profit. At least the intent is to make a profit and no loss (although loss
might ensue).
Investing in shares may be a good example. Pricing, marketing, forecasting, credit
sale, etc., are yet examples falling within the domain of speculation.
Pure Risk and Speculative Risks

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Pure risks are those risks where the outcome shall result in loss only or, at best, a
break-even situation. We cannot think about a gain-gain situation.
The result is always unfavorable, or maybe the same situation (as existed before
the event) has remained without giving birth to a profit (or loss).
As opposed to this, speculative risks are those risks where there is the possibility
of gain or profit. At least the intent is to make a profit and no loss (although loss
might ensue).
Investing in shares may be a good example. Pricing, marketing, forecasting, credit
sale, etc., are yet examples falling within the domain of speculation.
hese may be identified as speculative risks and usually not insurable.
Fundamental Risk and Particular Risks
Now coming to the last stage of classification of risk we may consider the subject
from the viewpoint of the cause of risk and its effect. We call such classifications
as fundamental risks and particular risks.
Fundamental risks are the risks mostly emanating from nature. These are the risks
that arise from causes that are beyond the control of an individual or group of
individuals.
The losses arising out of such causes may be catastrophic in dimension and felt
by a huge number of populations, the society, or by the state, although an
individual may be a part of that catastrophe. The common examples are:
 Flood & Cyclone, Subsidence & landslip,
 Earthquake & volcanic eruptions, Tsunamis,
 The convulsion of nature and other natural disasters,
 Famine, Draught
We may also add to the list perils like war, terrorism, riots & other political
activities, which are neither created by nature nor by an individual but result in
colossal losses.
But one thing is certain, which are this that all such perils are impersonal not
being caused or contributed by an individual or even a group of individuals.

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Normally fundamental risks were not supposed to be insurable because of the

magnitude, and these were considered to be the responsibility of the State. Now
because of demand and insurers’ strength, these risks are easily insurable.
Particular risks are; as opposed to what has been narrated hereinbefore, there are
risks that usually arise from the actions of individuals or even groups of
individuals.
These may be identified as causes arising from personal (or group) behavior and
effects (losses) not being of that magnitude.
ese are mostly men created because of their negligence, error in judgment,
carelessness, and disregard for law or respect.
We may even go on to suggest that these are indeed the cases (both cause and
effect) where there has been an omission to do something which should have been
done, or there has been done something which should not have been done.
We may call these risks of personal nature. The common examples are:
 Fire, Explosion,
 Burglary, housebreaking, larceny, and theft,
 Stranding, Sinking, Capsizing, Collision in case of a ship, including cargo loss,
 Machinery breakdown and deterioration of stock due to machinery breakdown,
 Motor accidents, including death and bodily injuries, Industrial accidents,
 The collapse of bridges, Derailments.
Particular risks are insurable risks, and most of the insurances relate to these risks.
Conclusion
Thus, risk in insurance is the risk that any unexpected event will cause loss of life
or financial loss to any property. If any person is unwilling to bear such risk and
wants to transfer the same, then such transfer is possible by taking the insurance
policy. In the case of insurance, the insurer agrees to undertake a person’s risk in
exchange for a certain premium, which calculates the essential nature of risk and
its impact. If such an unexpected event happens and causes loss to the insured

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person, the insurer has to pay the amount of loss incurred based on the terms of
an insurance policy.
6. Write a short note on assignment of insurance policies. (D 2021)
[38. Assignment and transfer of insurance policies. --(1) A transfer or assignment
of a policy of insurance, wholly or in part, whether with or without consideration,
may be made only by an endorsement upon the policy itself or by a separate
instrument, signed in either case by the transferor or by the assignor or his duly
authorised agent and attested by at least one witness, specifically setting forth the
fact of transfer or assignment and the reasons thereof, the antecedents of the
assignee and the terms on which the assignment is made.
(2) An insurer may, accept the transfer or assignment, or decline to act upon any
endorsement made under sub-section (1), where it has sufficient reason to believe
that such transfer or assignment is not bona fide or is not in the interest of the
policyholder or in public interest or is for the purpose of trading of insurance
policy.
(3) The insurer shall, before refusing to act upon the endorsement, record in
writing the reasons for such refusal and communicate the same to the policyholder
not later than thirty days from the date of the policyholder giving notice of such
transfer or assignment.
(4) Any person aggrieved by the decision of an insurer to decline to act upon such
transfer or assignment may within a period of thirty days from the date of receipt
of the communication from the insurer containing reasons for such refusal, prefer
a claim to the Authority.
(5) Subject to the provisions in sub-section (2), the transfer or assignment shall
be complete and effectual upon the execution of such endorsement or instrument
duly attested but except, where the transfer or assignment is in favour of the
insurer, shall not be operative as against an insurer, and shall not confer upon the
transferee or assignee, or his legal representative, any right to sue for the amount
of such policy or the moneys secured thereby until a notice in writing of the

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transfer or assignment and either the said endorsement or instrument itself or a

copy thereof certified to be correct by both transferor and transferee or their duly
authorised agents have been delivered to the insurer:
Provided that where the insurer maintains one or more places of business in India,
such notice shall be delivered only at the place where the policy is being serviced.
(6) The date on which the notice referred to in sub-section (5) is delivered to the
insurer shall regulate the priority of all claims under a transfer or assignment as
between persons interested in the policy; and where there is more than one
instrument of transfer or assignment the priority of the claims under such
instruments shall be governed by the order in which the notices referred to in sub-
section (5) are delivered:
Provided that if any dispute as to priority of payment arises as between assignees,
the dispute shall be referred to the Authority.
(7) Upon the receipt of the notice referred to in sub-section (5), the insurer shall
record the fact of such transfer or assignment together with the date thereof and
the name of the transferee or the assignee and shall, on the request of the person
by whom the notice was given, or of the transferee or assignee, on payment of
such fee as may be specified by the regulations, grant a written acknowledgement
of the receipt of such notice; and any such acknowledgement shall be conclusive
evidence against the insurer that he has duly received the notice to which such
acknowledgement relates.
(8) Subject to the terms and conditions of the transfer or assignment, the insurer
shall, from the date of the receipt of the notice referred to in sub-section (5),
recognise the transferee or assignee named in the notice as the absolute transferee
or assignee entitled to benefit under the policy, and such person shall be subject
to all liabilities and equities to which the transferor or assignor was subject at the
date of the transfer or assignment and may institute any proceedings in relation
to the policy, obtain a loan under the policy or surrender the policy without

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obtaining the consent of the transferor or assignor or making him a party to such
proceedings.
Explanation.-- Except where the endorsement referred to in sub-section (1)
expressly indicates that the assignment or transfer is conditional in terms of sub-
section (10) hereunder, every assignment or transfer shall be deemed to be an
absolute assignment or transfer and the assignee or transferee, as the case may be,
shall be deemed to be the absolute assignee or transferee respectively.
(9) Any rights and remedies of an assignee or transferee of a policy of life
insurance under an assignment or transfer effected prior to the commencement of
the Insurance Laws (Amendment) Act, 2015 (5 of 2015) shall not be affected by
the provisions of this section.
(10) Notwithstanding any law or custom having the force of law to the contrary,
an assignment in favour of a person made upon the condition that--
(a) the proceeds under the policy shall become payable to the policyholder or the
nominee or nominees in the event of either the assignee or transferee predeceasing
the insured; or
(b) the insured surviving the term of the policy, shall be valid:
Provided that a conditional assignee shall not be entitled to obtain a loan on the
policy or surrender a policy.
(11) In the case of the partial assignment or transfer of a policy of insurance under
sub-section (1), the liability of the insurer shall be limited to the amount secured
by partial assignment or transfer and such policyholder shall not be entitled to
further assign or transfer the residual amount payable under the same policy.]
[Link] of Indemity? (D 2022)
Insurance policies can be a lifesaver when an unexpected event happens.
However, with so many different types of insurance and confusing terminology,
it can be difficult to understand exactly what you are paying for. In this blog
today, we are going to discuss one key principle that determines how protection
is provided to insured parties. Yes, we are going to talk at length about the

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Principle of Indemnity. After going through this blog, you will have a clear idea
of what this principle is all about, the factors that influence it, and other related
matters.
Before proceeding to the main topic, let’s turn our attention to the basics -
Principle of Indemnity
In a legal sense, indemnification refers to the transfer of liability for damages. A
legally enforceable contract between two parties, termed an indemnity agreement,
specifies the conditions related to this transfer. Here, one party promises to pay
for the losses or damages of the other party. An insurance contract is a common
example, in which the insurer agrees to reimburse the other (the insured) for any
damages or losses, in return for premiums paid to the insurer by the insured. This
means the insurer indemnifies the policyholder or insured, promising to
compensate him for any insured loss or damage.
What is the Principle of Indemnity?
When it comes to insurance, the principle of indemnity says that insurance
contracts provide compensation for damage, loss, or injury only to the extent of
the loss incurred. Insurance contracts must ensure the insured does not make a
profit in the event of a loss incurred. It applies to only the non-life category of
insurance such as property, employers’ liability, public liability and casualty
insurance. Life insurance is not covered by the principle since human lives cannot
be measured in monetary terms. For the same reason, personal accident insurance
is not covered by this principle.
Example of Principle of Indemnity–
As a businesswoman, Priyanka owns a cosmetic shop and has insured her goods
for Rs 8 lakhs. Unfortunately, a fire broke out in the cosmetics shop causing
damage to part of the goods. Priyanka claimed the full amount of Rs 8 lakhs as
compensation but upon investigation, it was discovered that only Rs 3 lakh worth
of goods were damaged. Consequently, she will receive only Rs 3 lakh as
compensation.

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The principle of Indemnity does not apply to individuals and businesses which
try to profiting from their losses.
Objectives of the Principle of Indemnity
1. Insurance companies aim to restore your financial situation to what it was before
the loss occurred.
2. As soon as the insurer has fully examined and calculated the loss, the claim you
receive is equal to the amount of the loss.
3. The purpose of this principle is to prevent you from making a profit from your
insurance claims.

UNIT – III
[Link] the features of General Insurance Business (Nationalisation) Act,
1972? (J 2021)
 The General Insurance Business (Nationalisation) Amendment Bill, 2021 was
introduced in Lok Sabha on July 30, 2021. The Bill seeks to amend the General
Insurance Business (Nationalisation) Act, 1972. The Act was enacted to
nationalise all private companies undertaking general insurance business in
India. The Bill seeks to provide for a greater private sector participation in the
public sector insurance companies regulated under the Act.

 The 1972 Act set up the General Insurance Corporation of India (GIC). The
businesses of the companies nationalised under the Act were restructured in four
subsidiary companies of GIC: (i) National Insurance, (ii) New India Assurance,
(iii) Oriental Insurance, and (iv) United India Insurance. The Act was
subsequently amended in 2002 to transfer the control of these four subsidiary
companies from GIC to the central government, thereby making them
independent companies. Since 2000, GIC exclusively undertakes reinsurance
business.

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 Government shareholding threshold: The Act requires that shareholding of the

central government in the specified insurers (the above five companies) must be
at least 51%. The Bill removes this provision.

 Change in definition of general insurance business: The Act defines general

insurance business as fire, marine or miscellaneous insurance business. It
excludes capital redemption and annuity certain business from the
definition. Capital redemption insurance involves payment of a sum of money
on a specific date by the insurer after the beneficiary pays premiums
periodically. Under annuity certain insurance, the insurer pays the beneficiary
over a period of time. The Bill removes this definition and instead, refers to the
definition provided by the Insurance Act, 1938. Under the Insurance Act capital
redemption and annuity certain are included within general insurance business.

 Transfer of control from the government: The Bill provides that the Act will
not apply to the specified insurers from the date on which the central government
relinquishes control of the insurer. Control means: (i) the power to appoint a
majority of directors of a specified insurer, or (ii) to have power over its
management or policy decisions.

 The Act empowers the central government to notify the terms and conditions of
service of employees of the specified insurers. The Bill provides that schemes
formulated by the central government in this regard will be deemed to have been
adopted by the insurer. The board of directors of the insurer may change these
schemes or frame new policies. Further, powers of the central government under
such schemes (framed under the Act) will be transferred to the board of directors
of the insurer.

 Liabilities of directors: The Bill specifies that a director of a specified insurer,

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who is not a whole-time director, will be held liable only for certain acts. These
include acts which have been committed: (i) with his knowledge, attributable
through board processes, and (ii) with his consent or connivance or where he had
not acted diligently.
Objective of the GIC:
 To carry on the general insurance business other than life, such as accident, fire
etc.
 To aid and achieve the subsidiaries to conduct the insurance business and
 To help the conduct of investment strategies of the subsidiaries in an efficient and
productive manner.
Role and Functions of GIC
 Carrying on of any part of the general insurance, if it thinks it is desirable to do
so.
 Aiding, assisting and advising the acquiring companies in the matter of setting up
of standards of conduct and sound practice in general insurance business.
 Rendering efficient services to policy holders of general insurance.
 Advising the acquiring companies in the matter of controlling their expenses
including the payment of commission and other expenses.
 Advising the acquiring companies in the matter of investing their fund.
 Issuing directives to the acquiring companies in relation to the conduct of general
insurance business.
 Issuing directions and encouraging competition among the acquiring companies
in order to render their services more efficiently.

[Link] Life Insurance, discuss the various kinds of Life Insurance? (D

2022)
Or
[Link] is life insurance different from other insurances ? Explain.

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Life Insurance is a contract represented by a policy between an individual

and the insurance provider. The policyholder pays the premium for a long term
and upon maturity, s/he receives a large lump amount of money. Alternatively, it
is passed on to the nominee in case of the policy holder’s death due to unfortunate
circumstances. It acts as a support for the grieving family. Nominees can be
parents, siblings, children, or the spouse. If there is no mention of the nominee,
the legal heirs receive the insurance amount. For instance, the dependant spouse
or children or even the aging parents, as the case may be.
Can Insurance Companies Keep the Premium without Paying the Life
Insurance Cover Amount?
The type of life insurance coverage plan that a policyholder takes, answers the
above question. Two cases are possible. One, the family receives the lump sum
only in case of the death of the insured. Two, other than the insured’s death, s/he
also receives the insurance amount on the completion of the policy tenure. The
arrangement mentioned in the policy decides this. For example, some life
insurance schemes, mainly the term insurance covers offer only ‘death benefit’.
Death benefit means the family gets the insured amount upon the policyholder’s
death. Also, the pre-requisite condition is the insured passes away before the term
of the policy ends. If s/he stays alive, the money remains with the insurance
company.
Features of Life Insurance
There are specific features of life insurance that make it different from general
insurance policies. Below we discuss these attributes:
 It is long-term that may go from 10 to 30 years or even more. You have to pay
the life insurance premium for the term that you decide. This is called Premium
Payment Term
 The one who buys the policy and pays the premium is the insured. S/he can
appoint a nominee or a beneficiary to receive the amount in his/her absence
 Premium can be paid through regular monthly payments, annual payments, or a

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one-time payment
 A life insurance policy can be a good saving/investment plan for the future or a
pension/post-retirement plan. This depends on the type of policy. It can also
provide tax benefits
 It comes to aid in case of the untimely or sudden death of the breadwinner of the
family. If s/he is insured, then the family has a source of income. It makes them
financially stable, independent, and perhaps liability-free
Types of Life Insurance Plans
Various life insurance policies offer different coverages and benefits to the
policyholders. Choose the plan which suits you best to match your requirements
and financial objectives. The types of life insurance covers are:
1. Term Insurance
Term insurance covers are the most popular ones. It is because they are relatively
cheaper than other life insurance schemes and hence, affordable for many. Term
insurance carries no benefits or savings for the insured person as there is no
maturity period and consequent payment. It only offers a death benefit to the
family of the insured. The family receives the insurance money if the policyholder
passes away during the term of the insurance. The insurance lapses if the insured
person outlives the term of insurance.
2. Endowment Plans
In this life insurance plan, the policyholder is insured throughout the term/tenure
of the insurance policy. This means that the family can claim insurance money
upon the death of the policyholder. Also, the policyholder shall receive the lump
amount upon maturity or completion of the policy term if s/he outlives it.
Endowment Life Insurance Plan is a blend of savings and insurance plans. This
plan offers both the death benefit and the maturity amount.
3. Pension-cum-Insurance Plans
Similar to endowment insurance plans, the pension plans are a blend of post-
retirement savings as well as insurance schemes. The family shall receive

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compensation of the insured amount if the policyholder passes away before

retirement. If not, the premium paid as an employee accumulates as a pension
fund that will be paid back after retirement. It may be an annual payout in form
of annuities or a one-time lump sum payout.
4. Whole Life Insurance
Whole life insurance coverage is almost equivalent to endowment insurance, but
with a longer policy term, sometimes up to 100 years of age. The family gets the
insured amount if the policyholder passes away before the term. If not, the
policyholder gets the maturity amount after completion of 100 years or the
decided term for whole life insurance.
5. Money-back Insurance Plans
Money-back insurance plans have benefits both for the policyholders and their
families. The insured money is surely given to the nominee or beneficiary on the
death of the insured. It is paid provided the death occurs during the term when
the policy is active. It also allocates a portion of the premium amount to the
insured person which is paid at regular intervals. This regular partial payment is
called ‘survival benefit’. This can help achieve short-term goals.
6. Unit Linked Insurance Plan
ULIPs is an investment-cum-insurance plan. It often counts as a type of Mutual
Fund. Premiums paid are used for coverage and also to buy market-linked equity,
debt, and other instruments’ units. This provides life insurance to the insured
person as the family can avail of the death benefit. It gives returns that can lead
to creating a corpus amount. ULIPs offer flexibility to choose the type of fund
(equity, debt, or balanced). You can also switch from one fund type to another for
a minimal charge. It provides liquidity as there is an option for partial withdrawal
as well as has tax benefits. Returns depend on the performance of the fund opted
by you.
Benefits of Life Insurance Plan
The major benefit of a life insurance plan, irrespective of whichever type, is that

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it assures the financial security and protection of the dependent family members
when the insured person passes away due to untimely death. Many a time,
policyholders are the sole breadwinners of the family. In such cases, insurance
guarantees the financial stability of the family. Below we discuss all the
advantages of a life insurance policy:
1. Income Replacement
Insurance money acts as an income for the dependent family. It replaces the
income of the policyholder that passed away due to early demise.
2. Independent Family
Insurance money ensures that the family is not dependent on friends and relatives.
Also, it neither faces a financial crisis nor takes unnecessary debts when the
earning member dies. It makes them self-reliant and budgeted.
3. Reduces the Burden of Liabilities
The insured person may be bearing certain liabilities. For example, loans, credit
card bills, rent, EMIs, etc. This shall be a burden on the dependants. But the
insurance money makes sure that these liabilities can be paid off.
4. Achieve Goals
Insurance money also helps in achieving certain short-term goals. For instance,
paying off daily expenses or immediate expenses after death, education of
children through school fees, and others. Life insurance plans like pension plans,
endowment plans, etc. help in achieving long-term objectives. These include
higher education of children, children’s marriage, or having a regular source of
income after retirement.
5. Savings & Investments
All other types of plans, except term life insurance policy, are a mix of investment
or savings. Therefore, these can help acquire a considerable amount of corpus
after the term completion.
6. Tax Benefits
Life insurance schemes often come with tax benefits under Section 80C of the

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Income Tax Act. You are tax-exempt up to Rs. 1.5 lakh (total of all investments
and payments under this section). The premium should not exceed 10% of the
sum insured.
How to Choose Life Insurance Plans?
Out of several life insurance plans, decide carefully to choose insurance policies.
Keep in mind the below-mentioned factors before arriving at a decision to take
whichever type of policy:
 Keep in mind the number of dependents in the family. The insured amount can
be less if only your spouse is dependent on you. It should be more if there are
children or/and parents because the total house expenditure is more. Thereby, you
may need a larger amount for the insurance
 Always keep in mind the liabilities and goals. If the insurance money falls short
of paying off all liabilities then it is worrisome. Also, the insurance amount should
be as per the long-term and short-term goals. You must have clear objectives such
as education, marriage, owning a house, etc.
 Decide on the type of lifestyle you want your dependents to live after your death.
Insurance covers and hence the premium also depend on that
 It is always tempting to go for a large amount of life insurance money. This is
because it ensures the family’s safety. However, the premiums are also high. So
take care of what you can afford to pay
 Select which type of insurance plan would suit you. Compare different policies
from various insurance companies as well as the amount of coverage offered.
Also, evaluate the coverage amount against your liabilities, dependants, and
premium amounts
Wrapping it up:
Life insurance takes away the mental stress of the condition of the family if one
passes away. What will happen to the family if one loses his/her life in an
accident? Who will take care of the expenses if one dies? Such thoughts often
linger in the mind. So, a life insurance policy is an answer to those queries.

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Getting such a policy is always a safe move and also a step ahead in securing the
future of the family. Irrespective of the fact whether the insured person lives or
not, the family will be secured. Moreover, the plans that payout on maturity can
help in the capital generation or retirement corpus along with tax exemptions.

[Link] composition, power and function of life insurance

corporation?(2022)
Life Insurance Business in India was nationalized with effect from January 19,
1956. On the date, the Indian business of 16 non-Indian insurers operating in India
and 75 Provident Societies were taken over by Government of India. Life
Insurance Corporation of India, Act was passed by the Parliament on June 18,
1956 and came into effect from July 1, 1956. Life Insurance Corporation of India
commenced its functioning as a corporate body from September 1, 1956. Its
working is governed by the LIC Act. The LIC is a corporate having perpetual
succession and a common seal with a power to acquire hold and dispose of
property and can by its name sue and be sued.
Important Provisions of Life Insurance Corporation Act, 1956
 Constitution
 Capital
 Functions of the Corporation
 Transfer of Services
 Set-up of the Corporation
 Committee of the Corporation
 Authorities
 Finance, Accounts and Audit
 Miscellaneous
Life Insurance Corporation of India (LIC)
The LIC of India was set up under the LIC Act, 1956 under which the life
insurance was nationalised. As a result, business of 243 insurance companies was

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taken over by LIC on 1-9- 1956.

It is basically an investment institution, in as much as the funds of policy holders
are invested and dispersed over different classes of securities, industries and
regions, to safeguard their maximum interest on long term basis. LIC is required
to invest not less than 75% of its funds in Central and State Government
securities, the government guaranteed marketable securities and in the socially-
oriented sectors. At present, it is the largest institutional investor. It provides long
term finance to industries. Besides, it extends resource support to other term
lending institutions by way of subscription to their shares and bonds and also by
way of term loans.
LIC which has entered into its 57th year has emerged as the world’s largest
insurance co. in terms of number of policies covered. The LIC’s total coverage of
policies including individual, group and social schemes has crossed the 11 crore.
Objectives of LIC of India
The LIC was established with the following objectives:
 Spread life insurance widely and in particular to the rural areas, to the socially
and economically backward claries with a view to reaching all insurable persons
in the country and providing them adequate financial cover against death at a
reasonable cost
 Maximisation of mobilisation of people’s savings for nation building activities.
 Provide complete security and promote efficient service to the policy-holders at
economic premium rates.
 Conduct business with utmost economy and with the full realisation that the
money belong to the policy holders.
 Act as trustees of the insured public in their individual and collective capacities.
 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment
 Involve all people working in the corporation to the best of their capability in
furthering the interest of the insured public by providing efficient service with

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courtesy.
Power and functions of the Life Insurance Corporation -

Chapter III, Section 6 of the Life Insurance Corporation Act, 1956 - Functions of
the Corporation

 It collects the savings of the people through life policies and invests the fund in a
variety of investments.
 It invests the funds in profitable investments so as to get good return. Hence the
policy holders get benefits in the form of lower rates of premium and increased
bonus. In short, LIC is answerable to the policy holders.
 It subscribes to the shares of companies and corporations. It is a major shareholder
in a large number of blue chip companies.
 It provides direct loans to industries at a lower rate of interest. It is giving loans
to industrial enterprises to the extent of 12% of its total commitment.
 It provides refinancing activities through SFCs in different states and other
industrial loangiving institutions.
 It has provided indirect support to industry through subscriptions to shares and
bonds of financial institutions such as IDBI, IFCI, ICICI, SFCs etc. at the time
when they required initial capital. It also directly subscribed to the shares of
Agricultural Refinance Corporation and SBI.
 It gives loans to those projects which are important for national economic welfare.
The socially oriented projects such as electrification, sewage and water
channelising are given priority by the LIC.
 It nominates directors on the boards of companies in which it makes its
investments.
 It gives housing loans at reasonable rates of interest.
 It acts as a link between the saving and the investing process. It generates the
savings of the small savers, middle income group and the rich through several

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schemes.

[Link] the Compulsory Insurance of Motor vehicle under Motor Vehicle

Act, 1988? (D 2022)
Compulsory Insurance The Motor Vehicles Act, 1988, like the earlier Act of
1939, makes the insurance of motor vehicles compulsory. The owner of every
motor vehicle is bound to insure his vehicle against third party risk. The insurance
company, ie, the insurer covers the risk of loss to the third party by the use of the
motor vehicle. Thus, if there is insurance against third party risk, the person
suffering due to the accident (third party) caused by the use of motor vehicle may
recover compensation either from the owner or the driver of the vehicle, or from
the insurance company, or from them jointly. All such persons risk of loss to
whom, on account of the use of the vehicle, is required to be covered are third
party in the sense that they are other than the first party the insurer and the second
party' the insured.
Chapter XI of the Act (Sections 145 to 164) contains provisions concerning
"Insurance of Motor Vehicles against Third Party Risks". According to Section
146, no person can use, except as a passenger, or cause or allow any other person
to use a motor vehicle in a public place, unless an insurance policy against third
party risks, as required by this Chapter, is in force, in relation to the use of the
vehicle.
Section 146 (1), which contains the relevant as under : "No persons shall
use, except as a passenger, or cause or other person to use a motor vehicle in a
public place, unlese in any or allow any unless there is in force, in relation to the
use of the vehicle by that person at person or that other person, as the case may
be, a policy of insurance complying with the requirements of this Chapter:
Provided that in the case of a vehicle carrying, or meant to carry, dangerous or
hazardous goods, there shall also be a policy insurance cy of insurance under the
Public Liability Insurance Act, 1991,”

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Explanation.-A person driving a motor vehicle merely as a paid employee while

there is in force, in relation to the use of the vehicle no such policy as is required
by this sub-section, shall not be deemed to act in contravention of the sub-section
unless he knows or has reason to believe that there is no such policy in force."
The above stated requirement of insurance is not there in respect of any vehicle
owned by the Central Government or a State Government and used for
Government purposes unconnected with any commercial enterprise, or where an
exemption from the requirement of insurance has been given by the appropriate
Government. "196. Driving uninsured vehicle.—Whoever drives a motor vehicle
or causes or allows a motor vehicle to be driven in contravention of the provisions
of Section 146 shall be punishable with imprisonment which may extend to three
months, or with fine which may extend to one thousand rupees, or with both."
After Motor Vehicles (Amendment) Act 2019 penalty for driving without
insurance increased from Rs.1000 to Rs.2000/ 4
Object of Compulsory Insurance
All motor vehicles to be used in public places need to be insured against third
party risks. The object of this provision is to protect the interest of a third party,
who suffers by the use of the said vehicle. If the vehicle is insured against third
party risk the injured party can claim compensation from the insurance company.
Even if the driver or the owner of the vehicle is not in a position to pay
compensation to the accident victim, the insurer will pay compensation on behalf
of the owner of the vehicle insured. This provision aims at giving relief to such
person who would have suffered because of the inability on the part of the owner
or driver of the vehicle to pay compensation. The insurer is liable to indemnify
the person, or classes of persons, specified in the policy in respect of any liability,
which the policy purports to cover in the case of that person or those classes of
persons. It is the duty of the insurer to satisfy judgment against persons insured
in respect of third party risk.
In India, under the provisions of the Motor Vehicles Act, 1988, it is

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mandatory that every vehicle should have a valid Insurance to drive on the road.
Any vehicle used for social, domestic and pleasure purpose and for the insurer's
business motor purpose should be insured. This section is enacted to safeguard
the rights of third party who may be involved in motor vehicle accidents. If a
motor vehicle is involved in an accident with some person, who claims damages,
it is the insurance company which is made liable by forcing the vehicle owner to
get the vehicle insured before he can legally drive the same on the road.
Who Is Third Party: A third party insurance policy is a policy under which the
insurance company agrees to indemnify the insured person, if he is sued or held
legally liable for injuries or damage done to a third party. The insured is one party,
the insurance company is the second party, and the person you (the insured) injure
who claims damages against you is the third party.
Section 145(g) "third party" includes the Government.
National Insurance Co. Ltd. v. Fakir Chand(1995), it was held that third party
should include everyone (other than the contracting parties to the insurance
policy), be it a person traveling in 5 another vehicle, one walking on the road or
a passenger in the vehicle itself which is the subject matter of insurance policy.
Salient Features of Third Party Insurance
• Third party insurance is compulsory for all motor vehicles. In G. Govindan v.
New India Assurance Co. Ltd.[(1999), it was held that third party risks insurance
is mandatory under the statute .This provision cannot be overridden by any clause
in the insurance policy.
• Third party insurance does not cover injuries to the insured himself but to the
rest of the world who is injured by the insured.
• Beneficiary of third party insurance is the injured third party, the insured or the
policy holder is only nominally the beneficiary of the policy. In practice the
money is always paid direct by the insurance company to the third party (or his
solicitor) and does not even pass through the hands of the insured person.
• In third party policies the premiums do not vary with the value of what is being

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insured because what is insured is the legal liability' and it is not possible to know
in advance what that liability will be.
• Third party insurance is almost entirely fault-based.(means you have to prove
the fault of the insured first and also that injury occurred from the fault of the
insured to claim damages from him.
Requirements of Insurance Policies and Limits of Insurer’s Liability
Section 147 of Act provides about the requirements of valid policy of insurance,
and also the limits up to which the insurer will be liable in respect of an insurance
policy.
The provision is as under:
147. Requirements of policies and limits of liability.-
(1) In order to a policy which comply with the requirements of this Chapter, a
policy of insurance must be a policy which (a) is issued by a person who is an
authorized insurer; and 6 (b) insures the person or classes of persons specified in
the policy to the extent specified in subsection (2)-
2. against any liability which may be incurred by him in respect of the death of
or bodily injury to any person, including owner of the goods or his authorized
representative carried in the vehicle or damage to any property of a third party
caused by or arising out of the use of the vehicle in a public place; against the
death of or bodily injury to any passenger of a public service vehicle caused by
or arising out of the use of the vehicle in a public place :
Provided that a policy shall not be required
(i) to cover liability in respect of the death, arising out of and in the course of his
employment, of the employee of a person insured by the policy or in respect of
bodily injury sustained by such an employee arising out of and in the course of
his employment other than a liability arising under the Workmen's Compensation
Act, 1923 (8 of 1923) in respect of the death of, or bodily injury to, any such
employee- (a) engaged in driving the vehicle, or
(b) if it is a public service vehicle, engaged as a conductor of the vehicle or in

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examining tickets on the vehicle, or

(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability,
Explanation: For the removal of doubts, it is hereby declared that the death of or
bodily injury to any person or damage to any property of a third party shall be
deemed to have been caused by or to have arisen out of the use of a vehicle in a
public place notwithstanding that the person who is dead or injured or the
property which is damaged was not in a public place at the time of the accident,
if the act or omission which led to the accident occurred in a public place.
Third Party Legal Liability -Protection against legal liability due to accidental
damages resulting in the permanent injury or death of a person, and damage
caused to the surrounding property.
Subject to the limits of liability as laid down in Motor Vehicles Act 1988 as
amended from time to time, the insurance Company under this section will
indemnify the insured in the event of an accident caused by or arising out of the
use of the vehicle against all sums which the insured shall become legally liable
to pay in respect of: -
(i) death of or bodily injury to any person including occupants carried in the
vehicle (provided such occupants are not carried for hire or reward) but except as
far as it is necessary to meet the requirements of Motor Vehicles Act, the
Company shall not be liable where such death or injury arises out of and during
the employment of such person by the insured.
(ii) damage to property other than property belonging to the insured or held in
trust or in the custody or control of the insured.
Exclusions
The Comprehensive Insurance policy excludes the loss or damage caused
due to:
 Normal wear and tear and general ageing of the vehicle
 Depreciation or any consequential loss

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 Mechanical/ electrical breakdown

 Loss/ damage due to war, mutiny or nuclear risk
 Damage to/ by a person driving any vehicles or cars without a valid license
 Damage to/ by a person driving the vehicle under the influence of drugs or liquor
 Vehicles including cars being used otherwise than in accordance with limitations
as to use
 Wear and tear
 Consumables
 Damage to tyres and tubes unless the vehicle is damaged at the same time, in
which case the liability of the company shall be limited to 50% of the cost of
replacement
 Driving the vehicle against the limitations as to use.
INSURED DECLARED VALUE:
Each car is insured at a fixed value which is termed as the Insured’s Declared
Value (IDV). This sum insured is calculated based on several factors. Here’s how
it works:
 IDV is calculated based on the manufacturer's listed selling price of the vehicle
plus the listed price of any accessories after deducting the depreciation for every
year as provided by the Indian Motor Tariff.
 If the price of any electrical and / or electronic item installed in the vehicle is not
included in the manufacturer's listed selling price, then the actual value (after
depreciation) of this item can be added to the sum insured over and above the
IDV.
In case of vehicles fitted with bi-fuel system such as petrol/diesel and CNG/LPG,
permitted by the concerned RTO, the CNG/LPG kit fitted to the vehicle is to be
insured separately at an additional premium of 4% on the value of such kit. You
need to specifically declare this in the proposal form.
What Insurance Cover Is Right for You?
If what you are looking for is coverage for yourself, against damages to lives and

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properties of third parties (as required by M V Act) and your vehicle, a

comprehensive car insurance policy is what you need. It is a wider coverage plan
since it has provisions for third-party along with cover for the damages to your
vehicle due to accidents. Comprehensive coverage policy is expensive as
compared to just third-party insurance cover.
Various insurers are offering covers as mentioned above and in addition to that
add on covers also. There might be slight variations in the benefits and exclusions
depending on the insurance company and it is advisable to check the terms and
conditions in detail before taking a policy

[Link] can apply for compensation under Motor vehicle Act, 1988? State the
procedure. (D 2021)
[Link] fault liability" under Motor Vehicles Act.

A motor insurance plan is necessary for you if you have a vehicle be it a two-
wheeler or a car. It not only provides financial protection in case of accidents and
other damage but is also a legal obligation. The Motor Vehicle Act 166 comes
with salient features which look into the interest of the policyholders.
This act comprehensively covers all the aspects of road transport on the roads
which ensure the welfare of the third party. If you are severely affected by
accidents and injuries, then you can appeal under this act. A motor vehicle
tribunal will govern the cases that come under the Motor Vehicles Act, 1988. The
primary objective of this tribunal is to ensure the speedy trial of cases to make
sure that you get the right justice on time. It deals with the cases that involve
injuries, loss of life, or property allowing you to obtain maximum compensation.
What is section 166 Motor Vehicle Act 1988?
The Section 166 Motor Act 1988 talks about who can apply for compensation in
Motor Accidents Claims Tribunal (MACT). It allows you to get a clear picture of
the facts in detail that will help file a case in case there is a need.

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You can claim compensation for the following cases in the tribunal.
 If you have sustained an injury
 If you are the owner of the property
 When you are the legal representative of a person who died in an accident
 If you are an agent authorized by the injured person
How can you claim this compensation?
You can claim compensation by applying with either one of the following
tribunal locations.
 If you are the owner of the vehicle and residing in the claims tribunal area
 If you are a claimant and resides near the claims tribunal
 The claims tribunal where the accident took place
Also Read: RTO Rules For Car Glass Film 2022
When can you claim compensation?
There is no time limit prescribed by sec 166 of motor vehicle act if you want to
file a case. On the other hand, delaying too much will lead to doubts and suspicion
in the minds of tribunal members. Therefore, you should file a case as soon as
possible that will help receive the compensation in a quick turnaround time. The
tribunal will provide compensation in the following cases.
 When the accident caused injury to your body
 Death of your blood relatives
 If the accident has caused severe damage to your property
 When accidents occur mainly due to the use of motor vehicles
Types of claims that come under assessment
1. No-fault liability
The no-fault liability in motor vehicle act comes under section of act 140. If you
are a claimant, then there is no need to prove that the fault lies with the other
party. There is no joint liability and it arises when you are permanently disabled.
When your family member dies, then you can claim Rs, 50, 000, and Rs. 25,000
in case of permanent disability.

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2. Hit and run

It comes under section 161 of India Motor vehicle 1988 act and you can claim the
amount for your injuries when the prime accused runs away from the accident
area. You will obtain compensation of Rs. 12500 and your legal representative
will get Rs. 25000 upon your death.
Know more about damage assessment
If you are suffering from physical damages due to accidents, then you should
know more about the damage assessment in detail. The tribunal will classify the
damage under pecuniary damage and non-pecuniary damage. As a victim, you
should consult with a lawyer to know the salient features of motor vehicle act
1988 before filing a case. This will help in filing your case with ease.
Understand more about third-party insurance
If you are a vehicle owner, then you should understand more about third party
insurance. It is necessary for you when you have a bike or a car. Your insurer
will pay the amount to the third-party when your vehicle causes injury to someone
on the road. Most insurance companies offer third-party and comprehensive
insurance policy which are available online too.
Offenses and penalties under the Section 166 Motor Vehicles Act, 1988
 You shouldn’t drive a vehicle without a license and before becoming a major
 You shouldn’t ride a vehicle under the influence of alcohol and drugs
 Over speeding is an offence and should be avoided on the roads
 Driving your vehicle when you are suffering from any medical condition and
health issues
 Not wearing helmet in a two-wheeler and seat belt in a car
CONCLUSION: The Indian mv act 166 is mainly meant for regulating road
transport and they need proper implementation to bring down the increasing
number of accidents. If you are a vehicle owner, then make sure that you follow
the rules and do not cause any disturbance to others on the roads. Getting the right
insurance policy is also mandatory under the Motor Vehicle Act. Understanding

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the motor vehicle act and things related to motor insurance is made easy with
PayBima expert team. The team provides assistance in ascertaining the right
insurance option for your on-road needs.
[Link] the composition, powers and function of claims tribunal under
Motor Vehicle Act. (J 2021)
[Link] Tribunal under Motor Vehicles Act. (D 2022) (6 MARKS)

Introduction:
In India the court is not the only body to deal with cases and deliver justice, there
are some instances as well. One such justice delivery system which acts as an
alternative to the civil court is the Claims Tribunal. The Tribunals are constituted
to deal with some certain types of cases.
However, the state always strives to protect the basic rights and privileges of
people by exercising authority to conduct and supervise society. In course of time
tribunals have increased. These several tribunals resemble the improvisation of
government concern. We can draw differences between a court and tribunal in
four aspects. They are speed of delivery, functions of them, rules and regulation
both of them have and finally the expenditure one must spend. Moreover, the
tribunal is more considerable than a court after taking concern of statutes,
strategies, certainty and discretion.
Tribunals have less validation course when compared with the courts and also
there is no obligation to follow proof directives. Tribunals decide cases
furnishing the communal derivations. Tribunals lessen the work of courts and
deal with cases that have an impact on daily life. Another prime intention behind
tribunal establishment is to deal with cases with proficiency in particular areas.
In some matters, the tribunal has the provisions of a civil court. Tribunal has to
work judiciously and according to the legislation provided.
In this article, the reader can assess the functions, limitations, powers of the
Motor Vehicle Claim Tribunal.

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The Claims tribunal:

The Claims Tribunal is a body that provides expeditious, affordable adjudication
to accident claims or cases.[1] The Claims Tribunals were established in the year
1989 on the 1st of July by the provisions of the Moto Vehicles Act 1988. An
appeal can be filed from the Tribunal to the high court. The Tribunals deal with
motor vehicle cases that involve mislaying of human and assets or properties. The
supervisor of the Motor Vehicle Claims Tribunal [MACT] is the Judicial officer.
The high court supervises the tribunal.
The Motor Vehicles Act is a statute legislated to furnish and maintain road safety.
The tribunals provide a novel way to issue penalties or liabilities instead of going
through a slow process. In dealing with cases, it was determined that the tribunal
has to refer to substantive laws to issue liability or compensation. In the Insurance
co. vs. Kamal Kamini case, it was concluded that punishment/compensation is
determined considering the tort law and acts of Fatal Accidents.[2]
Provisions to establish a Claims Tribunal:
Section 165: The section specifies the regions that can have more Claims
Tribunals. The states can constitute more Claims Tribunals in the state depending
upon the region determined in the section. It is left out to the discretion of the
state in deciding the number of claims tribunals it can have.
Scope of powers of Claims Tribunal:
In Kailash Chandra Sharma v. E. Gurunath case, the court held that the Tribunal
must deliver fair justice. The tribunal has the power to document the
witnesses/evidence but it has to utilize those for fair delivery.[3] According to the
legislation the opponents have to endure all the outlays of lawyers and also for
visiting the place occurrence.
Limitations:
The tribunal cannot claim more than compensation of one thousand rupees in case
the issue falls under subsection one of the Motor Vehicles Act, 1988.
The time limit for filing a case:

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A claim or case can be filed anytime. But uncommon time like period of six
months obligates the party to provide a concrete reason for the delay.
The procedure of Claims Tribunal:
Testimonies a Claims Tribunal demands to submit before filing a claim:
1. A copy of the First Information Report registered.
2. Death certificate as per the case.
3. Identification of pleaders or claimant documents.
4. Proof of injury is the Medical certificate.
5. Bills of recovered damages.
6. Proof of age of the claimant or tribunal.
7. Documents of insurance policies.
8. Connection of the claimant with the dead individual or the injured person.
9. Certificates of disability.
[Link] certificates of the claimant or the pleader.

Representing claimants or pleaders:

The applicant has a privilege to maintain their legal representative or else the
claims Tribunal will appoint one.
The accident report:
This report has identification specifications like the victim's name, specifications
of the accident, an account of witnesses and some other information that the
Claims Tribunal demands or requires.
Types of compensation the Claims Tribunal issues:
Along with compensation, the Claims Tribunal affixes interest called an Award
of Compensation. This is specified in section 171 of the Motor Vehicles Act of
1988.
As a matter of delivering justice, the Claims Tribunal issues compensation on the
wrongdoer. This is called an Award of compensation or punishment. This is
mentioned in section 172 of the Motor Vehicles Act of 1988.

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If any party in the case is not saturated with the decision of the Tribunal, the party
can file an appeal. The high court of the respective state holds the appeal. High
courts entertain appeals within a gap of 90 days following the decision of the
tribunal. In case the appellant has averted for some reasons, the appeal is
entertained even after the completion of ninety days.
Conditions for compensation:
The tribunal adjudicates the issues which constitute:
1. The objector thing subjected to the accident must be a motor vehicle.
2. The accident has resulted in the death of a person or else left injuries to persons
or else caused loss or damage to any person or both. The damage can also be of a
third person.
The above requirements for compensation are specified in the MV Act 1988. In
section 168 to be more precise.
Who are privileged to claim or plead compensation:
Section 166 of the Motor Vehicles Act, 1988 mentions the persons who are
entitled to claim compensation from the tribunal. They are:
1. The Individual who is injured from the accident.
2. A third party or the one whose property has been mutilated.
3. A legal officer or any representative on behalf of the person died in an accident.
4. Any associate of dead person representing him [deceased].
A claim can be filed in the tribunals concerning the following:
A case or claim can be filed in the Claims Tribunal which extends its jurisdiction
to the pleader's or claimant's residence. In other words, we can say nearby Claims
Tribunal of claimant's or pleader's residents. Nearby Claims Tribunal to the
defendant's residence.
The procedure of Claims Tribunals:
While conducting an investigation or inquiry into a claim, the tribunal can execute
any of the provisions of section 168. It can follow any process or procedure that
it feels correct to deliver justice.

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The processes of acquiring the witness, ensuring the presence of evidence,

considering the witness's statements, proffering the objects and recordings are
similar to that of a Civil Court. It was also held in the ORIENTAL INSURANCE
[Link] V. SUBRATA MITRA case that the tribunal mustn't limit itself to the
ingrained provisions.
As per the criminal procedure code 1973, especially Section 195 and chapter
XXVI the Claims Tribunal is adjudged as a Civil Court for some purposes.[6]
The Claims Tribunal has the privilege to appoint a person or group who resemble
their expertise in pertinent aspects to continue the process of enquiry and
investigation. The claims that have resulted from motor accidents for
compensation can arise under section 140. There is an obligation on part of the
State government to assign different works to tribunals if there are more
Tribunals.
Composition of Claims Tribunal:
Claims tribunal has members connected to the judiciary in some other way. They
are:
1. The chairman.
2. The vice-chairman.
3. Members of the judiciary [a bench]
4. Some technical members. [the bench].

Distribution of work by the Central Government amongst the benches of

Claims Tribunal:
The functions of every bench are specified by a notification from the Central
government. Any case of doubt there will be discussed with the chairman and
finalized by him itself. The chairman has the privilege to interchange the works
between different benches. The difference of opinion will go with the majority
opinion.
Appointment of members in the Claims Tribunal:

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According to the legislation the member has or is to be the following

1. He/she is a judge in the high court or was a judge of the high court in past.
(OR)
2. He /she is functioning as a judge of the district court or was a judge of that
court.
(OR)
3. He/she delegated as a high court judge.
Claims Tribunal proceedings:
The proceedings in claims tribunal are considered as judicial proceedings under
sections of Indian Penal Code numbers 193,219 and 228.
Powers to make rules:
To inquire about the incompetency and illegal activities of the members, a
particular process is specified in section 8. Sub-section 3 to be more particular.
Under section 9 grievances and other service, specifications are mentioned.
Chairman's fiscal power is mentioned under section 11.
Mode of Claims Tribunal:
The tribunal has the liberty to adopt the procedure of execution on its own, as
mentioned in section 169. The process adopted shouldn't overrule or go against
the rules or provisions furnished to the tribunal. This privilege to plan its
procedure is given to the tribunal because the tribunal is treated equally with the
Civil Court. The motive behind this is that the tribunal shouldn't follow the
extravagant process with which a civil court is empowered with. Such an
elaborate process of execution contributes to the lagging of cases which affects
the very purpose of the establishment of the tribunal. In Krishna Reddy v.
Ramulamma case, the court held that the claims tribunal can select a process until
it holds the rules.[7]
Pleadings of lapse of time:
The tribunal approves pleadings of this kind only when it leads to infringement
of rights to favour the defendant on the virtue of delay in time. The tribunal

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doesn't entertain pleadings which contribute violations of rights due to time

constraint. This was used in Bihar Cooperative MV Insurance Society Ltd v.
Rameshwar Rout.
Pleadings for more compensation:
Pleadings filed to receive more compensation are entertained. No restriction to
this type of pleadings. In Krishna Devi and others v. Hardev Singh and others
case, the court utilized the proposition.
Potential to consider records without proofs:
Accepting records that are not provided with concrete authorisation goes against
the rudiment of Justice. So, every tribunal has to rely on documents that have the
potential to rely on those proven documents. This was executed in Smt. Amarjit
Kaur v. M/s Vanguard Ins. Co. ltd case
Power to encourage solicitation of reinstatement:
Provision to restore the application of claim is available in the Criminal Procedure
Code [CPC] the tribunal also accepts or entertains pleadings of restoration – used
in judgement of South Indian Tribunal Limited v. M.A.C Tribunal.
The stand of the tribunal in quashing evidence of the pleader:
As the legislation is to provide financial compensation to people who depend on
the died in motor vehicle accidents the stringent laws in CPC are not applicable
in this case. This was applied in Soma V. v. G. M. Haryana Roadways.
Power to Ex-Parte:
In general, a tribunal has the privilege to borrow some procedure to meet the
propositions of natural justice, equity. Every tribunal which has a quasi-judicial
character has the authority to take new methods.
Ability to grant awards:
Under provisions in section 35 of the CPC, the tribunal is privileged to grant
awards on its own with executing discretion.[8] One can get the return of all the
expenditure incurred by he/she if the losing party:
1. He/she must be the wrongdoer or guilty.

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2. He/she must have a concrete cause for not accepting cost.

3. Documentation by the court.
The process should not restrict the process of cross-examination by either of
the parties:
If either party or a party has suspicion upon the facts involved in the document or
the application, they can re-evaluate the facts by the process of cross-
examination. It does not mean to take over the re-examination process as the
tribunal follows a condensed procedure. This was executed in the Kalpana Ben
M. Shah v. Naveen Chandra Jeevanlal Acharya.

Power of Tribunal to evaluate the decision of the Lok-Adalat:

The decision pronounced in Lok-Adalat is not subjected to evaluation or review
by the tribunal. In other words, a tribunal has no privilege to re-examine the
settlement that has already pronounced in the Lok-Adalat.

The issue will be finalized on basis of documents or reports received:

The tribunal is entitled to provide aid and support to those dependent on the
deceased or the person suffering from the motor vehicle accident. The provisions
have not empowered the tribunal to abandon or disallow an issue from filing. The
tribunal has to accept an issue if it has required proceedings to move forward, the
tribunal is obligated to pronounce the decision on behalf of the appropriate party.
The tribunal should not leave an issue simply because there are no findings of the
issue from the applicant. Tribunal has the right to acquire required particulars
from the medical department, the police and remaining departments to deliver
justice to those who became incapable. Section 140 has the procedure if the
pleader or the claimant is attending or not. The principle utilized in Saramma

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Scaria and others v. Manthai and another.

Scrutinizing its previous decisions:
To fulfil the very purpose of establishment reviewing previous cases that the
tribunal feels is flawed or there is no delivery of justice or against the provisions
of the MV Act must be given utmost importance. Some unforeseen or unfortunate
flaws or mistakes
like weighing the award or compensation in the adjudication cannot be changed
or modified. Previous judgements or decisions cannot be modified even they are
flawed. The tribunal is furnished to rectify the elemental mistakes done in past
but cannot change the rudimentary basis of judgement.
The tribunal can re-evaluate within the limitations. Reviewing a judgement is
allowed but changing the decision as a matter of new facts that were not specified
is not allowed or acceptable. Order 47 provides the provision of reviewing of
previous judgements but not to tribunals in particular. The tribunal is furnished
with a limited base to review. It would be illegal if the decision is changed or
modified as a matter of flaw in the statute or the miscarriage of orders given by
the highest court. This was held in Oriental Insurance v. Jidad Ali.
Conclusion:
Thus, in conclusion, we can assert that Claims Tribunals are instruments that
reduce the burden on higher courts. However, there is ambiguity in the treatment
of the Claims Tribunal on whether it is equal to civil court or not. As India is an
excessive populated country, there are wide chances of a massive number of cases
that arise, so tribunals play a very important role in meeting and addressing all
those cases.

UNIT-IV
[Link] the salient features of Public Liability Insurance Act, 1991? (J

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2021)
Do we all remember the purpose behind the enactment of the Environment
Protection act of 1986? Is there any reason or incident that is connected to such
enactment in India? Supreme Court of India played a huge role in the
environmental protection in India, and thanks to MC Mehta for filing a much-
needed PIL in the Oleum Gas Leak case, which enabled the judges of the Supreme
Court to draft a new environmental jurisprudence in India, unlike in foreign
jurisdiction. This article will give a brief overview of the Public Liability
Insurance act of 1991 and its connection with landmark judgment in India,
thereby concluding with a very recent case in India relating to public liability.

Object and reason behind the act:

Before looking into a few of the important provisions of the act of 1991, let us
look into the preamble of the act to determine the purpose or objective behind the
enactment of this law. The preamble of the Public liability Insurance act states
that it is an act to provide public liability insurance to ensure immediate aid to
those persons who were affected due to the accident caused by handling
hazardous substances. This means that the industries that tend to cause harm by
using harmful substances are made liable or have been transferred with the
environmental liability for their actions. This objective resembles the idea that
forms the basis of the polluter pay principle. On the other hand, a historic
judgment delivered in the Oleum gas leak case, which will be briefed in the latter
part of this article along with the Bhopal gas tragedy, also spoke about the
importance of the absolute liability principle and not the strict liability principle.
Such principle or the ratio of the judgment has resembled in the preamble of this
act of 1991.
Defines important terms:
Let us look into a few important definitions provided under the act to further

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understand the application of provisions of the act.

Firstly, ‘Hazardous Substance’ has been defined under section 2(d), which states
that any substance or any preparation which has been noted to be hazardous under
the Environment protection act of 1986 and such substance has exceeded the
quantity as specified by the union government from time to time.
Secondly, ‘insurance’ under section 2(e) has been provided as insurance against
the liability incurred due to the death or personal injury or any kind of damage to
property out of an accident as per section 2(1) of the act of 1991. The definition
excludes a worker who incurs damage under the Employees compensation act of
1923.
Who can apply for a relief claim?
 As per section 6 of the act, an application for relief can be filed by the following
persons.
 The actual person who suffered the injury out of an accident,
 The owner of the property who received the damages as per the act,
 Thirdly, by one or all of the legal representatives of the person deceased out of an
accident,
 Lastly, any authorized agent of the property owner whose property has been
damaged or agent of the deceased person as the case may be.

The act establishes Environmental Relief Fund:

Section 7A of the act of 1991 provides for establishing an environmental
relief fund. It empowers the central government to establish such relief fund in
the name of Environmental relief fund. Such funds shall be utilized only for the
purpose of paying and implementing the schemes under provisions of the act.
Such shall also be specified by the union government under section 7 and also the
manner in which such relief fund shall be utilized.
Section 13 of the act allows the application to be made in the court for the
purpose of restraining the action of the owner of the property if such act is in

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contravention to the interests of public good or under the act.

Penalties:
Section 14 to 18 provides penalties for various entities such as companies,
government by itself etc., in case of any violations that occurred due to their
actions.
Landmark and recent Judgments:
Having seen a few essential sections under the act of 1991, let us briefly
look into three main judgments in which the public liability has been explicitly
determined.
Firstly, in the year 1986 Supreme Court of India delivered a historic
judgment relating to the liability of Shriram Corporation, Delhi in MC Mehta v.
Union of India. The case related to the closure of units that dealt with hazardous
substances. Delhi High court case, later transferred to Supreme Court of India in
which court established the liability of Shriram industries and came up with a new
environmental principle of absolute liability according to which suppose the
entity or a person engaged in the hazardous activity that would harm others in
case of escape. In that instance, the person or the entity shall be liable absolutely
in case of the same damages to the others and liable to pay compensation to all
those who got affected. It was the first and most crucial judgment ever in the
history of Indian environmental law jurisprudence in which judges actively
participated to ensure the public liability was imposed on violators.
This particular judgment was cited in the following case of Union Carbide
Corporation v. Union of India. The tragedy is still being spoken by many for the
twists that it witnessed as courts in India was allotted to reduce the amount of
compensation. In this case, Supreme Court considered the importance of ensuring
the duty vested on them both from humane conditions as well as from judicial
duty. The court referred the Oleum gas leak case and made UCC liable for their
settlement.

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Recently, 2020 witnessed another toxic gas leakage in India at

Vishakapatnam in which Korean Firm LG polymers was the defendant. In this
case, National Green Tribunal issued orders as per the NGT act of 2010. A
compensation of around 50 crores was imposed on LG polymers. Even though
the Public liability insurance act was not the legislation involved, the
requirements were referred by the tribunal regarding the same.
Do we all remember the purpose behind the enactment of the Environment
Protection act of 1986? Is there any reason or incident that is connected to such
enactment in India? Supreme Court of India played a huge role in the
environmental protection in India, and thanks to MC Mehta for filing a much-
needed PIL in the Oleum Gas Leak case, which enabled the judges of the Supreme
Court to draft a new environmental jurisprudence in India, unlike in foreign
jurisdiction. This article will give a brief overview of the Public Liability
Insurance act of 1991 and its connection with landmark judgment in India,
thereby concluding with a very recent case in India relating to public liability.
Object and reason behind the act:
Before looking into a few of the important provisions of the act of 1991,
let us look into the preamble of the act to determine the purpose or objective
behind the enactment of this law. The preamble of the Public liability Insurance
act states that it is an act to provide public liability insurance to ensure immediate
aid to those persons who were affected due to the accident caused by handling
hazardous substances. This means that the industries that tend to cause harm by
using harmful substances are made liable or have been transferred with the
environmental liability for their actions. This objective resembles the idea that
forms the basis of the polluter pay principle. On the other hand, a historic
judgment delivered in the Oleum gas leak case, which will be briefed in the latter
part of this article along with the Bhopal gas tragedy, also spoke about the
importance of the absolute liability principle and not the strict liability principle.
Such principle or the ratio of the judgment has resembled in the preamble of this

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act of 1991.

Defines important terms:

Let us look into a few important definitions provided under the act to further
understand the application of provisions of the act.
Firstly, ‘Hazardous Substance’ has been defined under section 2(d),
which states that any substance or any preparation which has been noted to be
hazardous under the Environment protection act of 1986 and such substance has
exceeded the quantity as specified by the union government from time to time.
Secondly, ‘insurance’ under section 2(e) has been provided as insurance
against the liability incurred due to the death or personal injury or any kind of
damage to property out of an accident as per section 2(1) of the act of 1991. The
definition excludes a worker who incurs damage under the Employees
compensation act of 1923.

Who can apply for a relief claim?

 As per section 6 of the act, an application for relief can be filed by the following
persons.
 The actual person who suffered the injury out of an accident,
 The owner of the property who received the damages as per the act,
 Thirdly, by one or all of the legal representatives of the person deceased out of an
accident,
 Lastly, any authorized agent of the property owner whose property has been
damaged or agent of the deceased person as the case may be.
The act establishes Environmental Relief Fund:
Section 7A of the act of 1991 provides for establishing an environmental
relief fund. It empowers the central government to establish such relief fund in
the name of Environmental relief fund. Such funds shall be utilized only for the
purpose of paying and implementing the schemes under provisions of the act.

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Such shall also be specified by the union government under section 7 and also the
manner in which such relief fund shall be utilized.

Section 13 of the act allows the application to be made in the court for the purpose
of restraining the action of the owner of the property if such act is in contravention
to the interests of public good or under the act.

Penalties:
Section 14 to 18 provides penalties for various entities such as companies,
government by itself etc., in case of any violations that occurred due to their
actions.
Landmark and recent Judgments:
Having seen a few essential sections under the act of 1991, let us briefly look into
three main judgments in which the public liability has been explicitly determined.
Firstly, in the year 1986 Supreme Court of India delivered a historic judgment
relating to the liability of Shriram Corporation, Delhi in MC Mehta v. Union of
India. The case related to the closure of units that dealt with hazardous substances.
Delhi High court case, later transferred to Supreme Court of India in which court
established the liability of Shriram industries and came up with a new
environmental principle of absolute liability according to which suppose the
entity or a person engaged in the hazardous activity that would harm others in
case of escape. In that instance, the person or the entity shall be liable absolutely
in case of the same damages to the others and liable to pay compensation to all
those who got affected. It was the first and most crucial judgment ever in the
history of Indian environmental law jurisprudence in which judges actively
participated to ensure the public liability was imposed on violators.

This particular judgment was cited in the following case of Union Carbide
Corporation v. Union of India. The tragedy is still being spoken by many for the

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twists that it witnessed as courts in India was allotted to reduce the amount of
compensation. In this case, Supreme Court considered the importance of ensuring
the duty vested on them both from humane conditions as well as from judicial
duty. The court referred the Oleum gas leak case and made UCC liable for their
settlement.

Recently, 2020 witnessed another toxic gas leakage in India at Vishakapatnam in

which Korean Firm LG polymers was the defendant. In this case, National Green
Tribunal issued orders as per the NGT act of 2010. A compensation of around 50
crores was imposed on LG polymers. Even though the Public liability insurance
act was not the legislation involved, the requirements were referred by the
tribunal regarding the same.

What are the contents of a Fire Policy ? State its scope. (D 2021)
Introduction
Fire is an unpredictable force of nature that can cause devastating damage to
properties, leading to immense financial losses. In such circumstances, fire
insurance plays a crucial role in providing protection and financial security to
individuals, businesses, and communities. This blog post explores the scope of
fire insurance, highlighting its importance, coverage, and benefits.
Understanding Fire Insurance
Fire insurance is a type of property insurance that covers losses and damages
caused by fire-related incidents. It provides compensation for the repair,
replacement, or reconstruction of damaged property, as well as for any associated
losses resulting from fire-related perils. The scope of fire insurance extends
beyond just fires caused by accidents; it also covers damages caused by lightning
strikes, explosions, and other fire-related events.
Coverage and Scope

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1. Dwelling Coverage: Fire insurance provides coverage for residential structures

such as houses, apartments, and condominiums. It compensates for the repair or
replacement of the structure and its contents, including personal belongings
damaged or destroyed by fire.
2. Commercial Property Coverage: Businesses and commercial properties are
also covered under fire insurance policies. This includes office buildings, retail
stores, factories, warehouses, and other commercial structures. Fire insurance
helps businesses recover from fire-related losses by providing compensation for
property damage, loss of inventory, equipment, and business interruption
expenses.
3. Liability Coverage: Fire insurance policies often include liability coverage,
which protects policyholders against legal liabilities resulting from fire-related
incidents. If a fire spreads and causes damage to neighboring properties or causes
injuries to others, liability coverage helps cover legal fees, medical expenses, and
other costs associated with claims or lawsuits.
4. Additional Living Expenses: In the event that a residential property becomes
uninhabitable due to a fire, fire insurance policies may cover additional living
expenses. This includes temporary accommodation costs, meals, and other
necessary expenses while the property is being repaired or rebuilt.
Benefits of Fire Insurance
1. Financial Protection: Fire insurance provides much-needed financial protection
against the substantial costs of property damage caused by fire-related incidents.
It helps policyholders recover quickly by covering repair or replacement
expenses, minimizing the financial burden associated with such events.
2. Peace of Mind: Knowing that you have fire insurance coverage gives peace of
mind to homeowners and business owners alike. It allows them to focus on their
daily lives and operations, knowing that they are financially protected in the event
of a fire.
3. Rebuilding and Reconstruction: Fire insurance facilitates the rebuilding and

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reconstruction process after a fire. It ensures that policyholders can restore their
properties to their pre-loss condition, allowing them to resume their normal lives
or business operations efficiently.
4. Business Continuity: For businesses, fire insurance is vital for maintaining
continuity in the face of a fire-related disaster. It covers the costs associated with
business interruption, such as lost income, temporary relocation, and ongoing
expenses, ensuring that the business can recover and continue its operations.
Conclusion
Fire insurance is an essential component of comprehensive property insurance,
offering protection against the unpredictable nature of fire-related incidents. It
provides financial security, peace of mind, and the ability to recover and rebuild
after a fire. Whether it’s a residential property or a commercial establishment, fire
insurance is a critical investment that helps mitigate the potential financial
devastation caused by fires. Therefore, it is highly advisable for homeowners and
business owners to carefully consider fire insurance and ensure they have
adequate coverage to protect their valuable assets.

What is Fire Insurance ? Explain its nature.

Explain the general conditions in a standard Fire policy. 14 (2022)

[Link] the importance of cattle insurance in India?(2022)

Cattle are considered one of the most valued possessions of the rural community.
Marginal, small and medium farmers earn considerable portion of their income
from cattle rearing. Since the livelihood of farmers depend so much on them, it
becomes important to get cattle insurance for comprehensive coverage against
cattle loss. Cattle insurance is another endeavour of the Government of India to
protect the agro-based economy of the country.
Meaning of Cattle Insurance
Cattle insurance protects Indian rural people from financial loss incurred due to

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the death of their cattle. The cost of cattle is high and their loss can force farmers
to get into a debt cycle. With cattle insurance, farmers will get comprehensive
protection against the cattle loss.
Types of Cattle Insurance
There are two types of risks which are insured under this policy:
1. Death of cattle: It covers loss of life due to accident or injury and disease
occurred due to surgical infection
2. Permanent Disability cover: It covers the risk of permanent and complete
disability
What Cattle Insurance Covers?
Besides death or disability caused by fire, road accidents, drowning,
electrocution, snake bites or poisoning, cattle insurance offers coverage for other
issues as well. They include:
 Death due to natural calamities like storms and earthquakes
 Death due to disease, infection or calving during surgical operations
 Permanent disability, for milch cows this refers to incapacity to conceive and
yield milk. For bulls, this refers to incapacity to breed
How Cattle Insurance Functions?
Cattle insurance is an important aspect for livestock management in rural area.
Let us understand how this insurance works.
 First step is to identify the cattle and determine the price of the cattle before
finalizsng the sum assured. This assessment is jointly carried out by the
beneficiary and an authorised veterinary doctor
 Beneficiary needs to pay the premium amount on monthly or yearly basis,
according to the policy
 In case of death or disability of the cattle, the beneficiary immediately informs
the bank about the mishap
 All the required documents need to be submitted to the insurance company
 Insurance company representative will validate all the documents and settle the

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claim
Eligibility Criteria
Cattle Insurance Policy covers people who have:
 Cows, bullocks or buffaloes of either sex
 Cross-breed and exotic cattle owned by private owners, military dairy farms, co-
operative dairies and corporate dairies
 Both schemed and non-schemed animals fall under this policy Schemed animals
refer to cattle subsidised under National Livestock Development Board (NLDB)
and State Livestock Development Board (SLDB)
The policy seekers need to ensure that at the time of buying insurance, the cattle
should not be injured or suffering from some disease. The health condition needs
to be certified by a veterinary surgeon. Animals under the following age group
are eligible for the insurance cover.
Documents Required for Claim Process
Following are the documents which should be submitted to get the claim amount:
 Proposal form
 Medical certificate from veterinary doctor
 Minimum 4 photographs of the insured animal
 Duly filled in claim form
 Receipt of payment while purchasing the animal
 Identification tag of the insured cattle
Claim Process
Following steps are followed to process cattle insurance claims:
 The owner should immediately intimate the insurer about the death/injury on the
24*7 toll free customer care number of the provider
 Get the death certificate or the certificate of disability from a veterinary
practitioner
 The beneficiary should also submit the duly filled in claim form along with the
death/disability certificate

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 An authorised member from the insurance company will visit the site and verify
the submitted details
 If the claim is found to be genuine, the amount is paid to the beneficiary, else it
is rejected
Exclusions
Though the cattle insurance aims to cover most of the rural Indians who have
cattle, the claim is non-payable under the following circumstances. Some of these
cases of exclusions are:
 Theft or clandestine sale
 Shipment via airways or sea
 Terrorism, war, radioactivity and nuclear explosions
 Neglect, over-loading and treatment under unskilled doctors
 Using for other purpose than what has been mentioned in the claim proposal
 Not treating when sick or not taking any initiative to prevent the death
 Accidents or injury which occurred before the commencement of the policy
 Slaughtering without permission from the veterinary or government official
Time Taken to Settle Claims
According to IRDA regulation, a cattle insurance needs to be settled by the insurer
within 30 days of claim submission. If further investigation is needed, the bank
can take maximum six months to settle the claim.
Companies offering Cattle Insurance in India
Some of the insurance companies offering this plan in India are:
 HDFC Ergo
 Reliance General
 ICICI Lombard
 TATA AIG
 Oriental Insurance
 SBI General
Important Aspects

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Also known as livestock insurance, this policy is available for almost all cattle
owners of rural India. However, before buying an insurance, the below mentioned
facts must be kept in mind:
 Cattle must be properly vaccinated and fed with nutritious food. If intentional
carelessness is found as the cause of death or disability, the claim might get
rejected
 To get the claim approval, the bank must be intimated immediately after the
mishap
 Skilled and certified veterinary doctor should be engaged to treat the cattle; else
the claim might get rejected
Advantages of Buying Cattle Insurance
Cattle insurance intends to benefit maximum number of people in rural India. The
insurance policy provides coverage against the risks of death and permanent
disability due to
 Famines
 Accidents
 Earthquakes
 Riots or strikes
 Surgical operations
 Fire, explosion, implosion and lightning
 Aircraft damage or missile testing activities
 Disease contracted and infection which was inflicted during the policy period
 Natural calamities like storms, tornado, typhoons, hurricane, inundation and
floods

[Link] are the rights and duties of parties in fire claims ? ( D 2022)
Rights of Insurer in a Fire Insurance Policy
The following are the rights of an insurer in a fire insurance policy.

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The following are the rights of an insurer in a fire insurance policy

Rights of Insurer in a Fire Insurance Policy
1. Right to avoid the contract.
2. Right of control over the property.
3. Right of entering the property.
4. Right of subrogation.
5. Right to salvage.
6. Right of reinstatement.
7. Right of contribution.
They are briefly explained as below.
1. Right to avoid the contract
In case the insured does not disclose any material fact concerning the subject
matter of insurance, the insurer can avoid the contract. This is because a contract
of fire insurance like other contracts of insurance is a contract of utmost good
faith.
2. Right of control over the property
The insurer has an implied right to acquire control over the goods or property
damaged or destroyed by fire. This is because, in the final analysis, only loss
under a fire insurance contract will have to be borne by the insurer who should,
for this reason, be entitled to get control over the damaged property to see if the
severity of loss could be lessened.
3. Right of entering the property
The insurer is entitled to enter upon the premises insured or wherein the things
insured are located. But in order to enable him to do so, the insured is required to
give an immediate notice of the fire with the particulars of damage done.
4. Right of Subrogation
Upon paying the amount of loss to the insured, the insurer steps into the place of
the insured, taking over all his rights. For example, if the insured receives any

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compensation from a third party, he will have to pay it to the insurer. His loss has
been made good by the insurer and therefore, any sum received by him from a
third party should be passed on to the insurer.
5. Right to Salvage
When the insured goods or property is destroyed or damaged by fire, the insurer
has got a right to take possession of the salvage i.e., the stock or property saved
after fire. This right of the insurer is absolute and flows from the contract of
indemnity.
6. Right of reinstatement
In case of damage or destruction of the subject matter, the insurer has a right
either to pay the amount of loss to the insured in cash or replace the damaged or
destroyed property in kind.
But this can be done
1. if the contract of insurance gives him the right to do so; or
2. if he suspects any fraud or arson; or
3. if he is requested to do so by a person other than the insured who owns or is
otherwise interested in the premises damaged by fire.
7. Right of Contribution
This right arises when the same subject matter has been insured with two or more
insurers. Thus, if in case of loss, one of the i insurers has made full payment to
the insured, he can claim rateable contribution from his co-insurers.
Duties of Insu
Duties of the insured refer to the responsibilities of the policyholder, which
generally requires the exercise of good faith and maintenance of fair dealing.
These duties are often listed in the conditions section of the insurance contract.
Some of the duties of the insured include the following:
 Disclose material information,
 Avoid concealment and misrepresentation,
 Report loss or damage to the authorities,

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 Provide notice of claim to the insurer,

 Prepare an inventory of the damaged or stolen property, and

Discuss the rules relating to the amount recoverable by the insured in Fire
Insurance
[Link] the History of crop insurance in India? ( D 2022)
Background and early attempts at Crop Insurance
Crop insurance as a concept for risk management in agriculture has emerged in
India since the turn of the twentieth century. From concept to implementation, it
has evolved sporadically but continuously through the century and is still
evolving in terms of scope, methodologies and practices.
India is an agrarian country, where the majority of the population depends on
agriculture for their livelihood. Yet, crop production in India is dependent largely
on the weather and is severely impacted by its vagaries as also by attack of pests
and diseases. These unpredictable and uncontrollable extraneous perils render
Indian agricultural and extremely risky enterprise. It is here that crop insurance
plays a pivotal role in anchoring a stable growth of the sector.
Pre-Independence
As far back as 1915 in the pre-independence era, Shri J.S. Chakravarthi of
Mysore State had proposed a rain insurance scheme for the farmers with view to
insuring them against drought. His scheme was based on, what is referred to today
as the area approach. He published a number of papers in the Mysore Economic
Journal enunciating the concept of Rainfall Insurance. In 1920 Shri Chakravarthi
published a book titled “Agricultural Insurance: Practical Scheme suited to Indian
Conditions”.
Apart from this, certain princely states like Madras, Dewas, and Baroda, also
made attempts to introduce crop insurance relief in various forms, but with little
success.

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Post-Independence
After the attainment of Independence in 1947, crop insurance gradually
started to find mention more often. The Central Legislature discussed the subject
in 1947 and the then Minister of Food and Agriculture, Dr. Rajendra Prasad gave
an assurance that the government would examine the possibility of crop and cattle
insurance, and a special study was commissioned for this purpose in 1947-48.

The first aspect regarding the modalities of crop insurance considered was
whether the same should be on an Individual approach or on Homogenous area
approach. The former seeks to indemnify the farmer to the full extent of the losses
and the premium to be paid by him is determined with reference to his own past
yield and loss experience. The 'individual approach' basis necessitates reliable
and accurate data of crop yields of individual farmers for a sufficiently long
period, for fixation of premium on actuarially sound basis. The 'homogenous area'
approach envisages that in the absence of reliable data of individual farmers and
in view of the moral hazards involved in the 'individual approach', a homogenous
area comprising villages that are homogenous from the point of view of crop
production and whose annual variability of crop production would be similar,
would form the basic unit, instead of an individual farmer.

The study reported in favour of a 'homogenous area' approach, as various agro-

climatically homogenous areas treated as a single unit and the individual farmers
in such cases pay the same rate of premium and receive the same benefits,
irrespective of their individual fortunes. The Ministry of Agriculture circulated
the scheme, for adoption by the State governments, but the States did not accept.

In October 1965 the Government of India decided to introduce a Crop Insurance

Bill and a Model Scheme of Crop Insurance in order to enable the States to
introduce crop insurance if they so desired. In 1970, the draft Bill and the Model

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Scheme were referred to an Expert Committee headed by Dr. Dharm Narain.

Thus, for over two decades the issue of crop insurance continued to be debated
and discussed.
First ever Crop Insurance scheme - 1972
From beginning of the seventy's decade, different experiments on crop
insurance were undertaken on a limited, ad-hoc and scattered scale. The first crop
insurance program was introduced in 1972-73 by the 'General Insurance'
Department of Life Insurance Corporation of India on H-4 cotton in Gujarat.
Later, the newly set up General Insurance Corporation of India took over the
experimental scheme and subsequently included Groundnut, Wheat and Potato
and implemented in the states of Gujarat, Maharashtra, Tamil Nadu, Andhra
Pradesh, Karnataka and West Bengal.

This experimental scheme was based on "Individual Approach". It continued upto

1978-79 and covered only 3110 farmers for a premium of 4.54 lakhs against
claims of 37.88 lakh.

It was realized that crop insurance programs based on the individual farm
approach would not be viable and sustainable in this country.
Pilot Crop Insurance Scheme (PCIS) - 1979
Professor V. M. Dandekar, often referred to as the “Father of Crop Insurance in
India”, suggested an alternate “Homogeneous Area approach” for crop
insurance in the mid-seventies.
Based on this Area approach, the General Insurance Corporation of India (GIC)
introduced a Pilot Crop Insurance Scheme (PCIS) from 1979. Participation by
the State Govts. was voluntary. The scheme covered cereals, millets, oilseeds,
cotton, potato, gram and barley. The risk was shared by GIC and the respective
State Govt. in the ratio of 2:1. The insurance Premium ranged from 5 to 10 per
cent of the Sum Insured.

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This PCIS ran till 1984-85 by which 13 States had participated. The scheme
covered 6.27 lakh farmers for a Premium of 1.97 crore against Claims of 1.57
crore.
Comprehensive Crop Insurance Scheme (CCIS) - 1985

Based on the learnings from PCIS, the Comprehensive Crop Insurance Scheme
(CCIS) was introduced with effect from 1st April 1985 by the Government of
India with the active participation of State Governments. The Scheme was
optional for the State Governments. The CCIS was implemented on
Homogeneous Area approach and was linked to short-term crop credit, that is, all
crop loans given for notified crops in notified areas were compulsorily covered
under the CCIS.
The salient features of the Scheme were:
1. It covered farmers availing crop loans from Financial Institutions for
growing food crops & oilseeds on compulsory basis. The coverage was restricted
to 100% of crop loan subject to a maximum of ` 10,000/- per farmer.
2. The Premium rates were 2% for Cereals and Millets and 1% for Pulses and
Oil seeds. 50% of the Premium payable by Small & Marginal farmers was
subsidized by Central and State Governments in equal proportion.
3. Premium & Claims were shared by Central & State Government in 2:1 ratio.
4. The Scheme was optional to State Governments.
5. The maximum Sum Insured was 100% of the crop loan, which was later
increased to 150%.
6. CCIS was a multi-agency scheme, involving Government of India,
Departments of State Governments, Banking Institutions and GIC.

Experimental Crop Insurance Scheme (ECIS) - 1997

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While the CCIS was being implemented, attempts were made to modify the
existing CCIS from time to time as demanded by the States. During the Rabi
1997-98 season, a new scheme, viz. Experimental Crop Insurance Scheme (ECIS)
was introduced in 14 districts of 5 States. The Scheme was similar to CCIS,
except that it was meant only for all small / marginal farmers with 100% subsidy
on Premium. The Premium subsidy and Claims were shared by the Central and
respective State Governments in the ratio of 4 : 1. The Scheme was discontinued
after one season due to its many administrative and financial difficulties.

During its one season, the ECIS covered 4,54,555 farmers for a Sum Insured
of 168.11 crore at a Premium of 2.84 crore against which the Claims paid
wer 37.80 crore.
Pilot Scheme on Seed Crop Insurance (PSSCI) - 2000

A Pilot Scheme on Seed Crop Insurance (PSSCI) was introduced in Kharif 2000
season in 11 States to provide financial security & income stability to the Seed
Growers in the event of failure of seed crop.
It was also the objective to provide stability to the infrastructure established by
the State owned Seed Corporations and State Farms, and to give a boost to the
modern seed industry by bringing it under scientific principles.
All seed-producing organizations, under Govt. or private control, producing
certain classes of seed for identified Crops/States/Areas were eligible. All farmers
growing the Foundation & Certified seed crops in the identified States /Areas,
who had offered the seed crop for certification and had got registered with the
concerned Certification Agency were eligible for coverage.
Farm Income Insurance Scheme (FIIS) - 2003

NAIS protects the farmers only against the yield fluctuations. The price

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fluctuations are outside the purview of this scheme. Farmers' income is a

cumulative function of yield and market prices. In other words, a bumper harvest
tends to bring down the market prices of grains and vice versa.

Therefore, despite normal production, farmers often fail to maintain their income
level due to fluctuations in market prices. To take care of variability in both the
yield and market price, the government introduced a pilot project, viz. Farm
Income Insurance Scheme (FIIS) during Rabi 2003-04 season.
Pradhan Mantri Fasal Bima Yojana (PMFBY) : Pradhan Mantri Fasal Bima
Yojana (PMFBY) alongwith Restructured Weather Based Crop Insurance
Scheme (RWBCIS) has been approved in place of NAIS/MNAIS for
implementation from Kharif 2016 season. Premium structure under Restructured
WBCIS has also been rationalized and made at par with PMFBY. PMFBY
provide a comprehensive insurance cover against failure of the crop thus helping
in stabilising the income of the farmers and encourage them for adoption of
innovative practices. Operational Guidelines of the scheme were revised and
revamped w.e.f. Rabi 2018 and Kharif 2020 respectively.
Brief features of PMFBY are as under:-
 Provides comprehensive insurance coverage against crop loss on account of
non-preventable natural risks, thus helping in stabilizing the income of the
farmers and encourage them for adoption of innovative practices.
 Increased risk coverage of Crop cycle – pre-sowing to post-harvest losses.
 Area approach for settlement of claims for widespread damage. Notified
Insurance unit has been reduced to Village/Village Panchayat for major crops.
 Actuarial/bidded premium but uniform maximum premium of only 2%, 1.5%
and 5% to be paid by farmers for all Kharif crops, Rabi Crops and Commercial/
horticultural crops respectively. Premium over and above these limits is shared
by the Central and State Governments on 50 : 50 basis except in North Eastern

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Region where it is 90 : 10.

 The difference between premium and the rate of Insurance charges payable by
farmers is provided as subsidy and shared equally by the Centre and State.
 Uniform seasonality discipline & Sum Insured for both loanee & non-loanee
farmers

[Link] of Reinstatement in fire insurance contract.(J 2021)(6MARKS)

Reinstatement of any property generally means replacement of what is lost or
repairing the damaged property by bringing it to its original value and usefulness.
In case of total destruction of an asset, the company generally replace the same
with new assets or if possible, repair the old one to bring it at the same conditions
or positions that it never damaged. In case when assets under damage have been
covered with an insurance policy then insurer try to repair damaged assets to bring
them in their condition before the peril or risk.
The term “reinstate”, in a Fire Insurance Policy refers to buildings and the terms
“replace”, refers to goods which have been completely destroyed. But we
generally use term “restoration “which has combined effect of “reinstatement “as
well as “replacement”. Normally insurer indemnify the insured of the loss
suffered by him, but the insurer with the consent of the insured can take recourse
to reinstatement.
The important provisions of the reinstatement value clause include the
following –

A) Reinstatement of the damaged asset must be done by the insured within 12

months from the date of damage or destruction of the asset.

The insured can also apply for an extension in the time for reinstating the asset
and if the insurance company allows an additional time, reinstatement should be
completed within the extended time. If the timeline is not followed, the claim

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would be settled on an indemnity basis only.

B) The pro-rata average method would be applied by comparing the sum insured
of the fire insurance policy with the reinstatement cost of the entire property on
the reinstatement date

C) Reinstatement value clause would not apply if the insured does not inform
the insurance company of his/her intention to replace the damaged asset within 6
months of loss. If an extended time is availed, information should be given within
the extended period to avail reinstatement value basis of claim settlement.

Moreover, if the insured is not willing to replace the damaged property, the
reinstatement value clause would not apply. In that case, the claim would be
settled on an indemnity basis

D) Reinstatement of the damaged property or asset can be done at any alternate

location as desired by the insured. However, this would be allowed only if the
liability under the fire insurance policy does not increase due to a change in
location

E) Reinstatement value clauses in fire insurance policies are applied on building,

plant and machinery, equipment, etc. which are in a new condition. The clause is
not applicable on stocks even when the stock is covered under a fire insurance
policy.

F) The sum insured of the policy would depend on the reinstatement value of the
asset or property which is damaged

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G) Till the time that reinstatement is not done, the liability under the fire
insurance policy would be determined on an indemnity basis which is the market
value basis.

The concept of the reinstatement value clause should be properly understood

when buying a fire insurance policy so that you know how a claim would be paid.

Problem associated with crop insurance? (2022)

Agriculture is a prehistoric occupation. In fact, it is said that human beings only
started building civilizations after they discovered agriculture. But agriculture has
always been an inherently risky business. Thousands of years have passed
between the discovery of agriculture and the modern society that we live in today.
However, the modern farmers are exposed to the same natural risks as their
ancestors. Weather, plays the most significant part in the prosperity of farmers
and they do not have any control over it!
Insurance companies have been able to help people mitigate risks for centuries
now. However, the products that they offer to mitigate agricultural risks are
substandard to say the least. In this article, we will first understand what crop
insurance is and why it is still unable to provide relief to the members of the
agricultural community.
Crop insurance is an insurance product that is meant to protect farmers from risks
that arise in due course of the business of agriculture. The risks must be beyond
the control of farmers. Crop insurance includes clearly identified risks such
as lack of rainfall. The adverse outcome of such risk factors must necessarily
lead to an adverse economic impact. Also, the relationship between the risks and
the loss must be clear and irrefutable.
For instance, if crop insurance is taken to protect against the adverse effects of

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rainfall, then it must be possible to ascertain whether the fall in yield is because
of a drop in rainfall or whether there are other factors at play as well.
Low Frequency High Severity
Insurance risk factors can be classified into several types. Most risk factors
pertaining to crop insurance have a low chance of occurring. In places where
drought and floods are common, insurance companies will typically not offer
these products at all!
However, if the risk factors do occur, they have a huge impact on the lives of the
farmers. Hence, people who purchase crop insurance expect speedy settlement of
claims.
Concept of Reference Yield
The whole concept of crop insurance is tacitly based on the concept of reference
yield. Let’s understand how this works with the help of an example. All farms in
one particular geographical area are considered to be homogenous. The data
pertaining to historical yields of these farms is collected. Statistical processes are
run on this data to arrive at an average yield. This is the benchmark number based
on which the sum to be paid out as insurance claims is calculated.
Deviation From Reference Yield
Farmer’s loss is defined as a deviation from the reference yield. Suppose the
reference yield was 5 kgs per hectare and a farmer has an actual yield of 3 kgs
per hectare, then they have incurred a loss of the balance 2 kgs. Insurance
companies will pay the minimum sales price that has been set by the government
for the lost 2 kgs per hectare. This loss is derived on the basis of deviation from
an assumed yield.
Risks Inherent in Crop Insurance
1. Basis Risk: Basis risk refers to the possibility that the insured person may not
receive any payout even though they have faced a loss. Alternatively it could also
refer to the possibility that a farmer who has not suffered any loss will receive a
payout. Therefore, basis risk refers to the errors made by the insurance company.

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2. Spatial Risk: Crop insurance is prone to spatial risk. This is because one farm in
every particular area is considered to be the reference farm. Hence, there might
be spatial differences in the weather conditions in the reference farm as compared
to the actual farm. This leads to wrong interpretation of the yields at the ground
level and leads to the two incorrect possibilities as mentioned in basis risk.
3. Design Risk: Every insurance company has a cause effect relationship which has
been mapped between identified causal factors and crop yield. For instance,
rainfall may be considered a risk factor. Therefore a variation in the level of
rainfall should ideally have a 100% correlation to the crop yield. Well, sometimes
it does not. Hence even if the rainfall was poor, there may be a good crop or vice
versa. Such scenarios are covered in design risk.
4. Other Factors Ignored: Crop insurance considers all farms in a given area to be
homogenous units. In reality, this is not the case. The yield would widely differ
from farm to farm even if there were no human interference. This difference
would be caused by an differences in the availability of irrigation, the soil type of
the farm etc.

[Link] ombudsmen ( 2022)(D 2022)(6MARKS)

Ombudsman
The Insurance Ombudsman scheme was created by the Government of India for
individual policyholders to have their complaints settled out of the courts system
in a cost-effective, efficient and impartial way.
There are at present 17 Insurance Ombudsman in different locations and any
person who has a grievance against an insurer, may himself or through his legal
heirs, nominee or assignee, make a complaint in writing to the Insurance
ombudsman within whose territorial jurisdiction the branch or office of the
insurer complained against or the residential address or place of residence of the
complainant is located.
You can approach the Ombudsman with complaint if:

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• You have first approached your insurance company with the complaint and
They have rejected it Not resolved it to your satisfaction orNot responded to it at
all for 30 days
• You have first approached your insurance company with the complaint and
• Your complaint pertains to any policy you have taken in your capacity as an
individual and The value of the claim including expenses claimed is not above Rs
30 lakhs.
Your complaint to the Ombudsman can be about:
• Delay in settlement of claims, beyond the time specified in the regulations,
framed under the IRDAI Act, 1999.
• Any partial or total repudiation of claims by the Life insurer, General insurer or
the Health insurer.
• Any dispute about premium paid or payable in terms of insurance policy
• Misrepresentation of policy terms and conditions at any time in the policy
document or policy contract.
• Legal construction of insurance policies in so far as the dispute relates to claim.
• Policy servicing related grievances against insurers and their agents and
intermediaries.
• Issuance of life insurance policy, general insurance policy including health
insurance policy which is not in conformity with the proposal form submitted by
the proposer.
• Non issuance of insurance policy after receipt of premium in life insurance and
general insurance including health insurance and
• Any other matter resulting from the violation of provisions of the Insurance Act,
1938 or the regulations, circulars, guidelines or instructions issued by the IRDAI
from time to time or the terms and conditions of the policy contract, in so far as
they relate to issues mentioned at clauses (a) to (f)

The settlement process:

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Recommendation:
The Ombudsman will act as mediator and
1Arrive at a fair recommendation based on the facts of the dispute
2If you accept this as a full and final settlement, the Ombudsman will inform the
company which should comply with the terms in 15 days
Award:
• If a settlement by recommendation does not work, the Ombudsman will:
• Pass an award within 3 months of receiving all the requirements from the
complainant and which will be binding on the insurance company
Once the Award is passed
The Insurer shall comply with the award within 30 days of the receipt of award
and intimate the compliance of the same to the Ombudsman.
[Link] Court (D 2022)(6 marks)
Consumer Court is a special purpose court in India. It primarily deals with
consumer-related disputes, conflicts, and grievances. The court holds hearings to
adjudicate these disputes.
When consumers file a case, the court primarily looks to see if they can prove the
exploitation through evidence such as bills or purchase memos. In cases where
no such evidence is presented, courts rarely rule in favor of the plaintiff. The
Court mostly decides its verdict based on the violations of Consumer Rights(if
any). The point of having a separate forum for consumer disputes is to ensure that
such disputes are speedily resolved and make it less expensive.

Rights provided by consumer courts

The rights provided by the Court are listed below:
Right to Safety: The right to be protected from all types of hazardous goods and
services.
Right to Information: The right to be fully informed about the performance and
quality of all goods and services.

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Right to Choose: The right to freely choose goods and services.

Right to be Heard: The right to be heard in all decision-making processes related
to consumer interest.
Right to Seek Redressal: The right to seek compensation, whenever consumer
rights have been infringed.
Right to Consumer Education: The right to complete consumer education.
There are two more Rights specified but they don't come as part of the 6 main
Rights mentioned above.
List of consumer courts
National Consumer Disputes Redressal Commission (NCDRC): A court that
operates nationally and deals with cases where claimed compensation exceeds
Ten crores (₹100 million). The National Commission is the apex body of
Consumer Courts; it is also the highest appellate court in the hierarchy. The
NCDRC is the highest judiciary of the consumer court, the consumer Supreme
Court of India.
State Consumer Disputes Redressal Commission (SCDRC): A court that
works at the state level in cases where compensation claimed is between one crore
(₹10 million) and Ten crores. The State Commission has appellate jurisdiction
over the District Forum.
District Consumer Disputes Redressal Forum (DCDRF): A court that works
at the district level in cases where the claimed compensation is below one
crore.[2]
Process to file a complaint
To file a complaint, a consumer obtains a copy of the Consumer Protection Act.
The format for filing a complaint is simple, with guidelines provided for
reference. It is advisable to describe the facts and support the claim with
comprehensive documentation.

• The consumer must attach photocopied documents (evidence and references) in

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the complaint file.

• A signed Vakalatnama should be attached with the documents. This authorises

a lawyer to represent the case in the Consumer Court.
History
The consumer movement a social force originated in the 1960s with the mission
of protecting and promoting the interests of consumers against unethical and
unfair trade practices. Rampant food shortages, hoarding, black marketing,
adulteration of food and edible oil gave birth to the consumer movement.
In 1986 the movement led the Indian government to enact the Consumer
Protection Act of 1986 (COPRA) The consumer movement a social force
originated in the 1960s with the mission of protecting and promoting the interests
of consumers against unethical and unfair trade practices. Rampant food
shortages, hoarding, black marketing, adulteration of food and edible oil gave
birth to the consumer movement.
In 1986 the movement led the Indian government to enact the Consumer
Protection Act of 1986 (COPRA).[3]
Objectives
The main function of the consumer court is to offer redress to consumers and to
maintain seller's orientation toward fairly treating the consumer and respecting
his/her rights. Approaching a consumer court is cheap as plaintiffs can represent
themselves without a lawyer and are only required to pay a nominal fee of 100
Indian rupees.
Gowrov insured his car with Galaxy Insurance Company, later with another
company called Moon Insurance Company. Gowrov’s car become liable in
damage to a motor cyclist. Which insurance company is liable to compensate the
loss to motor cyclist ?
Santhosh insured his sugar in the godown against fire for an amount of Rs. 50
lakhs. In a fire accident his sugar stock worth of Rs. 38 lakhs lost by fire. To what

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extent insurance co. is liable for the loss

Shobha has insured her jewels against loss by fire. During summer she kept the
jewels in a newspaper and placed them for safety in the fire-place to prevent
burglars from noticing them. Later without removing jewels, as she forgot about
them, she set the fire and they were burnt and damaged. Is insurer liable for the
loss ?
‘A’ has insured his house against fire. Afterwards he only assigned the fire policy
to ‘B’ without transferring any interest in the house. If that house is damaged by
fire after this assignment of policy, can ‘B’ recover the amount under the policy
?
Goods less by fire, insurance claim rejected on the ground that there was no actual
ignition. Whether claim can be rejected on the ground that no actual ignition.
Fire Policy did not cover damage due to natural heating. But fire loss caused to
the goods. Whether claim can be made ?
Sharan a gunny trader obtained insurance for his stock worth of Rs. 50 lakhs and
Oriental Insurance Company issued the fire policy to him for the same. While the
contract was in force the entire stock of gunnies was destroyed by fire, the
surveyor had recommended payment, higher than the value of the policy, but
national commission for readdressal of consumer dispute without relying on the
surveyor's report awarded a compensation less than the policy amount can
national commission do so ?
Kareem insured his house against "such loss or damage as should or might be
occasional by fire". There was an explosion of gun powder on ignition in a factory
situated 500 feet away from the insured house which caused damage to windows
and window frames. But house was not set on fire. Whether insurer is liable for
such damage caused to the insured

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UNIT – V
[Link] the various kinds of policies in Marine Insurance. (D 2022)
Introduction: Marine transport faces a relatively higher degree of threat as
compared to the other modes of transport, such as road, rail, and air. The range of
perils offered by the sea is very wide, ranging from weather or natural hazards to
cross-border conflicts to pirate attacks. the law mandates all the vessels engaged
in commercial transport to have a suitable marine insurance policy to mitigate the
potential risks. The Marine Insurance Act, 1963, regulates the principles and law
of marine insurance in India.
Types of Marine Insurance in India
Due to a very wide ambit of marine insurance, different categories of it are
classified based on different factors. Broadly, the classification of marine
insurance in India depends on two factors – the coverage area of the insurance
policy, and the structure of the insurance contract. Each of the two categories is
further sub-categorized, based on the different needs and suitability of the person
entering into the insurance contract.
Types of Marine Insurance – based on coverage area
The coverage area of an insurance policy is the geographical area or the protected
area in which the benefits of an insurance policy apply. The following types of
marine insurance are classified, based on the coverage area of the insurance
policy –
 Hull & machinery insurance – Hull is the most noticeable part of any ship. It is
the watertight body of a ship or a boat that protects the cargo inside the ship from
being damaged. Hull and Machinery Insurance, therefore, covers the loss or the

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damage caused to the body of the ship or any machinery or equipment in it, used
for the functioning of the ship. It mostly covers accidents caused due to collisions,
or the damages caused by earthquakes and explosions. This type of insurance is
generally taken by the owners of the ship.
 Marine cargo insurance – Marine cargo insurance is a type of property
insurance that covers the cargo owners against any loss or damage caused to their
cargo during its transit. It has extensive coverage, but also has certain limitations,
for instance, the cargo owners lose their claims if the packaging of the cargo was
defective. It also comes with a third-party liability, which covers the damages
caused to the port, or a ship, or a railway track due to the presence of defective
cargo.
 Liability insurance – Liability insurance covers the financial liability of the
person who is insured. It covers primarily the liabilities which arise due to the
damages or injuries caused to the third party, for instance, the death or personal
injury caused to any third party traveling in the ship.
 Freight insurance – Freight insurance covers the liability of the shipping
company or the logistics provider for the damage or loss caused to the shipment
during transit due to events outside the control of the company.
Types of Marine Insurance policies – based on the structure of the contract
A ‘policy is a document that embodies the terms and conditions of the contract of
insurance. It essentially is a written form of agreement between the insurance
company and the person insured. It generally contains the provisions regarding
the coverage area, the limitations of insurance policies, etc. Thus the different
types of policies available under marine insurance are –
 Open policy – An open policy, also called a floating policy, provides coverage
for an indefinite number of transit journeys during the subsistence of the policy.
This is especially beneficial for the companies which are involved in high-volume
trade, as they are saved from taking an insurance policy on each transit journey.
It covers all the transit journeys of the insured until the policy is canceled or until

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the last of the payment is realized, whichever is earlier.

 Voyage policy – A voyage policy works on the same lines as the marine cargo
insurance. Under this policy, the insurance company agrees to cover the losses or
damages caused to the cargo during a specific voyage. It expires when the vessel
reaches its destination, irrespective of the time it takes to reach there. Usually, it
is bought by small exporters who ship their goods by sea only on some occasions.
 Time policy – A time policy, as the name suggests, is issued for a fixed period of
time. The vessel may make any number of voyages during this period. Generally,
the insurance company issues this policy for one year, however, the period may
vary depending on the agreement between both parties.
 Mixed policy – A mixed policy is a combination or a mix of voyage and time
policies. The insurance company, while issuing this policy, agrees to cover the
loss or damage to the ship for a particular voyage till a particular period of time.
 Single vessel policy – A single vessel policy insures only a single ship of the
insured.
 Fleet policy – The person insured has an option of either insuring a single ship
by a policy, or of insuring several ships under one policy. If he chooses the latter
option, he undertakes a ‘Fleet Policy’, under which a fleet of ships is insured
under a single policy.
 Unvalued policy – Every insurance policy is either an unvalued or a valued
policy. Under an unvalued policy, the insurance company does not assign a value
to the thing insured (the vessel or the cargo), at the time of underwriting the
policy. The valuation of the property is done only after the claim of insurance has
been filed. However, for a successful claim, the true value of the property has to
be proved by the insured by way of invoices or estimates, before the valuation.
 Valued policy – In a valued policy, the insured property is given a specific value
when the policy is issued, and before any claims are made. When the claim is
made by the insured, a pre-estimated or the specified amount is given, which does
not depend on the amount of loss incurred by the insured. The depreciation of the

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property also does not affect the amount of claim, under a valued policy.
 Block policy – A block policy is an all risks policy. Unless a contrary intention
is expressed by the insurer, it essentially covers all the risks to which the goods
are exposed when they are in transit, bailment, and on the premises of the third
party. There are two popular types of block policy – furrier’s block
policy, and jeweler’s block policy since fur and jewelry are two high-value
commodities that are exposed to a greater threat of theft.
 Port-risk policy – A port-risk policy covers ships that are either docked or are
undergoing repair works at the port. It is an all-risk policy that covers all the risks
unless otherwise agreed between the parties. It provides coverage for physical
damages to the vessel as well as protection and indemnity but excludes any
liability arising on account of the crew and cargo.
 Named policy – A named policy is one in which the name or names of the ships
is mentioned in the contract of insurance.
 Wager policy – A wager policy protects from loss of the property of which the
insured does not have legal proof of possession. This means, when the insured is
not able to prove an insurable interest in the property, the insurance company may
issue a wager policy to him. Under it, the whole claim of the insured is subject to
the discretion of the insurer and the merits of the claim made. It is not a written
policy as it is issued in contravention of the law.
Conclusion: Marine insurance has an impressive array of policies, which cater to
the needs of almost all of the business owners and people associated with a
particular shipment or consignment. It ensures that not even the smallest
intermediary is left with losses due to events out of their control. However,
irrespective of the benefits it provides, marine insurance is not void of limitations,
drawbacks, and loopholes. Therefore, it is always advised to the people buying a
marine insurance policy to determine their needs before they make any agreement
with the insurer.

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[Link] is “Deviation”? Under what circumstances it is excused ?(J 2021)

Principle of Deviation
When a ship intentionally changes her route or remains in port without just cause,
the ship’s new route or delay is called a deviation. Unless the contract permitted
otherwise, in either case there is a breach of contract by the party responsible for
the deviation.
In the law of carriage of goods by sea, deviation has special penalty. From the
minute this happens, the voyage is altered, the contract determined, and the
insurer discharged from later responsibilities. By the contract, the insurer only
runs the risk of the contract agreed upon, and no other and it is, therefore, a
situation understood in the policy, that the ship shall continue to her port of
destination by the shortest, direct and safest route, and on no account to depart
from that route, but in cases of urgent and critical situation.

Deviation.
(1)Where a ship, without lawful excuse, deviates from the voyage contemplated
by the policy, the insurer is discharged from liability as from the time of deviation,
and it is immaterial that the ship may have regained her route before any loss
occurs.
(2)There is a deviation from the voyage contemplated by the policy—
(a)Where the course of the voyage is specifically designated by the policy, and
that course is departed from; or
(b)Where the course of the voyage is not specifically designated by the policy,
but the usual and customary course is departed from.
(3)The intention to deviate is immaterial; there must be a deviation in fact to
discharge the insurer from his liability under the contract.
Several ports of discharge. (Sec 47)
(1)Where several ports of discharge are specified by the policy, the ship may
proceed to all or any of them, but, in the absence of any usage or sufficient cause

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to the contrary, she must proceed to them, or such of them as she goes to, in the
order designated by the policy. If she does not there is a deviation.
(2)Where the policy is to “ports of discharge,” within a given area, which are not
named, the ship must, in the absence of any usage or sufficient cause to the
contrary, proceed to them, or such of them as she goes to, in their geographical
order. If she does not there is a deviation.
sec48:Delay in voyage.
In the case of a voyage policy, the adventure insured must be prosecuted
throughout its course with reasonable dispatch, and, if without lawful excuse it is
not so prosecuted, the insurer is discharged from liability as from the time when
the delay became unreasonable.
sec49:Excuses for deviation or delay.
(1)Deviation or delay in prosecuting the voyage contemplated by the policy is
excused—
(a)Where authorised by any special term in the policy; or
(b)Where caused by circumstances beyond the control of the master and his
employer; or
(c)Where reasonably necessary in order to comply with an express or implied
warranty; or
(d)Where reasonably necessary for the safety of the ship or subject-matter
insured; or
(e)For the purpose of saving human life, or aiding a ship in distress where human
life may be in danger; or
(f)Where reasonably necessary for the purpose of obtaining medical or surgical
aid for any person on board the ship; or
(g)Where caused by the barratrous conduct of the master or crew, if barratry be
one of the perils insured against.
(2)When the cause excusing the deviation or delay ceases to operate, the ship
must resume her course, and prosecute her voyage, with reasonable dispatch.

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Conclusion
Nowadays, huge engines and not sails move great metal ship hulls with
unthinkable even for the nineteenth century speed, carrying thousands tons of
merchant commodities for thousands of miles distance. Legal aspects of modern
shipping are so complicated that it will take quite a time to specify only important
branches of law involved. Human factor related accidents and disasters give live
to all-time increasing number of instructions, regulations and laws. However, sea
is same dangerous and almost same mysterious as it was thousand years ago, with
crews and their ships exposed to the elements of same force and disruptiveness.
Last but not least, some ghosts of the past like piracy and hijacking have re-
emerged from the dark of the centuries in its new and even more terrible and
inhumane form.

[Link] the warranties in Marine Insurance. 14 (2022) (D 2022)

Warranties in marine insurance are referred to as assurances or promise by
the policyholder about a certain act that shall or shall not be commissioned by
him. It is a promise that an insured makes to the insurance company regarding the
utilization of the insured ship or vessels. In addition, warranties in marine
insurance express whether or not the insurer shall be liable to entertain the claim
made by the policyholder.
Types of Warranties
Marine insurance includes two types or warranties. These are:
1. Express Warranties.
Express warranties are the promises and statements made by the
policyholder. The express warranties are clearly stated or written in the
deed or certificate of the insurance policy. The express warranties generally
includes the following conditions.
• Ship’s suitability for the intended journey.

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• Insured party’s adherence to good operational and safety standards.

• Full disclosure of all relevant information by the insured.
• The legality of the consignment and voyage.
• Accurate description of the cargo in accordance with applicable laws
and regulations.
2. Implied Warranties
There are two kinds of implied warranties:
Seaworthiness and legality of the ship; the implied warranties are not
explicitly written in the contract deed. Instead, their existence or
creditworthiness is assumed, which forms the insurance contract.
The ships used for transportation should be suitably constructed and
equipped . they should be capable of withstanding ordinary stress on the
voyage. The following points help us understand it better:
1. Deciding whether the ship is seaworthy or not is subjective and may
vary with any particular vessels at different periods of time and
destination, as ship may be seaworthy for summer but may not be
apt for winter.
2. Apart from the physical condition of the ship, seaworthiness also
includes adequacy of equipment, the expertise of crew members, and
the condition of the consignment.
3. The ship must be cargo-wothiness and reasonably fit to carry the
insured cargo. A ship should be seaworthy at the port of
commencement of the voyage and at different stages if the voyage
is to be completed in different stages.
No change in the destination of the voyage
If the destination of the voyage is changed intentionally after the inception of the
risk, there occurs a change in the voyage. If this happens, marine insurance
company is no more responsible for covering the new voyage.
No delay in the voyage

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There should be no delay in starting the voyage without a valid reason. It is

important to dispatch the insured venture within a reasonable time duration. In
case there is a delay, the insurer has all rights to refuse to give the coverage in the
absence of any legal reason.
No deviation
The liability of the marine insurer ends if there is a deviation in the journey i.e.,
deviation from the common route. In case a ship deviates from its fixed passage,
the insurer’s liability ends. This will be immaterial if the ship returns to its
original path before the loss, However, the insurer can quit responsibility only if
there is an actual deviation and not mere the intention of the deviation.
Exception of warranties in marine insurance
• When delay or deviation is due to a particular warranty of the
insurance policy.
• Delay or deviation for the safety of the ship or human lives is an
exception.
• When delay or deviation was beyond the control of the crew.
4.“A Marine insurance contract is no contract is no contract without
insurable interest” Discuss. (J 2021)
The fundamental principles of Marine Insurance are drawn from the Marine
Insurance Act, 1963* As in all contracts of insurance on property, the contract of
Marine Insurance is based on the fundamental principles of Indemnity, Insurable
Interest, Utmost Good Faith, Proximate Cause, Subrogation and Contribution.
Practitioners of Marine Insurance must familiarize themselves with the Act and
uphold these Principles when negotiating Contracts and settling claims under the
contract.
INDEMNITY:
The object of an insurance contract is to place the assured after a loss in the same
relative
financial position in which he would have stood had no loss occurred. By

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the Marine Insurance Act, the indemnity that is provided is “in manner and to the
extent agreed.” A “commercial” indemnity is thus provided. Because insurers
cannot undertake to reinstate or replace cargo in the event of loss or damage, they
pay a sum of money, agreed in advance, that will provide reasonable
compensation. In practice, this is achieved by agreeing in advance the insured
value, based on C.I.F., value of the goods to which it is customary to add an
agreed ten percent which is intended to include the general overheads and perhaps
a margin of profit on the transaction.
Upon total loss of the entire cargo by an insured peril the sum insured is paid in
full, and if part of the cargo is a total loss, the appropriate proportion of the insured
value is paid.
Claims for damage are settled by ascertaining the percentage of depreciation and
applying this percentage to the insured value. The percentage of depreciation is
calculated by comparing the value the goods would realize in their damaged state
with their gross sound value on the date of the sale. The same date is used for
both values to avoid distortion of the result arising from fluctuations in the market
prices.
In Marine insurance it is customary to issue agreed value policies. The agreed
value is conclusive between the Insurer and the Assured except in the event of
the unintentional error or where fraud is alleged.
“Duty” and “Increased Value” policies are not agreed value policies. They
provide pure indemnity only.
INSURABLE INTEREST:
The Marine Insurance Act contains a very clear definition of insurable interest.
It states that there must be a physical object exposed to marine perils and that the
insured must have some legal relationship to the object, in consequence of which
he benefits by its preservation and is prejudiced by loss or damage happening to
it or where he may incur liability in respect thereof.
Whereas in fire and accident insurance an insurable interest must exist both at

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inception of the
contract and at the time of loss, the interest in respect of a marine contract must
exist at the time of loss, though it may not have existed when the insurance was
affected. This is necessary when one considers the mercantile practice under
which there is every possibility of sale and purchase of goods during transit.
However, the MIA has provided that where the goods are insured “lost or not
lost” the assured may recover the loss, although he may not have acquired his
interest until after the loss, unless at the time of effecting insurance he was aware
of the loss and the insurer was not. If the assured had no interest at the time of the
loss, he cannot acquire interest by any act or election after he is aware of the loss.
Arising from this, both a contingent and a defeasible interest are insurable. A
partial interest is also insurable.
Unless like the normal indemnity policy of other classes of insurance, a
marine cargo policy is freely assignable either before or after loss provided
of course the assignee has acquired insurable interest.
The type of sale contract also determines the Insurable Interest. A separate
chapter has been devoted to most common terms of contracts known as “Inco
Terms”. The terms dictate which of the two parties to the contract, is
responsible to insure the goods.
GOOD FAITH:
Every contract of insurance is a contract “uberrimae fidei” i.e. one which requires
utmost good faith on the part of both the insurer and the assured. In Marine
Insurance, it is the duty of the proposer to disclose clearly and accurately all
material facts related to the risk. A material fact is a fact, which would affect the
judgement of a prudent Underwriter in considering whether he would enter into
a contract at all or enter into it at one rate of premium or another and subject to
what terms. Apart from the duty of disclosure, the insured must act towards the
insurer in good faith throughout the duration of the contract.
It is customary to classify breaches of the duty of utmost good faith under four

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headings: non- disclosure, concealment, innocent misrepresentation, and

fraudulent misrepresentation. The first two are termed passive breaches and the
other two are termed active breaches. The Marine Insurance Act places a statutory
duty on the assured to disclose to the insurer all material circumstances known to
him or which he should know in the ordinary course of his business.
Whether non-disclosure is intentional or inadvertent, the effect is the same and
the policy may be avoided, although deliberate and material non-disclosure would
usually amount to fraud and render the policy void.
Over-valuation, for example, must be communicated to the insurers; if it is not
so communicated, it is a concealment of a material fact and voids the insurance.
PROXIMATE CAUSE:
“Proximate cause means the active, efficient cause that sets in motion a train of
events which brings about a result, without the intervention of any force started
and working actively from a new and independent source.”
Insurers are liable if an insured peril is the proximate cause of the loss. If an
insured peril is only the remote cause of the loss, the proximate cause being an
uninsured or excepted peril, the insurers are not liable.
The proximate cause is not necessarily that which is proximate in time, but that
which is proximate in efficiency. It is the dominant, effective and operative cause
of the loss.
In case of concurrent causes, following rules apply: -

1. a) If one of the causes contributing to the loss is an insured peril, and no excepted
peril is involved, the loss is cov
2. b) If one of the causes is an excepted peril, the loss is not covered at all, unless
the consequences of the insured peril can be separated from those of the uninsured
peril, in which event the former, but not the latter, is cover.
SUBROGATION:
“Subrogation is the right which one person has of standing in place of another

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and availing himself of all the rights and remedies of the other, whether already
enforced or not.”
Subrogation is a corollary of the principle of indemnity and the right of
subrogation therefore applies only to policies, which are contracts of indemnity.
Subrogation is a matter of equity, the purpose of which is to ensure that the
insured is not over-indemnified for the same loss.
(a) In Marine insurance, where an insurer pays for a total loss:
1i) he is entitled to take over the interest of the assured in whatever may
remain of the subject-matter so paid for (abandonment);
[Link]) and he is subrogated to all the rights and remedies of the assured as from
the time of the loss (subrogation)
(b) Where an insurer pays for a partial loss, he acquires no title to the subject-
matter insured or to such part of it as may remain, but he is subrogated to all the
rights and remedies of the assured as from the time of the loss, and in so far as
the assured has been indemnified.
In marine insurance subrogation applies only after payment of a loss. The insurer
is entitled to recover only up to the amount, which he has paid, in respect of rights
and remedies.
On payment of a total loss, the insurer is entitled to assume rights of ownership
of the subject- matter insured. The right is conferred upon him by abandonment
(not by rights of subrogation) and the effect is that if the property is subsequently
salvaged or recovered the insurer is entitled to retain the whole of the proceeds of
sale even though they may exceed the sum paid out under the policy, always
assuming the property is fully insured and that the assured was not bearing
part of the risk himself.
In addition to this right of exercising ownership of the property, the insurer is
subrogated to “all rights and remedies of the assured” as from the time of casualty
causing the loss. This simply means that if the loss has been caused by the
negligence of a third party, against whom the assured has the right of action in

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tort – say, against a carrier or bailee – then the Insurer is entitled to succeed to
any recovery (whereby the loss is reduced) the assured may affect from such third
party. This principle applies equally to total and partial losses and has nothing
whatever to do with the doctrine of abandonment.
CONTRIBUTION
Sometimes one risk may be covered by more than one insurer. In that case it is
desirable not only to ensure that the insured does not receive more than an
indemnity but that any loss is fairly spread between all the insurers involved. The
principle of contribution is a method of distributing fairly among insurers the
burden of claims for which each shares some responsibility.
Following factors are required to exist before a loss is shared among the insurers
1. a) There must be at least two policies of insurance.
2. b) All insurances must be policies of indemnity
3. c) The policies must cover
i)The same interest
ii)The same subject matter
iii)The same peril
1. d) A loss must occur
2. e) The policies must be in force at the time of loss.
3. f) All policies must cover the
4. g) The policies must be legally enforceable.
A contract of marine insurance is an agreement whereby the insurer undertakes
to indemnify the insured, in the manner and to the extent thereby agreed, against
transit losses, losses incidental to transit. A contract of marine insurance may by
its express terms or by usage of trade be extended to protect the insured against
losses on inland waters or any land risk which may be incidental to any sea
voyage. In simple words the marine insurance includes
1. A) Cargo insurance which provides insurance cover in respect of loss of or
damage to goods during transit by rail, road, sea, air or by post. Thus, cargo

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insurance concerns the following:

(i) export and import shipments by ocean-going vessels of all types,
(ii) coastal shipments by steamers, sailing vessels, mechanized boats, etc.,
(iii) shipments by inland vessels or country craft, and
(iv) Consignments by rail, road, or air and articles sent by post.
1. B) Hull insurance which is concerned with the insurance of ships (hull,
machinery, etc.). This is a highly technical subject and is not dealt in this module.
Simply speaking this part of marine insurance which is called Hull Insurance is
dealing with insurance of Ships, barges launches, boats and offshore installations.
FEATURES OF MARINE INSURANCE
Offer & Acceptance: It is a prerequisite to any contract. Similarly, the goods
under marine (transit) insurance will be insured after the offer is accepted by the
insurance company.
2) Payment of premium: An owner must ensure that the premium is paid well in
advance so that the risk can be covered.
3)Contract of Indemnity: Marine insurance is contract of indemnity and the
insurance company is liable only to the extent of actual loss suffered.
4) Utmost good faith: The owner of goods to be transported must disclose all the
relevant information to the insurance company while insuring their goods.
5) Insurable Interest: The marine insurance will be valid if the person is having
insurable interest at the time of loss.
6) Contribution: If a person insures his goods with two insurance companies, then
in case of marine loss both the insurance companies will pay the loss to the owner
proportionately.
7)Period of marine Insurance: The period of insurance in the policy is for the
normal time taken for a transit. Generally, the period of open marine insurance
will not exceed one year.
8) Deliberate Act: If goods are damaged or loss occurs during transit because of
deliberate act of an owner then that damage or loss will not be covered under the

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policy.
9) Claims: To get the compensation under marine insurance the owner must
inform the insurance company immediately so that the insurance company can
take necessary steps to determine the loss.
OPERATION OF MARINE INSURANCE Marine insurance plays an important
role in domestic trade as well as in international trade. Most contracts of sale
require that the goods must be covered, either by the seller or the buyer, against
loss or damage.

[Link] is 'Perils of the sea' ? What are the Perils insured in a marine policy?
OR
[Link] perils in merin Insurance (2022)
INTRODUCION: Losses in the marine insurance business are the result of
various perils. Marine insurance policy does not necessarily cover all the risks.
The insurer is liable to indemnify an insured in respect of only losses which result
from perils insured against. When the loss occurs beyond the insured peril, the
insured himself shall have to bear it. The onus of proof under a policy of Marine
policy is upon the insured to establish that the loss was proximate, caused by an
insured peril. When goods are insured against ‘All Risks,’ the onus of proof of
loss is transferred to the insurer.
The perils insured against are mentioned in the policy, and the underwriter shall
be liable for damages caused by the insured perils.
“Marine Perils means the perils consequent on,” or incidental to the navigation of
the sea, that is to say, perils of the seas, fire, war perils (enemies), pirates, rovers,
thieves, captures, seizures, restraints, and detainment of princes and peoples,
jettisons, barratry, and other perils, either of the like-kind or which may be
designated by the policy.”

They are as follows:

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1. Perils of the Sea

They refer to all risks, perils and dangers peculiar to the sea. They include
accidents, capture of the ship or its cargo by pirates, losses by collision, etc. A
point to note here is that losses caused by perils of the sea cannot be prevented by
any reasonable care, skill and diligence on the part of human beings.
Thus, if a ship hits a sunken rock and sinks or collides with another ship and
suffers a loss, it is a case of loss by perils of the sea.
Other examples of such loss are:
1. Loss of cargo as a result of sea water entering the ship through a hole made by
rats in the bottom of the ship.
2. Loss resulting from negligent navigation, provided it was caused by a peril of
the sea.
3. Loss of cargo due to heat produced by the closing of ventilators to prevent the
entry of sea water on rough weather.
2. Fire
Fire is one of the most common perils of the sea and the underwriter is liable for
loss caused by it. Though every type of fire is not covered by the policy, damage
caused by smoke or by the heat of fire or damage by water used to put out or
prevent the spread of fire or fire resulting from lightning, spontaneous
combustion, explosion, negligence of the master or crew etc., are covered by the
policy.
If the loss is caused by the wilful misconduct of the insured or the fire takes place
on account of the inherent vice or nature of the subject matter insured, the insurer
is not responsible. It is to be remembered that certain losses on account of perils
of fire not covered by the standard form can be covered by having special clauses
and paying the extra charges.
3. Enemies:
Enemy literally means
It includes all damages or losses sustained owing to the hostile acts of an enemy.

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Enemies include all types of ships belonging to the foe or enemy countries and to
their hostile acts, provided such acts formed part of the enemy campaign.
4. Jettison
Jettisoning is the voluntary and intentional throwing overboard or away a part of
the cargo or part of vessel’s equipment for the purpose of lightening or relieving
the ship in case of necessity or emergency to have a safe adventure or voyage.
If the cargo or any other thing is thrown overboard accidentally or fortuitously,
then it does not constitute jettison. It should, however, be remembered that no
jettison of cargo owing to its inherent vice is covered by the policy.
For example, the jettison of fruits which have become rotten on account of delay
or of hemp shipped in an improper condition which as a result has become
dangerously heated, is not covered.
5. Barratry
It refers to every wrongful act willfully committed by the master or crew to the
prejudice of the owner without the connivance of the owner.
Instances of barratry include running or making away with the ship, willfully
carrying her out of the nominated course, sinking or deserting her, embezzling
the cargo, smuggling or any other act by which vessel or cargo is subjected to
arrest, detention, loss or forfeiture. In the case of ‘Scuttling’, connivance of the
owner does not constitute barratry.
6. Men-of-war
It refers to vessels authorized and maintained by nations for the purpose of
defense or attack in the event of hostilities and the loss arising out of collision
against a man-of-war is covered in a policy.
7. Pirates, Rovers, Thieves
In the olden days, when means of communications and transport were not so
developed, the perils on account of pirates (it means sea robbers but it includes
passengers of the ship who rise in revolt or those who attack the ship from the
shore), rovers (wanderers and pirates on the high seas), and thieves (robbers using

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force for violence and not clandestine thieves or pilferers or pickpockets from
among the passengers or crew) were very common.
The acts by those persons are committed for the pursuit of private ends by robbery
or marauders plundering indiscriminately in places beyond the jurisdiction of a
state. In the modern time, however these cases are rare.
8. Restraints
The prevention to free use of a port by the government of the country is known
as restraint. It may cause interruption and possible loss of voyages involving such
ports and sacrifice of cargo.
9. Detainment
It covers losses due to detention of a vessel and its cargo by blockage or possibly
quarantine regulation or other interference by the police of a nation while a vessel
is in port. It does not cover losses which are the result merely of delay or
interruption of the voyage or loss of market or some other remote result.
10. Arrest
It means forcibly taking away of the vessel and refers to political or executive
acts.
11. Letter of Mart
It means power granted by a state government to individual citizen who
undertakes to attack an enemies merchant ship in revenge for losses where they
had themselves suffered.
12. Letter of counter mart
It refers to the power granted by the opposing nation to other persons to resist and
retaliate such attacks.
13. Taking at sea
It refers to stopping and taking into port a ship for examination in the event of
any suspicion of carrying contraband goods.
14. All other perils
The term by the principle of ejusdem generis is intended to include perils of a like

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nature. The term does not mean all risks or even all marine risks. Smoke will
be ejusdem generis with fire; sweat arising out of heavy weather would be peril
of the seas and hence ice formed from sea water is ejusdem generis with it and
damage caused by contact with it will be covered.

Explain the express and implied warranties in marine insurance.

6 Marks
[Link] of Lading (2022)(6 Marks)
The term ‘Bill of Lading’ (BOL) is of ancient English origin and literally means
‘list of cargo’. It is one of the essential legal documents generated during the
shipping of overseas bound cargo and acts both as a contract as well as a receipt
between the shipper and the carrier.
Essentially, a BOL serves as a receipt for goods that change hands from the
exporter to the carrier. It also acts as a contract between the shipper and the carrier
for the carriage of goods, particularly in the absence of a separate contract to that
effect.
A bill of lading is issued by the carrier and, in doing so, he acknowledges that the
goods have been received from the shipper/exporter in good condition.
Functions of the Bill of Lading
 Evidence of contract between shipper and carrier - Proof that there is an
agreement between parties.
 A receipt that the goods have been loaded - Usually the ship's master/captain
verifies the receipt and forwards it to the seller's agent.
 Document of the title of goods - The Buyer receives the goods by verifying the
title of goods at the port. Due to this function, the document can be used to avail
advances/loans from financial institutions
 A master bill of lading is also the unique number for the shipping company to
identify the given shipment. This number is also used for Tracking the container

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during shipment.
The Purpose of BL in exports
Once the goods are shipped, the physical possession shifts from the exporter to
the carrier. At this stage, the exporter may not have yet received payment. This
makes the BOL a crucial component of the transaction. Bills of Lading in
International Trade, allows the exporter to hand over the control of the packages
to the carrier, giving the exporter indirect control over the goods during its
transportation phase.
The BOL is also important for the shipping of goods because the information it
holds influences various activities. This could include the destination of the
shipment, the number of packages in the consignment, billing details, payment
recovery instructions/details, and special instructions regarding the handling of
the packages at the docks or in the trailers.
Types of bills of lading
 Straight bill of lading – used when the shipment has been paid for in advance
and the carrier is delivering the freight to the buyer or other appropriate party.
 Order bill of lading – used when the goods are being shipped before they’re paid
for. It is expressed as “to order of” on the bill of lading often followed by the
recipient’s name. An order bill is considered a “negotiable instrument,” which
means that it acts as a substitute for money or as a promise to pay. An order bill
of lading might be used if the goods are shipped under an open account or letter
of credit.
When the recipient endorses or signs the order bill of lading, the carrier can
transfer title to the recipient. Endorsed order bills of lading can serve as collateral
against debt.
The bill of lading includes the following:
 Purchase order and/or account number
 Shipment date
 Shipper’s name and address

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 Recipient’s name and address

 Number of units being shipped
 Description of what’s being shipped
 Declared value of goods being shipped
 Shipment packaging – cartons, crates, pallets, etc.
 Notation if product in shipment is a Department of Transportation hazardous
material, which has special requirements
 The national motor freight classification (known as NMFC) for items being
shipped
 Exact shipment weight
 Pickup or delivery specifications
The bill of lading is used with both domestic and international shipments.

[Link] insurance.(J 2021)

Microinsurance is a category of insurance policies designed for the betterment of
the economically vulnerable population of the country. This category has been
created by the Insurance Regulatory and Development Authority of India
(IRDAI). Microinsurance is governed as per the IRDAI Microinsurance
Regulations, 2005. Such a policy can belong to General Insurance as well as the
Life Insurance category. However, the defining quality of such policies is that the
sum assured offered by them is equal to or less than Rs. 50,000.
Microinsurance, can enable some sort of insurance cushioning for the
economically vulnerable population. Such plans can provide a sense of security
to low-income people that are unable to afford the popular form of insurance.
Types of Microinsurance Plans:
Microinsurance plans can be divided into the following two broad categories.
1) General Microinsurance
A General or regular Microinsurance product covers health insurance, personal
accidents, and assets such as livestock, hut, etc. This product can be availed at an

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individual or a group basis.

2) Life Microinsurance
A Life Microinsurance Plan can be Term or an Endowment Plan. It can be
purchased at an individual or a group level and with or without an accident
benefit. Such plans can also be related to health insurance.
How Does a Microinsurance Policy Work?
Here are some points highlighting the working of a Microinsurance Policy in
India.
 Microinsurance policies, are distributed via Non-governmental Organizations
(NGOs), Self-help Groups, and Micro-finance Institutions.
 The premium for such plans is nominal to widen the reach and ensure engagement
at a large scale.
 Insurers have the freedom to offer composite covers or a packaged product
belonging to either the General Insurance or the Life Insurance category.
 Insurers also offer some Microinsurance Policies in case the sum assured of a
policy is within the range specified by the authorities.
Advantages of Choosing Microinsurance Policies:
The biggest advantage concerning Microinsurance is that it offers the opportunity
for the economically vulnerable section of the population to buy insurance at a
low cost. Because of buying Microinsurance Policies, they can receive financial
assistance during challenging times. This will result in the safeguarding of their
savings, which are usually on the lower side. Here are some top advantages of
specific Microinsurance Covers.
1) Endowment/Pension Microinsurance
It offers survival as well as death benefits as per the terms and conditions
Pension allowance can also be built-in
2) Term Microinsurance
Covers life risk with accidental benefits
Some insurers offer permanent disability benefits

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3) Health Microinsurance
It covers pre-and post-hospitalisation expenses
Covers medical bills for diagnosis, medical bills, etc.
4) Property Microinsurance
It offers coverage due to damage/losses of properties due to natural calamities.
This policy offers compensation due to the theft of assets.
Importance of Microinsurance Policies:
Here’s why such policies are important.
 They are an accessible risk-management tool to reduce financial vulnerability in
times of adversity.
 The affordable premium of such plans is an incentive for better reach in an
organized manner.
 Microinsurance covers the policyholder’s financial liability as per the chosen
plan.
 Microinsurance helps the poor to save money.
 Can bring about a positive change in poor people’s perception of insurance.

The crew of the ship forced the master to take back the ship to home port due to
the fear of attack by sea pirates. Can the master be executed for deviation? (D
2022)
[Link] of marine insurance (D 2022)
Historical Development
Marine Insurance is not of recent origin. Its existence can be traced back to
several centuries. Questions concerning it have naturally been coming up for a
number of years and the law concerning it had taken a definite shape much prior
to 1906 when the English Marine Insurance Act was passed with a view to
codify that law.

Contrary to popular belief, Lloyds’ of London was not the first group of people

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to offer insurance for maritime commerce. The first form of marine insurance
dates back to the year 3000 BC when Chinese merchants dispersed their
shipments amongst several vessels so as to abridge the possibility of damage to
the product(s). The earliest account of insurance came in the form of
‘bottomry’, a monetary payment that protects traders from debt if merchandise
is lost or damaged.

Another form of early insurance was the ‘general average’. During cargo
shipments in 916 BC, a merchant would accompany his cargo to see that it was
not jettisoned, or voluntarily thrown overboard by the crewmen in times of a
storm or sinkage. To guard against this mutual interest of safety and quarreling
amongst merchants, the Rhodians initiated the ‘general average’, which ideally
meant that a person would be compensated through pro rata contributions of
other merchants if their goods were jettisoned during shipment.

From the 11th century to 18th century, a few additional breakthroughs occurred
in marine insurance. In 1132, the Danish began to reimburse those who
experienced loss at sea. In 1255, ‘insurance premiums’ were used for the first
time as the Merchant State of Venice pooled these premiums to indemnify loss
due to piratry, spoilage, or pillage. The first marine insurance policy was
introduced in 1384 in an attempt to cover bales of fabric traveling to Savona
from Pisa, Italy. Within the next century, merchants from Lombard began the
first insurance practice in London. Finally, in 1688, Lloyd's of London, named
after Edward Lloyd, began the risky business of insurance underwriting. From a
Coffee house in London, it has now grown to become the largest marine
insurance underwriters in the world. [1]

The law relating to marine insurance was codified in England by the Marine
Insurance Act of 1906, and this Act came into force on January 1, 1907. This

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was proposed and initiated in an attempt to clarify and set forth the regulations
and policy variables associated with marine insurance agreements. This
enactment purported to codify only those principles of the law which related
exclusively to marine insurance and expressly enacted that the rules of the
common law, including the law merchant, save in so far as they were
inconsistent with the express provisions of the Act, were to continue to apply to
contracts of marine insurance.

Development of Indian law

Since independence Indian shipping had undergone a considerable expansion,
and it became mandatory for an Indian legislation consistent with Indian
conditions, for the smooth development of Indian marine insurance. Prior to
legislation, questions turning on this branch of law had to be decided by the
general law of contract and the English decisions based on the common law
rules of contract.

The Indian enactment is a substantial reproduction of its English counterpart,

following its plan closely and deviating from it at some places, only
unnecessarily.

The preamble to the Indian Act states that it is “ an Act to codify the law
relating to marine insurance.” The canon of construction generally applicable to
a codifying statute is well known: the language of the statute must be given its
natural meaning, regard being had to the previous state of the law only in cases
of doubt or ambiguity.[2]

But, as in the case of its English counterpart, the Indian Act embodies only
some and not all of the legal principles and rules of marine insurance, and its
language is so extremely concise and general that its full import and meaning

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can scarcely be understood without referring to the existing law which it was
intended to express or to the decided cases from which that law was evolved.[3]

In India the law of marine insurance has been put in a statutory form since 1963.

insurance adds the necessary element of financial security so that the risk of an
accident occurring during the transport is not an inhibiting factor in the conduct
of international trade. The importance of marine insurance, both to assureds, in
It is well known that in India, until the coming into operation of the Indian Act
of 1963, the courts used to follow the principles of English law and decisions
based on such principles as well as the provisions of the English Act, viz. the
Marine Insurance Act, 1906. The Indian law is a direct take- off from its
English counter part, and so, whenever it is not self evident, case law spanning
over two centuries is to be looked into to arrive at the true position. Moreover,
the Marine Insurance Act itself being a codification of previous case law, an
appreciation of past authorities is not only an essential requirement to the
understanding of the legal concepts generally, but also of paramount importance
when wishing to gain an insight into the very constitution of the sections within
the Act.
COUR COURSE-III: OPTIONALTIONAL -II: INSURNCE LAW

Objectives:
The insurance idea is an old-institution of transactional trade. Even from olden
days merchants who made great adventures gave money by way of consideration,
to other persons who made assurance, against loss of their goods, merchandise
ships and things adventured. The rates of money consideration were mutually
agreed upon. Such an arrangement enabled other merchants more willingly and
more freely to embark upon further trading adventures. The operational

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framework of insurance idea is provided by the general principles of contract.

The insurance policy, being a contract, is subject to all the judicial interpretative
techniques of rules of interpretation as propounded by the judiciary. Besides, the
insurance idea has a compensatory justice component. This course is designed to
acquaint the students with the conceptual and operational parameters, of
insurance law.

Course contents:
UNIT – I
Introduction: Nature- Definition- History of Insurance- History and development
of Insurance in India- Insurance Act, 1938- (main sections) Insurance Regulatory
Authority Act, 1999: Its role and functions.

UNIT – II
Contract of Insurance: Classification of contract of Insurance Nature of various
Insurance Contracts- Parties there to- Principles of good faith – non disclosure –
Misrepresentation in Insurance Contract- Insurable Interest- Premium:
Definition- method of payment, days of grace, forfeiture, return of premium,
Mortality; The risk – Meaning and scope of risk, Causa Proxima, Assignment of
the subject matter.

UNIT – III
Life Insurance: Nature and scope of Life Insurance- Kinds of Life Insurance.
The policy and formation of a life insurance contract Event insured against Life
insurance contract- Circumstance affecting the risk- Amount recoverable under
the Life Policy- Persons entitles to payment- Settlement of claim and payment of
money- Life Insurance Act, 1956Insurance against third party rights- General
Insurance Act, 1972- The Motor Vehicles Act, 1988 – Sec. (140-176), in India.
Nature and scope- Absolute or no-fault liabilities, Third

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party or compulsory insurance of motors vehicles- Claims Tribunal- Public

Liability Insurance –Legal aspects of Motor Insurance –Claims – Own Damages
Claims – Third Party Liability Claims.

UNIT – IV
Fire Insurance: Nature and scope of Fire Insurance –Basic Principles – Conditions
& Warranties – Right & Duties of Parties – Claims – Some Legal Aspects.
Introduction to Agriculture Insurance – History of Crop Insurance in India – Crop
Insurance Underwriting, Claims, Problems associated with Crop Insurance –
Cattle Insurance in India.

UNIT – V
Marine Insurance: Nature and Scope- Classification of Marine policies- Insurable
interest- Insurable values- Marine insurance and policy- Conditions and express
warranties Voyage deviation- Perils of sea- Loss- Kinds of Loss- The Marine
Insurance Act, 1963 (Ss 1 to 91).

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