INSURANCE LAW

3 AND 5 YEARS LLB UNDER KARNATAKA STATE LAW

UNIVERSITY

MOST IMPORTANT PREVIOUS YEAR QUESTIONS

ALONG WITH ANSWERS

By
ANIL KUMAR K T
Mob: 9584416446
 Karnataka State law university 3 & 5 year LLB
ANIL KUMAR K T LLB COACH
Insurance Law
Most important previous year Questions
1. Discuss the history and development of Life Insurance in India?
2. A contract of insurances is contract of utmost good faith Explain?
3. Define life insurances. Explain the various kinds of life insurance policies
?
4. Define fire insurance. Discuss about “insurance interest” in fire
insurance.
5. Explain the various kinds of policies in marine insurance.
6. What is premium? Under what circumstances it can be recovered back.
7. Who can apply far compensation under the motor vehicles act 1988?
State the procedure.
8. Write a note on public liability insurance.
9. Write a note on Composition of insurance regulatory and development
authority.
10.Write a note on principle of subrogation.
11.Define contract of insurance and discuss nature and scope of contract of
insurance.
12.Explain the rights and duties of insured in fire insurance.
13.What is deviation? When the deviation is allowed?
14.Explain the composition and functions of insurance regulatory and
development authority. State the rules relating to the assignment of
insurance policies.
15.Discuss about the persons who are entitled to the payment of the life
insurance money.
16.What is warranty? Explain the different kinds of warranties in marine
insurance.
17.Write a note on no fault liability.
18.Write a note on Re insurance and reinstatement.
19.Discuss the principle of “ Utmost good faith” under insurance contract.
20.Explain the kinds of losses in marine insurance.
21.Who are the persons entitled to the payment of life insurance policy
amount? Explain.
 22.Explain the rules governing the assignment of “ life insurances” and Life
insurance policies.
23.Write a note on grace period and lapse of policy.
24.Explain the rules governing the assignment of life insurance policies.
25.Define insurable interest. State the insurable interest in different kinds
of insurances.
26.Discuss about the claims tribunal under the motor vehicles act 1988.
27.Write a note on re insurance and double insurance.
28.Explain the appointment and the powers of controller of insurance
under the insurance act 1938.
29.Explain the salient features of IRDA act.
30.What are the defenses available to the insurer under compulsory
insurance of motor vehicle act?
31.Explain the illustration the doctrine of proximate cause in fire insurance.
32.sons and liability introduction of agricultural insurance in India.
33.Analyze the importance’s of insurance regulatory and development
authority.
34.Indemnity is the controlling principle in insurance contract but all
insurance contracts are not contracts of indemnity discuss.
35.Explain the powers and procedures of the motor accident claims
tribunal.
36.Register of insurance agent under the insurance act 1938.
37.Write a note on Cattle insurance.
38.Discuss the composition powers and functions of general insurance
corporations of India.
39.Write a note insurance ombudsman.
40.What is risk ? State the scope of risk in different kinds of insurance?

BY
ANIL KUMAR K T LLB COACH
1.Discuss the history and development of Life Insurance in India?
Introduction:
The scenario of today’s corporate India is altogether different to what it
happened to be before the era of economic reforms. Under the prevailing hyper
competitive environment ‘survival of the fittest’ has become popular mantra for
every business, be it a manufacturer or a service provider. These days, focus is
on creating and sustaining loyal clientele, so that, marketer can improve
profitability, market share and brand image.
The same is true about the Indian life insurance industry, since opening up the
number of global players in the market has increased and hence the
competition. The opening up of the insurance sector is also indicative of new
products, increased product variants and improved customer service.

The Government of India issued an Ordinance on 19 January 1956 nationalising

the Life Insurance sector and Life Insurance Corporation came into existence in
the same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16
non-Indian insurers and also 75 provident societies—245 Indian and foreign
insurers in all. In 1972 with the General Insurance Business (Nationalisation) Act
was passed by the Indian Parliament, and consequently, General Insurance
business was nationalized with effect from 1 January 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General
Insurance Corporation of India was incorporated as a company in 22 November
1972 as a private company under Companies Act, 1956 in Bombay and received
its Certificate for Commencement of Business on 1 January 1973.

The LIC had monopoly till the late 90s when the Insurance sector was reopened
to the private sector. But, now there are 23 private life insurance companies in
India.[4] Before that, the industry consisted of only two state insurers: Life
Insurers (Life Insurance Corporation of India, LIC) and General Insurers (General
Insurance Corporation of India, GIC). GIC had four subsidiary companies. With
effect from December 2000, these subsidiaries have been de-linked from the
parent company and were set up as independent insurance companies: Oriental
Insurance Company Limited, New India Assurance Company Limited, National
Insurance Company Limited and United India Insurance Company.

Historical Perspective
The history of life insurance in India dates back to 1818 when it was conceived
as a means to provide financial security for English Widows. Interestingly in
those days, a higher premium was charged for Indian lives than the non-Indian
lives, as Indian lives were considered more risky for coverage.
The Bombay Mutual Life Insurance Society started its business in 1870. It was
the first company to charge same premium for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880. The General
insurance business in India, on the other hand, can trace its roots to the Triton
(Tital) Insurance Company Limited, the first general insurance company
established in the year 1850 in Calcutta by the British. Till the end of nineteenth
century insurance business was almost entirely in the hands of overseas
companies.
Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912. Several
frauds during 20's and 30's sullied insurance business in India. By 1938 there
were 176 insurance companies. The first comprehensive legislation was
introduced with the Insurance Act of 1938 that provided strict State Control over
insurance business. The insurance business grew at a faster pace after
independence. Indian companies strengthened their hold on this business but
despite the growth that was witnessed, insurance remained an urban
phenomenon.
The Government of India in 1956, brought together over 240 private life insurers
and provident societies under one nationalized monopoly corporation and Life
Insurance Corporation (LIC) was born. Nationalization was justified on the
grounds that it would create much needed funds for rapid industrialization. This
was in conformity with the Government's chosen path of state led planning and
development.

Important milestones in the life insurance business in India

1912 The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1928 The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938 Earlier legislation consolidated and amended to the Insurance Act with the
objective of protecting the interests of the insuring public.
1956 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized the insurance sector. LIC formed by an Act
of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the
Government of India.
1993 Setting up of Malhotra Committee
1994 Recommendations of Malhotra Committee published
1995 Setting up of Mukherjee Committee
1996 Setting up of (interim) Insurance Regulatory Authority (IRA) and
Recommendations of the IRA
1997 Mukherjee Committee Report submitted but not made public
1997 The Government gave greater autonomy to Life Insurance Corporation,
General Insurance Corporation and its subsidiaries with regard to the
restructuring of boards and flexibility in investment norms aimed at channeling
funds to the infrastructure sector
1998 The cabinet decided to allow 40% foreign equity in private insurance
companies (26% to foreign companies and 14% to Non-resident Indians and
Foreign Institutional Investors).
1999 The Standing Committee headed by Murali Deora decides that foreign
equity in private insurance should be limited to 26%. The IRA bill is renamed the
Insurance Regulatory and Development Authority Bill
1999 Cabinet clears Insurance Regulatory and Development Authority Bill 2000
President gives Assent to the Insurance Regulatory and Development Authority
Bill
2000 IRDA was incorporated as the statutory body to regulate and register
private sector insurance companies.
2006 Relaxation of foreign equity norms, thus facilitating the entry of new
players

Insurance Sector Reforms

In 1993, Malhotra Committee headed by former Finance Secretary and RBI
Governor R.N. Malhotra was formed to evaluate the Indian insurance industry
and recommend its future direction. The Malhotra committee was set up with
the objective of complementing the reforms initiated in the financial sector. The
reforms were aimed at creating a more efficient and competitive financial
system suitable for the requirements of the economy keeping in mind the
structural changes currently underway and recognizing that insurance is an
important part of the overall financial system where it was necessary to address
the need for similar reforms. In 1994, the committee submitted the report and
some of the key recommendations included:
Structure
Government’s stake in the insurance companies is to be brought down to fifty
percent. Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations. All the insurance
companies should be given greater freedom to operate.
Competition
Private Companies with a minimum paid up capital of Rs.1bn should be allowed
to enter the sector. No Company should deal in both Life and General Insurance
through a single entity. Foreign companies may be allowed to enter the industry
in collaboration with the domestic companies. Postal Life Insurance should be
allowed to operate in the rural market. Only one State Level Life Insurance
Company should be allowed to operate in each state.
Regulatory Body
The Insurance Act should be changed. An Insurance Regulatory body should be
set up. Controller of Insurance (a part of the Finance Ministry) should be made
independent.
Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced
from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any
company (there current holdings to be brought down to this level over a period
of time)
Customer Service
LIC should pay interest on delays in payments beyond 30 days. Insurance
companies must be encouraged to set up unit linked pension plans.
Computerization of operations and updating of technology should be carried out
in the insurance industry.

2. A contract of insurances is contract of utmost good faith Explain?

Introduction:

The doctrine of the utmost good faith—sometimes referred to by its Latin

name, uberrimae fides—is a contractual legal doctrine that requires
contracting parties to act honestly and not mislead or withhold any
information that is essential to the contract. The parties to an insurance
contract include the insurer—meaning the licensed insurance agent or
broker—and the applicant or insured. An applicant is a person who is seeking
to buy insurance as an individual, or on behalf of a business. Once an applicant
is offered an insurance policy, has paid the initial premiums, and has received
the policy, she becomes the insured party.

An insurance policy is a document that sets forth the terms and conditions of
the coverage and serves as the formal insurance contract. In contracting with
applicants, insurance companies gather certain information that’s critical to
the decision to insure an applicant or not, and in setting premium prices. It’s in
the disclosure of this crucial information that the doctrine of good faith comes
into play.
How the Doctrine of Utmost Good Faith Works

In the context of insurance contracts, the doctrine of utmost good faith

requires the full and accurate disclosure of relevant information.

Representations

The doctrine of good faith requires that both parties to an insurance contract
must honestly disclose all relevant information. As applied to the insurance
company, this means honestly providing premium figures and coverage
limitations. Applicants must truthfully disclose all requested pertinent personal
information.

For example, if you’re applying for car insurance, you'll be required to disclose
information like any prior accidents or traffic tickets, and information about
your residence, income, and education level. If you're applying for life
insurance, you will be asked to provide information about your health
background and family history. The doctrine of the utmost good faith requires
that you honestly provide all "material" information.

A representation is considered "material" if the insurer relies on it in making

decisions about the applicant in question. A material statement that is false or
untrue is known in the law as a "misrepresentation." If an
applicant intentionally and knowingly made material misrepresentations, this
means that the insurer can void any resulting insurance contract.

Concealment

Concealment is closely related to misrepresentation. However, while a

misrepresentation is a false or misleading statement of material fact,
concealment refers instead to the intentional omission of material
information.

An insurer can void an insurance contract, or deny payment on a claim due to

concealment if:

1. The insured knew that there was a fact that was important in regard to
that insurance policy, and
2. The insured intentionally withheld that fact with the intent to defraud
the insurer.

Warranties
Another element of the requirement for the utmost good faith is warranties,
which are promises by an insurance applicant to do certain things or satisfy
certain requirements. Warranties ultimately become part of the insurance
contract. If an insured breaches a warranty, an insurer may have grounds to
void an insurance contract.

3.Define life insurances. Explain the various kinds of life insurance policies ?

Life Insurance is a contract between an insurance policy holder and an insurer,

where the insurer promises to pay a sum of money to the beneficiary when the
insured person dies or after a pre-determined period in exchange for the
premiums paid by policyholder.

Life insurance is defined as a legally binding contract between a policyholder

and an insurer in which the insurance company provides financial protection to
the policyholder and pays a death benefit to the nominee when the insured
dies. For a life insurance policy to remain in force, the policyholder must pay
regular premiums over the period of time or pay a single premium upfront.

1. Term Life Insurance or Term Plan

Term insurance is widely considered to be the simplest form of life insurance.

It is a pure cover plan which offers protection for a specified time period. If the
life insured passes away during that period, the nominee receives the
predetermined death benefit. The most distinctive feature of a term insurance
plan is the high amount of coverage offered at extremely nominal premium
rates. Certain term plans also offer maturity benefits, i.e. the return of
premiums if the policyholder outlives the policy term. One can also increase
the amount of coverage offered by a term plan by opting for additional riders,
such as Accidental Death Benefit or Child Support riders.

2. Whole-Life Insurance Plan

Unlike term insurance, wherein the insured has coverage only for a specified
period of time, whole life insurance offers coverage right until the death of the
policyholder. You can opt for either a participating or non-participating policy,
as per your financial needs and risk appetite. Though the premiums for
participating whole life insurance are higher in comparison, dividends are paid
out at regular intervals to the policyholders. The premium rates for a non-
participating policy are lower, but the policyholder generally cannot avail the
benefits of regular dividends.

3. Unit Linked Insurance Plan (ULIP)

Among the different types of life insurance policies available, ULIPs enjoy a
high amount of popularity owing to their versatile nature. ULIPs come with the
two-pronged benefits of both investment and insurance. A portion of the
premiums paid towards ULIPs is directed towards ensuring insurance coverage,
while the rest of the premium is invested into a bouquet of investment
instruments, which can include market-backed equity funds, debt funds and
other securities. ULIPs are extremely flexible instruments since investors can
easily switch or redirect their premiums between the different funds available.
ULIPs are also touted as having an edge over other market instruments in
terms of tax-saving benefits, since their proceeds are exempted from LTCG
(Long Term Capital Gains).
4. Child Insurance Plan

A child insurance plan is one of the different types of life insurance available.
Such a plan is tailored to fulfill one specific goal: to ensure financial protection
for the policyholder’s child upon the unfortunate demise of the policyholder. It
is ideal for ensuring the future needs of the child are well taken care of, even in
the absence of the life insured. Parents can invest in the best child insurance
plans, in order to meet the financial requirements for their child’s education,
marriage or to fulfill a multitude of other financial goals their child might have.

5. Endowment Plan

This is another type of life insurance policy which acts as, both, an instrument
for insurance and saving. Endowment plans aim to provide maturity benefits to
the life insured, in the form of a lump sum payment at the end of the policy
tenure, even if a claim hasn’t been made. Endowment plans are ideal for
people looking to get maximum coverage alongside having a sizable savings
component. They help the policyholder inculcate the habit of savings, even
while providing financial security to their family. Endowment plans can broadly
be classified into two types: with profit and without profit. Policyholders can
choose from these two types based on their risk appetite.
6. Money Back Plan

Being one of the best types of life insurance policies, a money-back

policy offers policyholders a percentage of the total sum assured at periodic
intervals in the form of Survival Benefits. Once the policy reaches maturity, the
remaining amount of the Sum Assured is handed over to the policyholder.
However, if the policyholder dies while the term is ongoing, their dependents
are given the entire Sum Assured without any deductions.
7. Retirement Plan

A retirement plan is a type of life insurance that focuses on providing you

financial stability and security post your retirement. After you retire, you lose
your regular income from employment. Investing in retirement plans can help
you create a stable regular income stream. If you continue to invest until
retirement, the plan will help you take care of your expenses after retirement.
A retirement plan requires you to invest a certain part of your income regularly
during your working life. At the time you retire, the amount that you create
over the years will be converted into a regular income stream.
Retirement plans also involve death benefits. Thus, if the policyholder passes
away during the course of the policy, their beneficiaries will be provided with
an assured sum.

8. Group Insurance Plan

A group life insurance policy covers a group of people inside a single plan.
Unlike individual life insurance policies, which cover one person for a period,
group insurance covers a minimum of 10 members.
Employers, banks, corporates, and other homogeneous groups of persons can
buy group Life Insurance policies for their employees and customers. While
employers would want to offer financial protection to their employees'
families banks and lending institutions aim to keep the debt off the borrowers’
family after their death.

4.Define fire insurance. Discuss about “insurance interest” in fire insurance.

Fire insurance is an agreement between an insurance company and an

individual or company where the insurer agrees to compensate the
policyholder in case of loss or damage due to fire. The policy holder can be an
individual or a company. The policy holder pays premiums to the insurance
company on a regular basis for certain period of time in exchange for
compensation in the event of loss of property due to a fire.

Insurable Interest

The first and foremost important feature of fire insurance is insurable interest.
In fact, insurable interest is the basis of all insurance policies. It’s an object or
property that if harmed or damaged will result in financial hardship for the
policy holder. Insurable interest simply means that a policyholder will incur a
loss if the insured property is to be lost. If there is no insurable interest the
policy cannot be valued. The Insurance interest should exist both at the time of
applying for fire insurance and at the time fire.

Insurable interest is also defined as a legal right to insure asset or person. These
are the following few principle of insurable interest.
▪ In theory, therefore, noting more is payable than the amount of actual
loss.
▪ It follows that unless the assured has a pecuniary interest in the thing
insured, no question of loss or indemnity shall arise.
▪ A person cannot therefore insure a thing, the loss of which cannot cause
him any financial loss.
▪ A policy of insurance, therefore, is void if the insured has no such
pecuniary interest in the subject matter of the insurance.
▪ Any person, who would suffer from destruction or loss of a thing, has
insurable interest in that thing.
The Insurable Interest must:-
 ▪ Be definite
▪ Be capable of valuation
▪ Be legally valid and subsisting
▪ Involve the loss of legal right
▪ Involve a legal liability

Creation of insurable interest

There are number of ways in which insurable interest will arise or can be
created. Few main ways are -;
1. By Contract -In some contracts a person will agree to be liable for
something, which he or she would not ordinarily be liable for. A landlord
is normally liable for the maintenance of property he owns rather than
the tenants. A lease may, however, make the tenant responsible for the
maintenance, repair etc. of the building. Such a contract places the
tenant in legally recognized relationship to the building. This gives him
an insurable interest, which would not be present if the contract had not
been entered into so these kinds of special contractual relationships give
arise to the insurable interest on something on which otherwise one
does not have any kind of insurable interest.
2. By Common Law – Where the essential elements of insurable interest
are automatically present, the same can be described as having arisen at
common law. The most straight forward example is ownership. One can
own a house, and there is therefore entitlement to insure it equally the
common law duty of care which one owes to the other, may give rise to
a liability which again is insurable. Like the use or driving of a motor
vehicle in a public place is sufficient insurable interest for the purpose of
effecting insurance in the favour of the third party .
3. By Statute – Some time an act of parliament will create an insurable
interest either by granting some benefit or imposing a duty. While the
statute may create insurable interest where none would otherwise exist.
There can be some statutes which can restrict liability and thereby also
restrict insurable interest.

5.Explain the various kinds of policies in marine insurance.

1. Voyage Policy:
It covers the risk from the port of departure up to the port of destination. The
policy ends when the ship reaches the port of arrival. This type of policy is
purchased generally for cargo. The risk coverage starts when the ship leaves
the port of departure.

2. Time Policy:
This policy is issued for a particular period. All the marine perils during that
period are insured. This type of policy is suitable for full insurance. The ship is
insured for a fixed period irrespective of voyages. The policy is generally issued
for one year. Time policies may sometimes be issued for more than a year or
they may be extended beyond a year to enable a ship to complete a voyage. In
India, a time policy is not issued for more than a year.

3. Mixed Policy:
This policy is a mixture of time and voyage policies. A ship may be insured
during a particular voyage for a period, e.g., a ship may be insured between
Bombay and London for one year. These policies are issued to ships operating
on a particular route.

4. Valued Policy:
Under this policy the value of the policy is decided at the time of contract. The
value is written on the face of the policy. In case of loss, the agreed amount
will be paid. There is no dispute later on for determining the value of
compensation. The value of goods includes cost, freight, insurance charges,
some margin of profit and other incidental expenses. The ships are insured in
this manner.

5. Unvalued Policy:
When the value of insurance policy is not decided at the time of taking up a
policy, it is called unvalued policy. The amount of loss is ascertained when a
loss occurs. At the time of loss or damage the value of the subject-matter is
determined. In finding out the value of goods, freight, insurance charges and
some margin of profit is allowed to the policy in common use.
6. Floating Policy:
When a person ships goods regularly in a particular geographical area, he will
have to purchase a marine policy every time. It involves a lot of time and
formalities. He purchases a policy for a lump sum amount without mentioning
the value of goods and name of the ship etc.

When he sends the goods, a declaration is made about the particulars of goods
and the name of the ship. The insurer will make an entry in the policy and the
amount of policy will be reduced to that extent. This policy is called an open or
a floating policy.

The declaration by the insured is a must. When the total amount of policy is
reduced, it is called ‘fully declared’ or ‘run off. The underwriter will inform the
insured who will take another policy. The premium is called on the basis of
declarations made.

7. Block Policy:
Sometimes a policy is issued to cover both land and sea risks. If the goods are
sent by rail or by truck to the departure, then it will involve risk on land also.
One single policy can be issued to cover risks from the point of despatch to the
point of ultimate arrival. This policy is called a Block Policy.

8. Wager Policy:
This is a policy held by a person who does not have any insurable interest in
the subject insured. He simply bets or gambles with the underwriter. The
policy is not enforced by law. But still underwriters claim under this policy. The
wager policy is also called ‘Honour Policy’ or ‘Policies Proof of Interest’ (P.P.I.).

9. Composite Policy:
A policy may be undertaken by more than one underwriter. The obligation of
each underwriter is distinctly fixed. This is called a composite policy.
10. Fleet Policy.
A policy may be taken up for one ship or for the whole fleet. If it is taken for
each ship, it is called a single vessel policy. When a company purchases one
policy for all its ships, it is called a fleet policy. The insured has an advantage of
covering even old ships at an average rate of premium. This policy is generally
a time policy.

11. Port Policy:

It covers the risks when a ship is anchored in a port.

6.What is premium? Under what circumstances it can be recovered back.

Introduction:

Premium, is the consideration for the risk run by the insurers, and if there is no
risk there should be no premium. If risk is not run, consideration fails and it is
inequitable for the insurer to keep premium paid, whether it is a fault on the
part of insured. The underwrites receives a premium for running risk of
indemnifying the assured, and if for any cause the risk is not run, the
consideration for which the premium or money put into its hands, fails
therefore it out to return premium received. The right to the return of the
premium is enforceable by an action for money had and received and not by
an action on the policy.

Section 64 in The Indian Contract Act, 1872

Consequences of rescission of a voidable contract. —When a person at whose

option a contract is voidable rescinds it, the other party thereto need not
perform any promise therein contained in which he is the promisor. The party
rescinding avoidable contract shall, if he had received any benefit thereunder
from another party to such contract, restore such benefit, so far as may be, to
the person from whom it was received.

Section 65 in The Indian Contract Act, 1872

Obligation of person who has received advantage under void agreement, or

contract that becomes void.—When an agreement is discovered to be void, or
when a contract becomes void, any person who has received any advantage
under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.

Section 65 includes the case of an agreement which is void ab-initio, and thus
risk is never run, and the suit for the recovery of the premium should be
treated as a suit for money had and received.

Section 65 includes the case of an agreement which is void ab-initio, and thus
risk is never run, and the suit for the recovery of the premium should be
treated as a suit for money had and received.

SOME CIRCUMSTANCES IN WHICH RISK IS NEVER RUN; in below mentioned

circumstances it will be considered that risk never run and the insurer is
required to return premium received;

1.Where before the policy comes into force the subject-matter of insurance
ceases to be in existence;

2.Where subject-matter is wrongly described;

3.Where the insured had never any insurable interest in the subject-matter;

4.Where the policy is void on account of some illegality;

5.Where the policy is void on account of some breach of a condition

precedent.

Section 56 of the Income Contract Act, 1872

Agreement to do impossible act:

Contract to do act afterwards becoming impossible or unlawful: A contract to

do an act which, after the contract is made, becomes impossible, or, by reason
of some event which the promisor could not prevent, unlawful, becomes void
when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be

impossible or unlawful: Where one person has promised to do something
which he knew, or, with reasonable diligence, might have known, and which
the promisee did not know, to be impossible or unlawful, such promisor must
make compensation to such promisee for any loss which such promisee
sustains through the non-performance of the promise.

THE DOCTRINE OF FRUSTRATION;

The principal of frustration of contract is contained in section 56 of the Indian

Contract Act, 1882. The principal underlying the section is that performance of
contract can be avoided if on account of happening of an event which is not
the result of action of either party, the performance of contract may be
avoided. The Doctrine of Frustration as embodied in Section 56, of the
Contract Act, may apply if below mentioned three conditions satisfied; A valid
and subsisting contract between parties; There must be some part of the
contract yet to be performed; The contract after it is made, become
impossible. The Doctrine of frustration is applicable only where performance
of contract become impossible.

Prabhumal Gulamal Vs. Baburam Bassesar Das; it was held that “the
agreements were void to the knowledge of both parties at the time they were
made , and it cannot , therefore , be said that it was discovered to be void , or
when a contract become void any person who has received any advantage
under such agreement is bound to restore it.”

Srinivas Ayyer Vs. Sesha Ayyer; Justice Blackwell “The words discovered to be
void”, are more opt to describe an agreement which was void ab initio, but not
then known to the parties to be so than to an agreement of which illegally
must be taken to have been always know to them”. Where the contract void
ab initio the consideration cannot be refunded.

7.Who can apply far compensation under the motor vehicles act 1988? State
the procedure.

The Motor Vehicles Act of 1988 or MV Act, 1988 is milestone legislation that
dedicatedly governs the laws for road transport regulations, fines,
punishments, and accidents and associated remedies in India. However, a list
of amendments to the Act in 2019 brought in a slew of additional clauses and
higher penalties. The law is divided into 2 Schedules, XIV Chapters and 216
Sections.

In this article, we will be looking at Section 166 of the Motor Vehicles Act,
which deals with specifying the authorised claimants for compensation
through the MACT. MACT's full form is Motor Accident Claim Tribunal which
governs the motor accident claims in India.

Importance of MV Act, 1988 for Rightful Compensation to Road Accident

Victims

With the increasing number of vehicles on the Indian roads, high traffic,
underdeveloped road conditions and instances of rash driving, the volume of
road accidents is going up by the day. Road accidents can lead to major
damage to property, serious injuries as well as death.

The MV Act, 1988 acts as the constitutional platform for providing redressal
and remedies in such situations. It ensures that the interest of the innocent
victims is protected, fair punishment is given to the perpetrator, and adequate
compensation is provided to all aggrieved parties.

Thus, this Act not only lays down the guidelines for ensuring safer road
conditions but also provides an extensive redressal mechanism if an
unfortunate incident does occur.

To get the necessary compensation under the Act, the aggrieved parties need
to apply to the Motor Accidents Claim Tribunal. Section 166 of the Motor
Vehicle Act,1988 laws down the provisions regarding who can claim through
MACT if they are involved in a road accident. Let us understand this Section in
detail.

What is Section 166 of the Motor Vehicle Act, 1988?

Under Section 166 IPC (Chapter XII) of the Motor Vehicles Act 166, an
individual can be considered the rightful claimant and can claim compensation
from Motor Accidents Claim Tribunal if:

• They are someone or authorised representatives of someone who has

sustained any injuries in the vehicular accident
• They are the rightful owners of any property that sustained damages in
the accident
• They are the rightful owners of the property involved in the accident
• They are the legal heirs/representatives of someone who passed away
due to the accident
Detailed Procedure For Filing Compensation Under Section 166 of the Motor
Vehicles Act, 1988

Suppose an owner of a car loses control of their vehicle and crashes on the
pavement, injuring and killing a few people. Here there are two aspects for
further action:

• Action against the offender for the commission of a criminal offence

(injury and death)
• Procedure for compensation to the victims
The following is a basic explanation of post-accident events for
compensatory claims under the Motor Vehicles Act, 166 Section:

• If you are a victim, take pictures/videos of the accident scene as

evidentiary proof. Even if you are not a victim and just a passerby, you
can take the video/photo and submit it to the local police station to
support their investigation.
• If possible, call the 100 number and inform the police about the
accident. The call is recorded and can be used as evidentiary proof later.
• The local police will register an FIR either on receipt of a complaint or by
suo moto cognisance. Then, they will conduct their investigation and
chargesheet the accused in case of criminal offences. Post this, the
judicial proceedings will begin.
• During the judicial proceedings, proper details regarding the
compensatory claims of the victims need to be put forth before the
Motor Accident Claim Tribunal.

8.Write a note on public liability insurance.

What is Public Liability Insurance?

Public liability insurance is a type of business insurance that protects

companies against compensation and damage claims from accidents and
injuries which happen in relation to business operations. It covers the
insurance cost of the incident claimed by the affected party—like the general
public, or other third-parties such as customers, suppliers, or subcontractors.
This type of policy covers the claim expense of incidents that happened within
business premises and claims of damage to someone else’s property involving
a business and its activities.

The general goal of public liability insurance is to protect businesses from

losing too much money because of public claims and avoid costly litigation
processes that may significantly affect companies and how they operate.

What Does it Cover?

Public liability insurance typically covers incidents that happened within
business premises or when business operations resulted in damage to
someone else’s property. Below are some of the common public liability
inclusions:

• Legal costs ordered to pay as a result of a covered claim

• Cover for injuries (bodily and personal), as well as death to a third party

• Cover for loss or damage of goods – owned by someone else’s but are in
your care, custody, or control
• Loss or damage of someone else’s property that occur while performing
your business activities
• Liability arising out of damage caused from a third party acting on your
business’ behalf
• Compensation to others who sustain injury while visiting your premises,
as well as first aid expenses incurred at the time of the incident
What it Doesn’t Cover?
The exclusions from a public liability insurance differ based on the policy and is
best determined though the product disclosure statement, however, being
knowledgeable on this can be advantageous for you and your business. Below
is a list of some of the scenarios this specific insurance doesn’t normally
include:
• Workers or employee injuries – as previously mentioned, this is usually
covered by the workers’ compensation insurance
• Punitive damages – the extra damages awarded if a judge believes your
behavior was extremely despicable
• Aircraft products – these are usually covered under different aviation
insurance
 • Asbestos – also commonly covered by a separate asbestos liability
insurance
• Products recalls and withdrawals
• Gradual pollution caused by company operations

9.Write a note on Composition of insurance regulatory and development

authority.

Introduction:
Insurance Regulatory and Development Authority of India or the IRDAI (also
referred to as IRDA) is a government body responsible for regulating and
developing the insurance industry in India.

Insurance Regulatory and Development Authority of India or the IRDAI

The Insurance Regulatory and Development Authority of India or the IRDAI is the
apex body responsible for regulating and developing the insurance industry in
India. It is an autonomous body. It was established by an act of Parliament
known as the Insurance Regulatory and Development Authority Act, 1999.
Hence, it is a statutory body.
The IRDAI is headquartered in Hyderabad in Telangana. Prior to 2001, it was
headquartered in New Delhi.

IRDA Functions
The functions of the IRDA are listed below:

• Its primary purpose is to protect the rights of the policyholders in India.

• It gives the registration certificate to insurance companies in the country.
• It also engages in the renewal, modification, cancellation, etc. of this
registration.
• It also creates regulations to protect policyholders’ interests in India.

IRDA Mission
To protect the interests of the policyholders, to regulate, promote and ensure
orderly growth of the insurance industry and for matters connected therewith
or incidental thereto.
What is IRDA and its functions?
Insurance Regulatory and Development Authority of India or the IRDAI is the
apex body responsible for regulating and developing the insurance industry in
India. Some of its functions can be listed as follows:

• Issuing & regulating the registration certificates to insurance companies

• Protecting the interest of policyholders
• Providing licences to insurance intermediaries and setting the necessary
code/norms of conduct for them.

10.Write a note on principle of subrogation.

Principle of subrogation refers to the practice of substitution of a person or

group by another in cases of debt claims in insurance. Subrogation is an
important component of indemnity principle, which is a differentiating factor
between a commercial contract and an insurance contract.
Subrogation is defined under the Marine Insurance Act, 1963. It says that the
insurer (which is the insurance company) pays for a loss to the insured (an
individual or company) due to the wrongdoing of a third party, then the insurer
has the authority to subrogate the rights of insured and therefore is able to
prosecute a suit against the wrongdoer for the recovery of the amount it had
paid to the insurer.
By invoking the principle of subrogation, the insurer (which will be the
insurance company) gets hold of the insured property and with this has the
legal right (seeking claim) of the insured property.
In other words, once the insurer has paid the insured for any loss or damage to
the property, the right to ownership of property then passes on to the insurer.

Types of Subrogation

There are three categories of subrogation which are as follows:

1. Subrogation by equitable assignment
2. Subrogation by contract
3. Subrogation cum contract
Subrogation by equitable assignment: In this category, the subrogation is not
based on any kind of document, rather it is based on the insurance policy and
the receipt that is issued by the insured where it is acknowledged that the
claim has been paid in full for the loss.
Subrogation by Contract: In this type of subrogation, it is evidenced by an
instrument. This is done to avoid any kind of dispute regarding the right to
claim reimbursement or settling the priority of inter-se claims or for confirming
the quantum of reimbursement in pursuant of subrogation and also ensuring
that the assured offers full cooperation in suing the wrongdoer.
This is facilitated by a letter of subrogation that specifically mentions the rights
of the insurer and the insured. With the use of this letter, the insurer gets the
right to sue the wrongdoer.
Subrogation cum assignment: In the case of subrogation cum assignment, the
insured executes a letter of subrogation cum assignment which enables an
insurer to sue the wrongdoer in the name of the insured or the insurer itself.
11.Define contract of insurance and discuss nature and scope of contract of
insurance.

Introduction -

Insurance is a contract in which one party (the insurer) agrees for payment of
consideration (the premium) to make monetary provision for the other (the
insured) upon the occurrence of some event against some risk.
Meaning of Life Insurance -

Life insurance is a contract in which the insured agrees to pay certain

sums, called premiums, at specified times and in consideration, thereof the
insurer agrees to pay a certain sum of money on certain conditions and in a
specified way, upon happening of a particular event contingent upon the
duration of human life.
Definitions of Life Insurance -

Currently, there is no statutory, satisfactory definition of Life

Insurance. Some Important Definitions of Life Insurance are as follows -

Insurance may be defined as a contract between two parties whereby one

party called insurer undertakes in exchange for a fixed sum called premium to
pay the other party called insured a fixed amount of money after happening of
a certain event.
Joseph Vs Law Integrity Insurance Company (1912) - It was observed by
Bunyon J that " A contract of life Insurance may further be defined to be that in
which one party agrees to pay a given sum of money upon the happening of a
particular event contingent upon the duration of human life in consideration of
immediate payment of a smaller sum or other equivalent periodical payment
by the other.
According to R.S. Sharma " Life Insurance Contract may be defined whereby
the insurer, in consideration of premium paid either installment, undertakes to
pay an annuity on the death of the insured of a certain number of years.

According to Magee J.H - "The Life Insurance contract embodies an agreement

in which broadly stated, the insurer undertakes to pay a stipulated sum upon
the death of the insurer to a designated beneficiary.
Nature and Scope of Life Insurance -

It is not possible to predict the future or prevent many serious hazards

events such as fire, disability, and premature death, etc. It is the function of
insurance in its numerous forms to enable individual to safeguard themselves
against such misfortunes by spreading the loss to the person who agreed to co-
operate each other at the time of loss by making contributions agreed to co-
operate each other at the time of loss by making contributions to the common
fund.

All Insurance Contracts except Life insurance are Contract of Indemnity. The
Loss due to loss of life can not be measured in the term of actual loss,
therefore the insurer undertakes to pay a fixed amount in such kind of
contingency. It is, therefore in the nature of Contingency Insurance. It provides
payment on a contingent event.

In developing countries like India, it is very common and popular practice to

bundle together a risk coverage and savings in the form of life insurance

Insurance is just the opposite of gambling. In gambling, a person exposes

himself to the risk, there is of losing whereas, in the insurance, the insurance is
always opposed to risk.
Essentials of Life Insurance Contract -
Essentials of Life Insurance Contract are as follows -

a) Offer and Acceptance

b) Agreement
c) Competency
d) Free Concent
e) Legal Consideration
f) Lawful Object
g) Consensus ad idem (Meeting of Mind)
h) Utmost Good faith
i) Insurable interest

(a) Offer and Acceptance -

Like all other contracts, a contract of life insurance is also concluded

through offer and acceptance. In life insurance contract offer can be made
either by the insurance company or the applicant and the acceptance will
follow.

(b) Agreement -

There should be an agreement between the (insurer and insured) parties.

(c) Competency -

It is important that in the contract of life insurance the parties must be

competent to enter into a Life Insurance contract. (section 10 of the Indian
Contract Act 1872 says that for the formation of a valid contract parties must
be competent.)

(d) Free Concent -

Free consent, free consent means both the parties agreed on the same
thing for some purpose. When both parties to contract agreed and willing to
abide by terms and condition of contract in the same sense and spirit, they are
said to have a free consent. (Section 13 of the Indian Contract Act 1872).
Where the consent is obtained through coercion, fraud, undue influence,
misrepresentation or mistake about an essential fact, the contract becomes
voidable at the option of the party whose consent was so caused, except fraud.
(e) Legal Consideration -

There is no validity of a contract if there is no consideration, which is the act

or promise offered by one party and accepted by the other as the price of his
promise. In the Contract of Life Insurance Premium is Consideration. The
insured gives premium as a consideration in return of which insurer
undertakes to pay a certain amount at a specified contingency. The contract of
life insurance cannot be termed as a valid contract without the payment of the
first premium.

(f) Lawful Object -

The object of the life insurance contract should not be unlawful.

According to Section 23 of the Indian Contract Act 1872 the object is unlawful
which is -

(i) Forbidden by law

(ii) Immoral

(iii) Opposed to public policy or

(iv) which defeats the provision of any law

(g) Consensus ad idem (Meeting of Mind) -

For the formation of a valid contract, both parties to contract should be of

the same mind and there must be consent arising out of common
intention. The understanding between the insurer and the insured person
should be of the same thinking or mind. The reasons for taking the insurance
policy should be understandable to both the parties.

12.Explain the rights and duties of insured in fire insurance.

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
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:

Some of the duties of the insured include the following:

• Disclose material information,

• Avoid concealment and misrepresentation,
• Report loss or damage to the authorities,
• Provide notice of claim to the insurer,
• Prepare an inventory of the damaged or stolen property, and
• Provide proof of loss to the insurer.

The inability of the insured to comply with their duties is a ground for breach
of contract, cancellation of the policy, and forfeiture of the premiums paid.

13.What is deviation? When the deviation is allowed?

Deviation

(1) Where a ship, without lawful excuse, deviates from the voyage
contemplated by the policy, the insured 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 designed 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.

What Are the Effects of Deviation?

From the moment this happens, the voyage is changed, the contract
determined, and the insurer discharged from all subsequent responsibility. By
the contract, the insurer only runs the risk of the contract agreed upon, and no
other; and it is, therefore, a condition implied in the policy, that the ship shall
proceed to her port of destination by the. shortest and safest course, and on
no account to deviate from that course, but in cases of necessity.
The effect of a deviation is not to vitiate or avoid the policy, but only to
determine the liability of the underwriters from the time of the deviation. If,
therefore, the ship or goods, after the voyage has commenced, receive
damage, then the ship deviates, and afterwards a loss happen, there, though
the insurer is discharged from the time of the deviation, and is not answerable
for the subsequent loss, yet he is bound to make good the damage sustained
previous to the deviation.
But though he is thus discharged from subsequent responsibility, he is entitled
to retain the whole premium.
A deviation that will discharge the insurer, must be a voluntary departure from
the usual course of the voyage insured, and not warranted by any necessity. If
a deviation can be justified by necessity, it will not affect the contract; and
necessity will justify a deviation, though it proceed from a cause not insured
against. The cases of necessity which are most frequently adduced to justify a
departure from the direct or usual course of the voyage, are:

1. Stress of weather.
2. The want of necessary repairs.
3. Joining convoy.
4. Succouring ships in distress.
5. Avoiding capture or detention.
6. Sickness of the master or mariner.
7. Mutiny of the crew.

A deviation is a departure from the intended voyage or contract of carriage. It

can occur either where voyage courses are expressly stated or not, but any
departure from the customary route may be treated as a deviation. Therefore,
the route of the voyage is crucial to the proper fulfillment of the contract of
carriage. Any unjustifiable deviation from the agreed, direct, or customary
route will constitute a breach of the contract of carriage. A deviation is
justifiable in only three situations.
Firstly, if there is an area or immediate danger, the carrier may deviate from
protecting and preserving the cargo. In certain circumstances, if the well being
of the load so demands, it may be the carrier "s duty to deviate. Secondly, the
carrier may deviate to save human life. However, he may not unnecessarily
delay the vessel at the scene of a casualty. Finally, the contract of carriage may
permit a deviation from the contractual voyage if it contains a "liberty to
deviate" clause. It is not safe to rely on such clauses as they are interpreted in
a most narrow and restrictive manner.
The Rules, which will usually be incorporated into the contract of carriage,
excuse deviations to save life and or property, or for any other reasonable
purpose. It is virtually impossible to define what is meant by reasonable.
However, the question of whether a deviation is reasonable will be considered
not only from the carrier but also on the cargo owners.

The carrier is also under an obligation to ensure that the vessel proceeds
promptly to her destination. The duration of the voyage is crucial to the proper
fulfillment of the contract of carriage. Any unnecessary delay will be treated in
the same way as a deviation from the contractual voyage.

If the vessel deviates from the agreed, direct, or customary route, or in the
event of delay in the prosecution of the voyage, the Master should notify
owners immediately. Besides, he should ensure that the precise and detailed
reasons for the deviation or delay are thoroughly and accurately recorded, and
documents such as the logbook, ship to shore communications, course
recorders, and charts must be made available to owners.

However it should be noted that deviation does not necessarily mean a

physical change in the course and can occur in a simple case of slowing down
to receive stores at an intermediate off-port-limits call.

Justifiable Deviation

The deviation can be justified (i.e., excused) in the following cases;

• to save human life or aid a ship in distress where human life may be in
danger
• where reasonably necessary for obtaining medical or surgical aid for any
person onboard
• where reasonably necessary for the safety of the ship
• if authorised by any special term in the insurance policy
• where reasonably necessary to comply with an express or implied
warranty
• where caused by circumstances beyond the control of the Master
• where caused by barratry of the Master or crew (if barratry is an insured
risk). Barratry is defined as "An act committed by the Master or mariners
of a vessel, for some unlawful or fraudulent purpose, contrary to their
duty to the owners, whereby the latter sustain an injury. It may include
negligence, if so gross as to evidence fraud."
14.Explain the composition and functions of insurance regulatory and
development authority. State the rules relating to the assignment of
insurance policies.

Introduction:
The IRDAI is an independent and autonomous statutory body. The IRDAI was
constituted under the Insurance Regulatory and Development Authority Act
which was passed in 1999. The main function of the IRDAI is to regulate
the insurance industry of the country.

For many years the insurance sector of India was protected. The IRDA Act of
1999 allowed the entry of private companies in the insurance sector. It also
allowed for 26% investment by foreign companies. Since 2014 the FDI limit has
been increased to 49% and further opened up the insurance sector.

So the Insurance Regulatory and Development Authority of India has a role to

protect the policyholders from any form of discriminatory practices. They
regulate all the insurance companies. All companies have to approach the IRDAI
for registration certificates. And they are responsible for the renewal,
modification or cancellation of these certificates.

Functions and Powers of the IRDAI

The IRDA Act gives the authority its functions and powers. Section 14 of the Act
contains the scope of powers of the Insurance Regulatory and Development
Authority of India to regulate the insurance and reinsurance industry. Let us take
a look at the powers and functions of the IRDAI

The IRDAI has the authority to issue registration certificates to any applicant. The
also may re-issue, renew, cancel or modify these certificates as per their
discretion.

• Protection of the policyholders in matters such as assigning of policy,

nominating members to the policy, insurable interest, settlement of
claims, and any other such matters
• Make guidelines and provide training for the appropriate code of
conduct for insurance agents and intermediaries
 • Also making the code of conduct for loss assessors and surveyors
working with the insurance companies.
• They can also conduct investigations and audits of insurance
companies, intermediaries, and any other organizations with a
connection to the insurance business
• Regulation of rates, terms, and conditions, etc. that the insurers offer
their customers in the general insurance business
• The IRDAI can also dictate the manner in which the insurance
companies have to maintain their records and books of accounts.
And how they prepare their final accounts as well.
• They regulate how the insurance companies invest their funds and
maintain their margin of solvency
• The adjudication of matters and disputes of any kind involving the
insurance companies or intermediaries is also done by the IRDAI
• There is a Tariff Advisory Committee with relation to the
insurance company. The IRDAI regulates its functions as well.
Role of IRDAI as a Business Facilitator
One function of the Insurance Regulatory and Development Authority of India is
that it also acts as a business facilitator. It regulates the insurance industry and
creates trust and goodwill in the market for these insurance companies.

The IRDAI is also responsible for the growth and development of the insurance
sector. The increasing participation of foreign companies under the watchful eye
of the authority is good for both the insurance sector and the economy as a
whole.

Assignment of a life insurance policy means transfer of rights from one person
to another. You can transfer the rights on your insurance policy to another
person / entity for various reasons. This process is referred to as ‘Assignment’.

In regards to the assignment, the following points should be noted:

• A policy assignment transfers/changes only the ownership, not the risk

associated with it. The person assured thus becomes the insured.
 • The assignment may lead to cancellation of the nomination in the policy
only when it is done in favour of the insurance company due to a policy
loan.
• Assignment for all insurance plans except for the pension plan and the
Married Women's Property Act (MWP), can be done.
• A policy contract endorsement is required to effect the assignment.

In regards to the nomination, the following points should be noted:

• In order to nominate, the policyholder and life assured must be the

same.
• In the case of a different policyholder and life assured, the claim benefits
will be paid to the policyholder.
• Nominations cannot be changed or modified.
• The policy can have more than one nominee.
• As part of successive nominations, if the life assured appoints person “A”
as the first person to receive benefits. Now, in the event of the life
assured’s death after person “A” dies, the claim benefits will be given to
person “B”. The benefits will be available to Nominee “C” if Nominee “A”
and Nominee “B” have passed away.

15.Discuss about the persons who are entitled to the payment of the life
insurance money.

The person who goes to the insurance company to make a claim has to also
inform the firm of her capacity earlier mentioned in your insurance policy.

Nominee
A nominee is the person who is entitled to receive the funds. Like all
investments, even insurance policies mandate that the policyholder mentions
a nominee while buying a life insurance cover. You can change the nominee
mid-way through the policy’s tenure.

If the nominees die before the policy matures or the insured person expires,
then the amount secured by the policy shall be payable to the policyholder
himself or his heirs or legal representatives or succession certificate holder.

The matter of whether a nominee should receive the funds or should the legal
heirs is delicate and can cause a delay in claims. Hence, insurance companies
wash their hands off the legal liability, by inserting a clause “….The insurance
company does not accept any responsibility or express any opinion as to its
validity or legal effect.”

Beneficiary
The beneficiary is the true heir to the policy proceeds, after the demise of the
policyholder. A beneficiary can be a person who is insured (in case it’s a
money-back or endowment policy), proposer, or his nominee or assignee or
someone who has been proved to be an executor or administrator.

If the insured had mentioned a beneficiary in the will and nominated another
person in the insurance policy, then the ‘Will’ will take precedence and the
proceeds will go to the beneficiary upon the demise of the insured.

In case there is any legal representative nominated by any court to withdraw

the money, then the same would include the beneficiary as well.

Assignee
Sometimes, we take a loan against a policy that we may have bought. But if the
policyholder dies, the loan needs to be repaid first. That is when an assignee
comes in. In case a loan is taken against an insurance cover, the policy gets
transferred to the lender. This lender becomes the assignee.

So, if the person dies during this assignment period, then the family or legal
heir will not get the funds. The claim would be handed over to the assignee as
a loan has already been taken against the policy.

Once the loan is paid back then the policy is reassigned or transferred back in
the favour of a policyholder. Under such a circumstance, the nomination too is
automatically revived. Assignment does not cancel the nomination but affects
the rights of the nominee based on the situation.

If there is a partial assignment, then only that portion of the funds is restricted
from being handed over to the legal heir or nominee.

Appointee
If a nominee appointed for a policy is below 18 and doesn’t turn major at the
time of the payment of the insurance claim, then the amount is paid to an
Appointee, on behalf of the minor.

Where the nominee is a minor, the appointee secures the funds, handed over
under a policy, until the minor nominee turns 18.
Executor
While a Will is written to distribute the assets of a person after his or her
death, ensuring that the actual distribution happens as per the deceased’s
wishes is the task of an executor. The executor's duty is to take stock of all the
assets mentioned in the Will, account for the debts or taxes and manage the
affairs, including transferring the assets to the correct party as per the Will.

Usually, the lawyer, accountant or a trusted family member is nominated as an

executor, given the complexity of the matter.

Administrator
If there is a situation where an executor has not been mentioned in a Will,
then the court appoints an administrator who acts as an executor of the Will.

Another circumstance that can arise is that the actual executor named in the
Will of a deceased refuses to be an executor or is too old and unable to take on
the responsibilities of an executor. Here too an administrator would have to be
appointed by the court.

16.What is warranty? Explain the different kinds of warranties in marine

insurance.

Introduction:

A warranty is something by which the insured undertakes that some things

shall or shall not be done during the tenure of the policy. The policyholders
affirm or negate the existence of particular facts.
Warranties are like statements according to which an insured promise to do or
not to do some particular things. It is to be kept in mind, warranty is a
statement of fact and not merely a condition. Warranties are strongly insisted
upon and therefore, irrespective of the fact that the warranty was important
or not, the contract becomes null and void in case warranties are broken.

Express Warranties

Express warranties are those warranties that are expressly included or

incorporated in the policy by reference.

Implied Warranties
These are not mentioned in the policy at all but are tacitly understood by the
parties to the contract and areas fully binding as express warranties.

Warranties can also be classified as (1) Affirmative, and (2) Promissory. An

affirmative warranty is a promise which the insured gives to exist or not to
exist certain facts.

A promissory warranty is a promise in which the insured promises that he will

do or not do a certain thing up to the period of the policy. In marine insurance,
implied warranties are very important.

Seaworthiness of Ship

The warranty implies that the ship should be seaworthy at the commencement
of the voyage, or if the voyage is carried out in stages at the commencement of
each stage.

This warranty implies only voyage policies, though such policies may be of a
ship, cargo, freight, or any other interest. There is no implied warranty of
seaworthiness in time policies.

Legality of Venture

This warranty implies that the adventure insured shall be lawful and that so far
as the assured can control the matter, it shall be earned out in the lawful
manner of the country. Violation of foreign laws does not necessarily involve
the breach of the warranty.

There is no implied warranty as to the nationality of a ship. The implied

warranty of legality applies to total policies, voyage, or time. Marine policies
cannot be applied to protect illegal voyages or adventures. The assured could
have no right to claim a loss if the venture was illegal.

An example of an illegal venture may be trading with an enemy, violating

national laws, smuggling, breach of the blockade, and similar ventures
prohibited by law.

Illegality must not be confused with the illegal conduct of the third party, e.g.,
barratry, theft, pirates, rovers. The waiver of this warranty is not permitted as
it is against public policy.

Other Implied Warranties

There are other warranties that must be complied with marine insurance;

No Change in Voyage

When the destination of the voyage is changed intentionally after the

beginning of the risk, this is called a change in the voyage.

In the absence of any warranty contrary to this one* the insurer quits his
responsibility at the time of change in the voyage. The time of change of
voyage is determined when there is determination or intention to change the
voyage.

No Delay in Voyage

This warranty applies only to voyage policies. There should not be a delay in
starting the voyage and laziness or delay during the journey. This is an implied
condition that venture must begin within a reasonable time.

Moreover, the insured venture must be dispatched within a reasonable time. If

this warranty does not comply, the insurer may avoid the contract in the
absence of any legal reason.

No deviation

The liability of the insurer ends in the deviation of a journey. Deviation means
removal from the common route or given path. When the ship deviates from
the fixed passage without any legal reason, the insurer quits his responsibility.

This would be immaterial that the ship returned to her original route before a
loss. The insurer can quit his responsibility only when there is the actual
deviation and not the mere intention of the deviation.

17.Write a note on no fault liability.

Introduction:
There are situation when a person may be liable for some harm even though
he is not negligent in causing the same, or there is no intension to cause the
harm, or sometimes may be he have made some positive efforts to avert the
same. This liability is called as “no fault” liability.
No fault liability was primarily noted in Ryland v. Fletcher case, in which the
house of lord declared “strict liability” as the no fault liability. It was noted in
the case that the defendant could be held liable even though he had not done
any fault but caused inconvenience to others. Principal of no-fault liability is
evolved by Justice Blackburn in strict liability in this case.

It simply means that the defendant will be held liable without any negligence
or ‘fault’ on his part. Thus it was proved out to be a ‘No fault liability’. It does
not matter if the defendant has intended to cause such damage or not.

In other words, this principle held a person strictly liable if the

following essentials are applicable simultaneously:

1. Some dangerous thing must have been brought by a person on his

land: It is necessary that the thing brought on the land is dangerous.
A dangerous thing is defined as something which poses an
exceptionally high risk to the neighbouring property such as electricity,
vibrations, explosives etc.
2. It must be non-natural use of land: It is the unusual use of land which
amounts to special hazards, judged by the standards appropriate at
the relevant place and time such as constructing a water reservoir.
3. The thing thus brought or kept by the person must escape: It is
essential that the thing causing damage must escape in the area
outside the occupation or control of the defendant such as the escape
of extremely dangerous wild dogs from an individual’s property in the
locality.
4. The damaged caused should be foreseeable to the
defendant: Foreseeability of damage is essential to claim damages in
cases of strict liability such as accidents in a cracker factory in very
much foreseeable to the owner as well as workers of the factory.

Exceptions to Strict Liability

1. Act of God: Acts which are occasioned by the forced nature

and cannot be controlled by the agency of men such as
earthquake, lightning, severe frost, storm etc. Comes under
the category of the act of god.
 2. The wrongful act of the third party: The defendant cannot be
held liable if the damaged caused is due to an inevitable
accident or wrongful act of a third party.
3. Plaintiff’s own fault: The defendant cannot be held liable in
case damage caused to the plaintiff is because of his own
default. For example, if the plaintiff enters into defendant’s
garden without his permission and consumes some toxic
fruits which caused damage to his health.
4. Artificial work maintained for the common benefit of both
plaintiff and defendant: The defendant cannot be held
responsible for damage caused by a source which was equally
beneficial to the plaintiff or either consented by the plaintiff
such as sharing the same building or a common water
resource.
5. Acts of statutory authority: no one can be held liable for
doing acts which the legislature has authorised provided it is
done without any negligence on their part such as a municipal
corporation.

18.Write a note on Re insurance and reinstatement.

Reinstatement

Definition: If an insured person fails to pay the premium due to various

circumstances and as a result the insurance policy gets terminated, then the
insurance coverage can be renewed. This process of putting the insurance
policy back after a lapse is known as reinstatement.

Description: Before reinstatement various factors are taken into account. Pros
and cons of renewing the policy are considered. The insured person might
have to compensate for the failure to pay the premium.

Reinstatement is the restoration of a person or thing to a former position.

Regarding insurance, reinstatement allows a previously terminated policy to
resume effective coverage.

In the case of nonpayment, the insurer may require evidence of eligibility,

such as an updated medical examination for life insurance, and full payment
of outstanding premiums. The insurer would be advised not to let non
payment happen after having their policy reinstated.

Reinsurance

Definition: It is a process whereby one entity (the reinsurer) takes on all or part
of the risk covered under a policy issued by an insurance company in
consideration of a premium payment. In other words, it is a form of an
insurance cover for insurance companies.

Description: Unlike co-insurance where several insurance companies come

together to issue one single risk, reinsurers are typically the insurers of the last
resort. The insurance business is based on laws of probability which
presupposes that only a fraction of the policies issued would result in claims.

As a result, the total sum insured by an insurance company would be several

times its net worth. It is based on this same probability of loss that insurance
companies fix the insurance premium. The premiums are fixed in such a
manner that the total premium collected would be enough to pay for the total
claims incurred after providing for expenses.

However, there is a possibility that in a bad year, the total value of claims may
be much more than the premium collected. If the losses are of a very large
magnitude, there is a chance that the net worth of the company would be
wiped out. It is to avoid such risks that insurance companies take out policies.
Secondly, insurance companies take the support of reinsurers when they do
not have the capacity to provide a cover on their own.

Broadly, reinsurance can be classified under two heads - treaty reinsurance

and facultative reinsurance.

19.Discuss the principle of “ Utmost good faith” under insurance contract.

Utmost good faith or the Principle of Utmost Good Faith is one of the most
fundamental laws that are applicable in insurance. It is also known
as ubberimae fidei in Latin.
The principle of utmost good faith states that the insurer and insured both
must be transparent and disclose all the essential information required before
signing up for an insurance policy.
It states that both the parties must disclose all the material facts before
subscribing to the policy. Material facts are those facts which increase the risk
factor associated with the insurance policy.
The insurer needs to disclose all the investment strategies and the insured
needs to disclose any medical history, existing health conditions, or any kind of
habits like drug abuse, alcoholism or smoking.
It can happen that in situations of misrepresentation of facts by either the
insurer or the insured, the terms of contract will be violated and the policy
becomes void.
The presence of a medical record will lead to higher premium or overall
rejection of the policy. Similarly, the insurer has to inform the insured about
the exclusions present in the policy.
The concept of (subjective) good faith has long been familiar in English law in
the sense of honesty which can be reflected in the context of negotiable
instruments and the sale of the property. However, the idea of a general
doctrine of good faith, in the sense of a requirement of fair dealing, was not
part of the lexicon of English contract law until quite recently. It underwent a
legislative overhaul and has moved away from the strict common law position.
Under English law, there exists a duty of good faith only in insurance law,
which was created in the context of the rapid development of maritime trade
in the UK. However, as of today, its most recent version enshrined in
the Consumer Insurance Disclosure and Representations Act
(2012) and Insurance Act, 2015 is abolished with the aim to reform the
century-old principles as found in the Marine Insurance Act (1906).

The classical origination dates back to the eighteenth century, traceable to

Lord Mansfield who in the case of Carter v Boehm (1766), stated that the
governing principle of “good faith” was applicable to “all contracts and
dealings”. However, the duty to “all contracts” was overlooked by the English
courts who only applied this concept on insurance to impose a very
comprehensive duty of disclosure on the insured. The courts have generally
refused to recognize such a duty in the context of commercial contracts. This
concept changed with the recent case of Yam Seng Pte Ltd v International
Trade Corporation Ltd (2013), in which the High Court ruled that any “hostility”
of the English courts towards adopting a general duty of good faith in contracts
is misplaced.
In the Court’s conclusion after having found support from various precedents
for the implication of obligations of good faith in commercial contracts, it was
stated for long term distribution agreements, a general duty of good faith
should be implied between the parties. Another example of its implementation
is the case of Bristol Ground School Ltd v Intelligent Data Capture
Ltd (2014), wherein a contract under which the parties had cooperated with
each other on manufacturing training manuals for commercial airline pilots, a
duty of good faith was implied.

Thus, it can be observed that the Court is developing to incorporate the

principle of good faith in the overall application of commercial contracts under
English law though the same is not being followed in all common law
jurisdictions. Therefore, keeping aside the contract of insurance, under general
circumstances the parties are not bound by any obligation of good faith under
the English law, although except in the law of tort for one party to be held
liable of negligence, there must first be a duty of care, which implies acting
honestly. This has been the ratio of the judgment in the case of Esso Petroleum
v. Mardon (1976), where the court held the defendant liable for providing
incorrect information under the tortious remedy of negligent misstatement.

General requirements

The good faith exercised here is of a higher standard than in general contract
laws as the insurance contracts are one of speculation. Therefore, the term
“utmost good faith” is used in insurance contracts. The parties are required by
law to voluntarily disclose the information. There is also the remedy to breach
of such contracts which renders the contract terminated upon breach which
might not necessarily contribute to the loss. With regard to misrepresentation
and non-disclosure, except the fact that in misrepresentation the court has the
discretion to award damages in lieu of rescission while in non-disclosure the
court has not, the distinction between misrepresentation and non-disclosure
may not be material.

Duty of disclosure

It has been observed, this duty of disclosure is to continue throughout the

contract. The situations in which the insured owes a post-contractual duty of
utmost good faith may well be confined to some categories. These categories
at least include that the insured should avoid making any fraudulent claim or
any other fraudulent acts and that the insured owes a duty of disclosure in any
situation in which the insured is required to give information to the insurer
under the terms of the policy (e.g., where there is an increase of risk). This duty
can also be extended in reference to the terms of the policy.

Insured’s duty of disclosure

The law never requires the insured to disclose what he is not able to know, but
it is complicated as to whether the insured should disclose what he “ought to”
know. In marine insurance, Section 18(1) of the Marine Insurance Act, 1906
(U.K.) provides that an insured is “deemed to know every circumstance which
in the ordinary course of business ought to be known by him”. Although, it is
said that the 1906 Act has stated the rule applicable to both marine and non-
marine insurance, the Court of Appeal has decided that the constructive
knowledge, or the deemed knowledge, does not apply to private insurance.
The duty of disclosure-only extends to those “material” circumstances. The
requirement for materiality is set up in Section 18(2) of the 1906 Act as “Every
circumstance is material which would influence the judgment of a prudent
insurer in fixing the premium or determining whether he will take the risk”.

Positive outcome or pessimistic results

Though under the English law, Section 17 of the Marine Insurance Act of 1906
codifies the duty of both insurer and insured to act in good faith, failing which
contract can be avoided, in practice the 1906 Act was mostly relied upon by
insurers to avoid the contract for non-disclosure of information and
misrepresentation. The Act had been a backbone for all marine and non-
marine contracts but it is reflected in the light of being unduly harsh on
insureds and seemed redundant for the rapid developments taking place.

When the new law in the form of the Consumer Insurance (Disclosure and
Representations) Act 2012 was enacted, the aim of it was to safeguard the
customers by offering more proportionate remedies to insurers in cases where
there was innocent/negligent non-disclosure or misrepresentation. This was
followed by the Insurance Act, 2015 which essentially replaced the duty of
utmost good faith with a new duty of fair presentation of the risk for a
business insurance contract. This was with the intention that the English courts
will now use the principle as a shield rather than a sword.
20.Explain the kinds of losses in marine insurance.

If the loss takes place on account of any of the perils insured against with the
insurer, the insurer will be liable for it and shall have to make good the losses
to the assured. If the peril is insured, the insurer will indemnify the assured,
otherwise not.
The doctrine of causa-proxima is to be applied while calculating the amount of
loss. It means for payment of losses, the real or proximate cause is to be taken
into account. If the proximate cause is insured, the insurer will pay, otherwise
not.

Marine losses can be divided into two main parts containing several subparts;

A. Total loss;

1. Actual total loss

2. Contractive total loss

B. Partial loss;

1. Particular average losses

2. General average losses
3. Particular charges
4. Salvage charges

These classifications are described in detail below;

Total loss

There is an actual total loss where the subject-matter insured is destroyed or

so damaged as to cease to be a thing of the kind insured or where the assured
is irretrievably deprived thereof.

Losses are deemed to be total or complete when the subject- matter is fully
destroyed or lost or ceases to be a thing of its kind.

It should be distinguished from a partial loss where only part of the property
insured is lost or destroyed.

In case of a total loss, the insured stands to lose to the extent of the value of
the property provided the policy amount was to that limit.
Actual total loss

The actual total loss is a material and physical loss of the subject matter
insured.

Where the subject-matter insured is destroyed or so damaged as to cease to

be a thing of the kind insured, or where the insured is irretrievably deprived
thereof, there is an actual total loss.

When a vessel is foundered or when merchandise is so damaged as to be

valueless or when the ship is missing, it will be an actual total loss.

Constructive total loss

The subject matter is not lost in the above manner but is reasonably
abandoned when its actual total joss is unavoidable or when it cannot be
preserved from total loss without involving expenditure that would exceed the
value of the subject matter.

The cost of repair and replacement was estimated to be $50,000, whereas the
ship was estimated to be $40,000, the ship may be abandoned and will be
taken as a constructive total loss.

But if the value of the ship were more than $50,000, it would not be a
constructive total loss. Here it is assumed that retention of the subject matter
would involve financial loss to the insured.

Salvage loss

Where actual total loss occurred, and the subject matter is so damaged as to
cease to be a thing of the kind insured or when they have been sold before
reaching the destination, there is a constructive total loss. The usual form of
settlement is that the net sale proceeds will be paid to the assured.

The net sale proceeds are calculated by deducting the expenses of the sale
from the amount realized by the sale.

The insured will recover from the insurer the total loss less the net amount of
sale. This amount received from the insurer is called a ‘salvage loss.’

Partial loss
Any loss other than a total loss is a partial loss. The partial loss is there where
only part of the property insured is lost or destroyed or damaged partial losses,
in contradiction from total losses, include;

1. Particular average losses, i.e., damage or total loss of a part,

2. General average losses (general average) le., the sacrifice expenditure,
etc., done for the common safety of subject-matter insured,
3. Particular or special charges, i.e., expenses incurred in special
circumstances, and
4. Salvage charges.

Particular average loss

The particular average loss is ‘a partial loss’ of the subject-matter insured

caused by a peril insured and is not a general average loss.

The general average loss or expense is voluntarily made for the standard safety
of all the parties insured.

But, the particular average loss is fortuitous or accidental, and it cannot be

partially shifted to others but will be borne by the persons directly affected.

General average loss

General average is a loss caused by or directly consequential on a general

average act that includes a general average expenditure and general average
sacrifices.

The general average loss will be there where the loss is caused by an
extraordinary sacrifice or expenditure voluntarily and reasonably made or
incurred in time of peril to preserve the property imperiled in the common
adventure.

The following elements are involved in the general average.

The loss must be extraordinary, and the sacrifice or expenditure must not be
related to the performance of routine work.

21.Who are the persons entitled to the payment of life insurance policy
amount? Explain.

Refer Q.No.15
22.Explain the rules governing the assignment of “ life insurances” and Life
insurance policies.
Refer Q.No.14 for Assignment of Life insurances.

Life Insurance - Meaning

Life Insurance can be defined as a contract between an insurance policy holder
and an insurance company, where the insurer promises to pay a sum of money
in exchange for a premium, upon the death of an insured person or after a set
period. Here, at ICICI Prudential Life Insurance, you pay premiums for a specific
term and in return, we provide you with a Life Cover. This Life Cover secures
your loved ones’ future by paying a lump sum amount in case of an
unfortunate event. In some policies, you are paid an amount called Maturity
Benefit at the end of the policy term.
There are two basic types of Life Insurance plans -

1. 1. Pure Protection
2. 2. Protection and Savings

What is Pure Protection Plan?

A Pure Protection plan is designed to secure your family’s future by providing a
lump sum amount, in your absence.

What is Protection and Savings Plan?

A Protection and Savings plan is a financial tool that helps you plan for your
long-term goals like purchasing a home, funding your children’s education, and
more, while offering the benefits of a Life Cover.

Factors that affect life insurance premium

Now that you know what is life insurance and why you need it, find out the
factors that can affect the life insurance premium:

• Age: One of the prime factors that affect the premium for a life
insurance plan is your age. The life insurance premium is lower for
younger people and gradually increases with age
• Gender: Studies have shown women live longer than men1. Therefore,
the life insurance premium is lower for women as compared to men
• Health conditions: Your present and past health conditions can
determine the premium for your life insurance plan. If you have any pre-
 existing illnesses or have suffered from an illness in the past that may
resurface or affect your present health, you would be charged a higher
premium
• Family health history: The chances of suffering from a disease that runs
in your family are considerably high. So, if any hereditary illnesses run in
your family, you may have to pay a higher premium
• Smoking and drinking alcohol: Lifestyle habits like smoking and drinking
alcohol can impact your health and lead to multiple health issues.
Therefore, insurance companies charge a high premium for individuals
who smoke or drink alcohol
• Type of coverage: The type of coverage you opt for can increase or
decrease the life insurance plan’s premium. If you add any riders to your
plan, the premium would increase. A longer policy term can also result in
a higher premium compared to a shorter term. In addition to this, the
type of life insurance plan you select also impacts the premium. For
instance, term life insurance is the most affordable form of life insurance
• Amount of coverage: A higher sum assured would result in a higher
premium and vice versa
• Occupation: If you work in a high-risk job, the premium for your life
insurance plan would be higher than others. For example, if you work in
construction or if your job puts you at any kind of risk, such as regular
exposure to chemicals, the insurance company will charge a higher
premium

23.Write a note on grace period and lapse of policy.

Definition: The policy for which all benefits to the policy holder cease and is
terminated due to non payment of premium amount on the due date or even
after the grace period is called a lapsed policy.

Description: Excessive delay in payments and servicing of the policy leads to

the policy being dead or lapsed. However, a lapsed policy may be revived by
fulfilling the terms and conditions as per the policy statement. To avoid losses
to all parties, generally the revival and reinstatement is encouraged and
facilitated.

Insurance policies require the policyholder to pay a certain premium amount to

keep the insuarance plan in force. If the insured individual fails to pay the
premium on time or at all, it will result in a lapsed policy. To put it simply, it
means that the life insurance contract between the insured and the insurer will
become inactive.

A lapsed policy occurs both in case of missed premium payment and if cash
surrender value is exhausted in case of a permanent life insurance policy. The
policyholder and their family will no longer be entitled to receive life coverage
or insurance policy benefits in case of a lapsed policy.
It is important to note that you are entitled to a grace period after the due date
of premium payment before you end up with a lapsed policy. It is the duration
when the insured can pay the premium without any penalty charges.

However, a lapsed policy does not mean that all hope is lost. There are specific
ways you can make sure your family stays financially secure even after lapsed
life insurance policy.

What is an Insurance Grace Period?

An insurance grace period is the specified time wherein the policyholder is

allowed to make payments towards the premium to avoid lapses in the
coverage. The provider can revise the grace period, depending on the type of
policy and the insurer.

The insurance grace period can vary from as low as 24 hours to as much as 30
days, depending on the policy the individual has subscribed to. The insurance
policy agreement states the grace period given and making the payments after
the due date can attract additional charges in the form of a penalty.

Understanding Insurance Grace Period

Insurance grace periods shield policyholders from the immediate loss of

coverage in case they delay the payment of premiums. Insurance grace periods
depends on the type of policy the subscribers hold and are monitored and
managed by a regulator. However, many issuers still drop their policyholders
immediately on defaults without any prior notice.

Insurance firms generally try to shorten the insurance grace period to avoid
instances where they will be required to cover for damages even if the
policyholder has not paid the premium.
The insurer is responsible for paying the policyholders for any services they are
eligible for as long as the insurance grace period is still active. There are no
exceptions that state that the company will have to cover for the damages in a
cancelled policy due to non-payment.

In such cases, you might be required to start the entire process from scratch.
Meaning you might be required to subscribe to the insurance policy again.

Since most insurance applications often require to mention if you have ever
cancelled a policy, you are most likely to be labelled a high-risk customer in the
case of any prior cancellations of your policy. Also, the insurance company
might attract higher premiums on your policy.

24.Explain the rules governing the assignment of life insurance policies.

Refer Q.No.14

25.Define insurable interest. State the insurable interest in different kinds of

insurances.

Introduction:
The term “insurable interest” refers to a sort of investment that protects
against financial loss. When the damage or loss of an item, event, or action will
result in financial loss or other problem, a person or entity has an insurable
interest in it. A person or entity with an insurable interest would purchase an
insurance policy to cover the person, thing, or event in the issue. If something
occurs to the asset, such as it being destroyed or lost, the insurance coverage
would reduce the risk of losses.

Insurable interest is a condition for providing an insurance policy since it makes

the entity or event legitimate, valid, and protected against malicious activities.
People who are not at risk of losing money do not have an insurable interest.
As a result, a person or corporation cannot buy insurance to protect
themselves if they are not truly at risk of financial loss.

Understanding insurable interest

Insurance is a kind of risk pooling that protects policyholders against financial

losses. Insurers have devised a variety of instruments to cover losses resulting
from a variety of reasons, including automotive expenditures, health-care
expenditures, lost income due to disability, death, and property damage.
Insurable interest refers to persons or institutions with a reasonable
expectation of longevity or sustainability, assuming no unanticipated negative
occurrences. This individual or entity’s insurable interest protects them against
the possibility of a loss.

As an instance, homeowners and mortgage lenders both have an insurable

interest in their properties. You can’t insure anything if you don’t have an
insurable interest in it. Renters only have an insurable interest in their
belongings, not in the building they live in. If you own something or would
suffer financially if it was damaged or destroyed, you have an insurable
interest in it.

Types of insurable interest

Insurable interest can be divided into two categories. There are two types of
insurable interest: contractual and statutory. Contractual insurable interest
refers to an insurable interest that is required by an insurance contract in order
to affect the policy, whereas statutory insurable interest refers to an insurable
interest that is prescribed by specific laws dealing with insurance.

The term “insurable interest” is not defined in either the British Life Assurance
Act of 1774 or the Indian Insurance Act of 1938 . As seen in certain
circumstances, interest in the subject matter of insurance is needed by law for
the policy’s legality, whether by specific statutory law, such as the Marine
Insurance Act, 1906 of UK or by Section 30 of the Indian Contract Act,
1872 which simply proclaims that all wagering contracts are void. This is the
statutory shareholder or the interest required by law. If this agent is not
present, the insurance is unlawful or unenforceable, and no agreement
between the parties may be successful in removing this need. If the insurer
does not raise the plea of interest in a contract action, the court may decline to
enforce the contract at its own discretion.

Let’s look at a case law that explains the distinction between these two types
of insurable interests. In Macaura v. Northern Assurance Company (1925), one
Macaura insured the timber on his land against fire. He sold timber to a
business in which he held the sole substantial shares. After the majority of the
timber was destroyed by fire, he requested that he be compensated. The
insurer was able to avoid complying with the requirement. The insured had no
statutory interest in the firm’s assets, despite the fact that he would suffer loss
if the firm lost its property, nor did he have any contractual interest under the
policy because he couldn’t show interest at the time of the loss. Despite the
fact that the insured had no statutory interest in the property, the policy was
found to be not a wagering contract since, as the only shareholder, he had an
interest or, to put it another way, an insurable interest in it.

26.Discuss about the claims tribunal under the motor vehicles act 1988.

The motor accident claims tribunal or the MACT is the phenomenon started by
the civil courts to ensure that the cases related to motor vehicles are speedily
carried out. India is a country where the cases are more, and the civil courts
are less. This causes the bunch of cases to remain pending and justice is often
delayed. With the introduction of something as useful as the motor vehicle
accident claims tribunal, justice can be served faster. This will result in lesser
number of pending cases.

The motor vehicles claims tribunal was created under the Motor Vehicles Act,
1988. It was formed to deal with cases relating to motor vehicle accident. This
phenomenon removes the jurisdiction from the civil courts. Appeals from the
claim tribunals are entertained in the High Court for a period of ninety days
even after expiry or lapsing of time. This is mentioned under the section 173.
The Motor accident claims tribunal is concerned with the loss of life or
property by the motor accident. There are MACT courts which are presided
over by the Judicial Officers from Delhi Higher Judicial Service. The claims are
directly filed in the concerned tribunal. These courts are under direct
supervision of the Hon’ble High Courts of various States.

Powers:
Some powers of the claims tribunal include-
• “In holding any inquiry under section 168, the Claims tribunal
may, subject to any rules that may be made in this behalf, follow
such summary procedure as it thinks fit. “
• Talking about the powers of the claims tribunal, it is noteworthy
to mention that section 169 of the motor vehicles act gives the
claims tribunal the powers of the civil courts and a position equal
to it.
• The claims tribunal may also call the persons of knowledge of the
ongoing case for inquiry. Subject to any rules that may be made in
this behalf, the claims tribunal may call these people for the
purpose of adjudicating upon the any claim for compensation.
Case laws:
Kailash Chandra Sharma vs E. Gurunath And Ors. on 17 January, 2007
“After perusal of the provisions of Section 169 of the Motor Vehicles Act, 1988
I find that the Court has, undoubtedly, wide powers while deciding the
procedure for deciding claim cases and as per Sub-section (2) of Section 169,
the Tribunal shall be deemed to be a civil Court for all the purposes of Section
195 and Chapter XXVI of the Code of Criminal Procedure, 1973. From reading
of this section, it appears that for recording evidence, the Tribunal has wide
powers, but such powers are to be exercised by the Tribunal for doing justice
to the party.”
Krishna Reddy vs K. Ramulamma And Others on 15 July, 1994
“There is no merit in any of the two contentions advanced on behalf of the
petitioner. Section 169 of the Motor Vehicles Act 1988 deals with procedure
and powers of the Claims Tribunals. Sub-section (1) of’Section 169 provides
that”in holding any enquiry under Section 168, the Claims Tribunal may,
subject to any rules that may be made in that behalf, follow such summary
procedure as it thinks fit. Sub-section (2) of Section 169 of the Act further
provides that the Claims Tribubal shall have all the powers of a Civil Court for
the purpose of taking evidence on oath and of enforcing the attendance of
witnesses and of compelling discovery and production of documents and
material objects and for such other purposes as may be prescribed; and Claims
Tribunal shall be deemed to be a Civil Court for all the purposes of Section
195 and Chapter 26 of the Code of Criminal Procedure, 1973 (Act 2 of 1974).”

Smt. Krishna Devi And Ors. vs Hardev Singh And Ors. on 18 August, 1998
“In a motor vehicle accident two claimants claimed Rs. 30,000/- and Rs.
15,000/- respectively. Instead of granting full claim of the claimants in both the
petitions, the Tribunal assessed damages at lower figures in both the claim
petitions and assessed the amounts payable by all the opponents.”

27.Write a note on re insurance and double insurance.

Definition of Double Insurance

Double insurance is described as an insurance arrangement in which a

particular subject or risk is insured with multiple insurance policies of the same
insurer, or with multiple insurers, for the same period. It is made to attain
security and satisfaction, which the insurers will make good the loss occurred
to the insured.
In the event of loss, the insured can claim compensation from all the insurers
under the concerned policies. However, the total amount of compensation
cannot exceed the actual loss incurred to him, and so the insurers will
contribute, in the proportion of the sum insured.

Definition of Reinsurance

Reinsurance is a product offered by insurance companies to other insurance

companies to cover large losses. When an insurance company is not capable of
bearing the entire loss arising out of the insurance provided to the insured,
then it can go for reinsurance, in which a part of the risk is reinsured, with
another insurer.

Usually, the insurance company chooses reinsurance, when the insurance

amount is high, and a single insurance company cannot bear it easily.

BASIS FOR
DOUBLE INSURANCE REINSURANCE
COMPARISON

Meaning Double insurance refers to Reinsurance implies an

a situation in which the arrangement, wherein the
same risk and subject insurer transfer a part of risk, by
matter, is insured more insuring it with another
than once. insurance company.

Subject Property Original insurer's risk

Compensation It can be claimed with all It can be claimed from the

insurers. original insurer, who will claim
the same from reinsurer.

Loss Loss will be shared by all The reinsurer will only be liable
the insurers in proportion for the proportion of
of the sum insured. reinsurance.

Aim To assure the benefit of To reduce the risk of the insurer

insurance
 BASIS FOR
DOUBLE INSURANCE REINSURANCE
COMPARISON

Interest of Insurable interest No interest

insured

Consent of Necessary Not necessary

insured

28Explain the appointment and the powers of controller of insurance under

the insurance act 1938.

Section 2B. Appointment of Controller of Insurance. -- If at any time, the

Authority is superseded under sub-section (1) of section 19 of the Insurance
Regulatory and Development Authority Act, 1999, the Central Government
may, by notification in the Official Gazette, appoint a person to be the
Controller of Insurance till such time the Authority is reconstituted under sub-
section (3) of section 19 of that Act.

(2) 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 qualifications.
Powers of Controller:

• To avail the applicant a certificate of registration, renewal,

modification, withdrawal, suspension or cancellation of such
registration.
• To protect the interests of the policy holders in cases related to
assigning and nomination of policy holders, understanding of insurance
claims, insurable interests, surrendering of the value of the policy and
other terms and conditions of the insurance contract.
• To specify the necessary qualifications, code of conduct and practical
training for intermediary or insurance intermediaries and agents.
• Explaining the required code of conduct to the surveyors and loss
assessors.
 • To ensure that the proficiency and efficiency of the conduct of the
business of insurance.
• To encourage and regulate the relationship between the professional
organisations and the insurance and reinsurance businesses.
• To levy charge to carry out the purpose of the Act.
• To call for the information, undertaking an inspection of, conducting
enquiries and investigations including the audit of insurers,
intermediaries, insurance intermediaries and other organisations
connected with the insurance business.
• To control and regulate the rates, benefits, terms and conditions which
are offered to the insurer in respect of general insurance business that
is not controlled and regulated by the Tariff Advisory Committee
under Section 64U of the Insurance Act of 1938 (4 of 1938).
• To specify the manner in which the books are to be maintained and the
way in which the statement of accounts shall be rendered by insurers
and other insurance companies.
• To maintain the investment funds by the insurance companies.
• To regulate the maintenance of margin solvency.
• Deciding the disputes between the insurers and the intermediaries of
insurance intermediaries.
• Administering the functioning of the Tariff Advisory Committee.
• To set down the percentage premium income of the insurer of finance
schemes for promoting and regulating the professional organisations.
• To protect the interests of the policyholders in cases related to
assigning and nomination of policyholders.
• To set out the percentage of life insurance business and general
insurance business to be taken forward by the insurer in the rural or
social sector.
• Exercising other powers as may be prescribed.

29.Explain the salient features of IRDA act.

The following are salient features of the IRDA Act (1999):

• The insurance sector in India has been thrown open to the private
sector. The second and third schedules of the Act provide for removal
of existing corporations (or companies) to carry out the business of
life and general (non-life) insurance in India.
• An Indian insurance company is a company registered under the
Companies Act, 1956, in which foreign equity does not exceed 26 per
cent of the total equity shareholding, including the equity
shareholding of NRIs, FIIs, and OCBs.
• After commencement of an insurance company, the Indian promoters
can hold more than 26 per cent of the total equity holding for a
period of ten years, the balance shares being held by non-promoter
Indian shareholders which will not include the equity of the foreign
promoters, and the shareholding of NRIs, FIIs, and OCBs.
• After the permissible period of ten years, excess equity above the
prescribed level of 26 per cent will be disinvested as per a phased
programme to be indicated by IRDA. The Central Government is
empowered to extend the period of ten years in individual cases and
also to provide for a higher ceiling on share holding of Indian
promoters in excess of which disinvestment will be required.
• On foreign promoters, the maximum of 26 per cent will always be
operational. They will thus be unable to hold any equity beyond this
ceiling at any stage.
• The Act gives statutory status to the Interim Insurance Regulatory
Authority (IRA) set up by the Central Government through a
Resolution passed in January 1996.
• All the powers presently exercised under the Insurance Act, 1938, by
the Controller of Insurance (COI) will be transferred to the IRDA.
• The IRDA Act also provides for the appointment of CoI by the Central
Government when the Regulatory Authority is superseded.
• The minimum amount of paid-up equity capital is Rs.100 crore in case
of life insurance as well as general insurance, and Rs.200 crore in the
case of reinsurance.
• Solvency margin (excess of assets over liabilities) is fixed at not less
than Rs.50 crore for life as well as general insurance; for reinsurance
solvency margin is stipulated at not less than Rs.100 crore in each
case. Insurance companies will deposit Rs.10 crore as security deposit
before starting their business.
• Safeguards for policy holders’ funds include a specific provision
prohibiting investment of policy holders’ funds outside India and
 provision for the investment of funds in accordance with policy
directions of IRDA, including social and infrastructure investments.
• Every insurer shall provide life insurance or general insurance policies
(including insurance for crops) to the persons residing in the rural
sector, workers in the unorganized or informal sector or for
economically vulnerable or backward classes of the society and other
categories of persons as may be specified by regulations made by
IRDA.
• Failure to fulfill the social obligations would attract a fine of Rs.25
lakh; in case the obligations are still not fulfilled, the license would be
cancelled.

30.What are the defences available to the insurer under compulsory

insurance of motor vehicle act?

Representation

A representation is a statement made by someone seeking an insurance

policy—for example, a statement that the applicant did (or did not) consult a
doctor for any illness during the previous five years. An insurer has grounds to
avoid the contract if the applicant makes a false representation. The
misrepresentation must have been material; that is, a false description of a
person’s hair colouring should not defeat a claim under an automobile
accident policy. But a false statement, even if innocent, about a material fact—
for instance, that no one in the family uses the car to go to work, when
unbeknownst to the applicant, his wife uses the car to commute to a part-time
job she hasn’t told him about—will at the insurer’s option defeat a claim by the
insured to collect under the policy. The accident need not have arisen out of
the misrepresentation to defeat the claim. In the example given, the insurance
company could refuse to pay a claim for any accident in the car, even one
occurring when the car was driven by the husband to go to the movies, if the
insurer discovered that the car was used in a manner in which the insured had
declared it was not used. This chapter’s case, Mutual Benefit Life Insurance Co.
v. JMR Electronics Corp., (see Section 15.4.1 "Misrepresentation to Insurer"),
illustrates what happens when an insured misrepresents his smoking habits.
Concealment

An insured is obligated to volunteer to the insurer all material facts that bear
on insurability. The failure of an insured to set forth such information is
a concealment, which is, in effect, the mirror image of a false representation.
But the insured must have had a fraudulent intent to conceal the material
facts. For example, if the insured did not know that gasoline was stored in his
basement, the insurer may not refuse to pay out on a fire insurance policy.

Warranties

Many insurance policies covering commercial property will contain warranties.

For example, a policy may have a warranty that the insured bank has installed
or will install a particular type of burglar alarm system. Until recently, the rule
was strictly enforced: any breach of a warranty voided the contract, even if the
breach was not material. A nonmaterial breach might be, for example, that the
bank obtained the alarm system from a manufacturer other than the one
specified, even though the alarm systems are identical. In recent years, courts
or legislatures have relaxed the application of this rule. But a material breach
still remains absolute grounds for the insurer to avoid the contract and refuse
to pay.

Incontestable Clause

In life insurance cases, the three common defences often are unavailable to
the insurer because of the so-called incontestable clause. This states that if the
insured has not died during a specified period of time in which the life
insurance policy has been in effect (usually two years), then the insurer may
not refuse to pay even if it is later discovered that the insured committed fraud
in applying for the policy. Few nonlife policies contain an incontestable clause;
it is used in life insurance because the effect on many families would be
catastrophic if the insurer claimed misrepresentation or concealment that
would be difficult to disprove years later when the insured himself would no
longer be available to give testimony about his intentions or knowledge.

Requirement of Insurer’s Good Faith

Like the insured, the insurer must act in good faith. Thus defences may be
unavailable to an insurer who has waived them or acted in such a manner as to
create an estoppel. Suppose that when an insured seeks to increase the
amount on his life insurance policy, the insurance company learns that he lied
about his age on his original application. Nevertheless, the company accepts
his application for an increase. The insured then dies, and the insurer refuses
to pay his wife any sum. A court would hold that the insurer had waived its
right to object, since it could have cancelled the policy when it learned of the
misrepresentation. Finally, an insurer that acts in bad faith by denying a claim
that it knows it should pay may find itself open to punitive damage liability.

31.Explain the illustration the doctrine of proximate cause in fire insurance.

Proximate Cause of Fire Insurance

The rule is that the immediate cause, rather than the remote cause, is to be
considered as causa proxima non-remota spectatur. The proximate trigger is
important in fire insurance.

The theory of proximate cause has already been thoroughly explored.

When paying a claim, the insurer still considers the proximate cause.

If the insured property is burnt but the fire was caused by an excepted peril,
the legal situation is determined by whether the excepted peril was proximate.

When an explosive bomb destroyed the house, the remote cause was enemy
action; the proximate cause was enemy action.

Proximate cause is the active efficient cause that initiates a chain of events
that results in a result without the interference of any power. It is a powerful,
successful, and proximate cause to the exclusion of all other causes that are
too distant.

If the loss is due to the insured perils, the insurer is responsible for the loss as a
direct and inevitable consequence of the direct causal relationship being
formed.

Proximate Cause Insurance Example

• An intoxicated motorist causes an accident by weaving towards

oncoming traffic and hitting another car. There is a connection between
driving under the influence of alcohol and the accident.
• One of the customers falls because the workers didn’t clean up the spill
that had occurred on the floor. They suffer a wrist fracture. The
accident’s immediate root cause can be traced back to the spill that
occurred on the floor.
• When a company does not take measures to restrict the number of
customers who enter their location, the space on the ground level might
become very congested. Due to the jostling, a customer accidentally
knocks into another customer, causing them to tumble. Even if the
customer was the one who actually led to the fall, the failure of the
business to properly restrict the amount of visitors in its facility is the
proximate cause of the fall, as well as the victim’s injuries that resulted
from the fall.
• A retailer abandons a pallet of merchandise in the middle of an aisle. A
client is out and about while texting on their mobile device. They crash
through the pallet as well as fall to the ground. Even if the act of texting
was a contributing factor to the accident, the fact that the pallet was left
in the aisle was also a contributing factor.

32.Reasons and liability introduction of agricultural insurance in India.

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.

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
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.

33.Analyze the importance’s of insurance regulatory and development

authority.

What are the Aims of IRDA?

Following are the aims of IRDA:

• Maintain the development of the Insurance Sector;

• Prevent wrongdoings and frauds;
 • Carry forward the policyholder’s interests;
• Make sure rapid resolution of claims;
• Make sure fair conduct in the fiscal market when dealing with the
insurance.

What is the Importance of Roles of IRDA?

Insurance Regulatory and Development Authority is an independent apex legal

body, controls and develops the insurance sector in India. In India, insurance
dates back to 1850 with the General Insurance Organisation established in
Calcutta. Since then, there emerged different players in this market. Each
organisation rehearsed business on its own rules and rates. It made customers
untrustworthy, which brought into issue the validity of the insurance. With time
the management understood this reality and later established an independent
administrative body called IRDA. After that, new requests came out, and the
market was overflowed with insurance products.

Understanding the Roles of IRDA in the Indian Insurance Sector

In India, the insurance industry, established in the early 1800s, has developed
over the decades with better importance and clearness on safeguarding the
policyholders’ interest. Here are the roles of IRDA in the Indian Insurance Sector:

1. Safeguarding the policyholders’ interest;

2. Encourage transparency & fairness of insurance in financial markets;
3. Take suitable actions when high standards are maintained, and fiscal
stability is observed by the policy providers;
4. To makes sure the finest level of self-regulatory is maintained in the
insurance business;
5. Help in advancing the growth of the insurance industry in an organised
way for the benefit of the ordinary man;
6. Take suitable actions when high standards are not maintained;
7. Make sure authentic claims are settled efficiently
8. Deliver long-term funds to boost the Indian economy.

Various Roles of IRDA

As per the IRDA Act, 1999 (Section 14)[1], the authority should make sure the
improvement, regulation and encouragement of the insurance business. Some
of the vital roles of IRDA are mentioned below:
1. To provide the candidate with the Insurance Company
Registration Certificate, amendments, renewal, cancellation/suspension,
withdrawal of such registration.
2. To describe the code of conduct applicable to the surveyors and to
assessors.
3. To promote and control the relationship of professional organisations and
the insurance & reinsurance businesses.
4. To call for conducting enquiries, information, investigations, undertaking
examination and investigations, comprising the insurer’s audit,
intermediaries, insurance mediators and other organisations associated
with the insurance business.
5. To safeguard the interest of policyholders in the case of nomination and
assigning policyholders insurable interests, knowing insurance claims,
cancelling the policy value and other terms and conditions of the
insurance contract.
6. Make sure the proficiency and efficiency of the conduct of the insurance
business.
7. To control or legalise the benefits, rate, terms & conditions offered to the
insurer pertaining to general insurance business not controlled &
regulated by the Tariff Advisory Committee under Section 64U of the
Insurance Act 1938.
8. To describe required code of conduct, qualifications and practical training
for mediator or insurance mediators and agents.
9. To uphold the investment funds by the insurance entities.
10.To administer the working of the Tariff Advisory Committee.
11.To protect the policyholders’ interests in the case of nomination and
assigning of policyholders.
12.To change, grant or cancel Insurance Company Registration license.
13.To regularly frame laws to remove any range of uncertainty in the
insurance sector.
14.To impose the charge to carry out the aim of the Act.
15.To identify the way in which the books must be maintained and the way
in which the statement of accounts is to be provided by insurers and other
insurance entities.
16.Regulation of the upholding of margin solvency.
17.To decide the arguments among the mediators and insurers of insurance
mediators.
18.Setting out the percentage of life and general insurance business to be
taken forward by the insurer in the social sector or rural sector.
 19.Setting down of the percentage most adequate income of the insurer of
the finance schemes to encourage and control the professional
organisations.
20. To control the insurance industry in a manner that makes sure fiscal
soundness of the applicable laws & regulations.
21.To take action where the suitable standards are insufficient or not
enforced efficiently.
22.To perform such other roles of IRDA as maybe (Insurance Regulatory and
Development Authority) prescribed.

34.Indemnity is the controlling principle in insurance contract but all

insurance contracts are not contracts of indemnity discuss.

Principle of Indemnity states that the insured shall be compensated

appropriately for the losses caused to the goods by the insurer, only to the
extent that the insurer does not make a profit out of the loss that occurred.
In other words, principle of indemnity deals with the premise that in the event
of a loss, the insurer must put the insured to the position in which he was
before the loss occurred. This means that the insurer shall receive any
compensation that is neither more nor less than the actual loss that has taken
place.
The limit of the compensation is always subject to the sum insured and the
terms and conditions that govern the policy.
Principle of Indemnity is applicable in case of fire insurance and marine
insurance contracts.

Functions of Principle of Indemnity

Following are the functions of Principle of Indemnity:

1. It should compensate the insured (victim) in such a way that the insured is
placed in a situation where they were before the event of loss that occurred.
2. The compensation that is received by the insured should not in any
circumstances result in increasing the asset of the insured as the whole
purpose of the insurance policy is not to serve as a source of profit for the
insured.
As per Section 124 of the Indian Contract Act, an agreement by which one
party promises to save the other from loss caused to him by the conduct of the
promisor himself or by the lead of someone else is classified as “Contract of
Indemnity”.
To protect the promisee from unanticipated losses, parties enter into the
contract of Indemnity.

It is a promise to save a person without any harm from the consequences of an

act.

There are two parties involved in the Contract of Indemnity. The two parties
are:

1. Indemnifier: Someone who protects against or compensates for the

loss of the damage received.
2. Indemnified/Indemnity-holder: The other party who is compensated
against the loss suffered.
Example- A contracts to indemnify B against the consequences of any
proceedings which C may take against B in respect of a certain sum of 200
rupees. This is a contract of indemnity.

In the case of Mangladha Ram v. Ganda Mal, the vendor’s promise to the
vendee to be liable if title to the land was disturbed was held to be one of
indemnity.

35.Explain the powers and procedures of the motor accident claims tribunal.

Refer Q.no.26 for procedure.

Powers:
Some powers of the claims tribunal include-
• “In holding any inquiry under section 168, the Claims tribunal
may, subject to any rules that may be made in this behalf, follow
such summary procedure as it thinks fit. “
• Talking about the powers of the claims tribunal, it is noteworthy
to mention that section 169 of the motor vehicles act gives the
claims tribunal the powers of the civil courts and a position equal
to it.
• The claims tribunal may also call the persons of knowledge of the
ongoing case for inquiry. Subject to any rules that may be made in
 this behalf, the claims tribunal may call these people for the
purpose of adjudicating upon the any claim for compensation.

36.Register of insurance agent under the insurance act 1938.

Appointment of insurance agents. –

(1) An insurer may appoint any person to act as insurance agent for the
purpose of soliciting and procuring insurance business:

Provided that such person does not suffer from any of the disqualifications
mentioned in sub-section (3).

(2) No person shall act as an insurance agent for more than one life insurer,
one general insurer, one health insurer and one of each of the other mono-line
insurers:

Provided that the Authority shall, while framing regulations, ensure that no
conflict of interest is allowed to arise for any agent in representing two or
more insurers for whom he may be an agent.

(3) The disqualifications referred to in the proviso to sub-section (1) shall be

the following: --

(a) that the person is a minor;

(b) that he is found to be of unsound mind by a court of competent

jurisdiction;

(c) that he has been found guilty of criminal misappropriation or criminal

breach of trust or cheating or forgery or an abetment of or attempt to commit
any such offence by a court of competent jurisdiction:

Provided that where at least five years have elapsed since the completion of
the sentence imposed on any person in respect of any such offence, the
Authority shall ordinarily declare in respect of such person that his conviction
shall cease to operate as a disqualification under this clause;

(d) that in the course of any judicial proceeding relating to any policy of
insurance or the winding up of an insurer or in the course of an investigation of
the affairs of an insurer it has been found that he has been guilty of or has
knowingly participated in or connived at any fraud, dishonesty or
misrepresentation against an insurer or insured;

(e) that in the case of an individual, who does not possess the requisite
qualifications or practical training or passed the examination, as may be
specified by the regulations;

(f) that in the case of a company or firm making, a director or a partner or one
or more of its officers or other employees so designated by it and in the case of
any other person the chief executive, by whatever name called, or one or more
of his employees designated by him, do not possess the requisite qualifications
or practical training and have not passed such an examination as required
under clauses (e) and (g);

(g) that he has not passed such examination as may be specified by the
regulations;

(h) that he has violated the code of conduct as may be specified by the
regulations.

(4) Any person who acts as an insurance agent in contravention of the

provision of this Act, shall be liable to a penalty which may extend to ten
thousand rupees and any insurer or any person acting on behalf of an insurer,
who appoints any person as an insurance agent not permitted to act as such or
transacts any insurance business in India through any such person shall be
liable to penalty which may extend to one crore rupees.

(5) The insurer shall be responsible for all the acts and omissions of its agents
including violation of code of conduct specified under clause (h) of sub-
section (3) and liable to a penalty which may extend to one crore rupees.
37.Write a note on Cattle insurance.

What is Cattle Insurance?

Cattle insurance protects Indian rural people from financial loss incurred due
to 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 finalizing 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 claim

38.Discuss the composition powers and functions of general insurance

corporations of India.

Introduction:

The General Insurance Business Nationalization Act was passed in 1972 to set
up the general insurance business. It was the nationalization of 107 insurance
companies into one main company called General Insurance Corporation of
India and its four subsidiary companies with exclusive privilege for transacting
general insurance business. This act has been amended and the exclusive
privilege ceased on and from the commencement of the insurance regulatory
and development authority act 1999. General Insurance Corporation has been
working as a reinsurer in India. Their subsidiaries are working as a separate
entity and plays significant role in the public sector of general insurance.

General Insurance Corporation of India (GIC)

General insurance industry in India was nationalised and a government

company known as General Insurance Corporation of India was formed by the
central government in November, 1972. General insurance companies have
willingly catered to these increasing demands and have offered a plethora of
insurance covers that almost cover anything under the sun.
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.

39.Write a note insurance ombudsman.

The institution of Insurance Ombudsman was created by a Government of

India Notification dated 11th November, 1998 with the purpose of quick
disposal of the grievances of the insured customers and to mitigate their
problems involved in redressal of those grievances. This institution is of great
importance and relevance for the protection of interests of policy holders and
also in building their confidence in the system. The institution has helped to
generate and sustain the faith and confidence amongst the consumers and
insurers.

Appointment of Insurance Ombudsman

The governing body of insurance council issues orders of appointment of the

insurance Ombudsman on the recommendations of the committee comprising
of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the
Central Government. Insurance council comprises of members of the Life
Insurance council and general insurance council formed under Section 40 C of
the Insurance Act, 1938. The governing body of insurance council consists of
representatives of insurance companies.

Eligibility

Ombudsman are drawn from Insurance Industry, Civil Services and Judicial
Services.
Terms of office

An insurance Ombudsman is appointed for a term of three years or till the

incumbent attains the age of sixty five years, whichever is earlier. Re-
appointment is not permitted..

Power of Ombudsman

Insurance Ombudsman has two types of functions to perform (1) conciliation,

(2) Award making. The insurance Ombudsman is empowered to receive and
consider complaints in respect of personal lines of insurance from any person
who has any grievance against an insurer. The complaint may relate to any
grievance against the insurer i.e. (a) any partial or total repudiation of claims
by the insurance companies, (b) dispute with regard to premium paid or
payable in terms of the policy, (c) dispute on the legal construction of the
policy wordings in case such dispute relates to claims; (d) delay in settlement
of claims and (e) non-issuance of any insurance document to customers after
receipt of premium.

Ombudsman's powers are restricted to insurance contracts of value not

exceeding Rs. 20 lakhs. The insurance companies are required to honour the
awards passed by an Insurance Ombudsman within three months.

40.What is risk ? State the scope of risk in different kinds of insurance?

Introduction:

Risk insurance refers to the risk or chance of occurrence of something harmful

or unexpected that might include loss or damage of the valuable assets of the
person or injury or death of the person where the insurers assess these risks
and, based on which, work out the premium that the policyholder needs to
pay.

Risk Insurance shall involve assessing the price to be paid to Insurance

policyholders who have suffered from the loss that occurred to them, which is
covered by the policy. It involves various types of risks such as theft, loss, or
damage of property or also may involve someone being injured; there is a
chance that something unexpected or harmful may happen at any point in
time.

The following are the different types of risk in insurance:

#1 – Pure Risk

• Pure risk refers to the situation where it is certain that the outcome will
lead to loss of the person only or maximum it could lead to the condition
of the break-even to the person, but it can never cause profit to the
person. An example of pure risk includes the possibility of damage to the
house due to natural calamity.
• In case any natural calamity occurs, it will damage the house of the
person and its household items, or it will not affect the person’s home
and household items. Still, this natural calamity will not give any profit or
gain to the person. So, this will fall under the pure risk, and these risks
are insurable.

#2 – Speculative Risk

• Speculative risk refers to the situation where the direction of the

outcome is not specific, i.e., it could lead to a condition of loss, profit, or
break-even. These risks are generally not insurable. An example of
speculative risk includes the purchase of the shares of a company by a
person.
• Now, the prices of the shares can go in any direction, and a person can
make either loss, profit, or no loss, no profit at the time of the sale of
those shares. So, this will fall under the Speculative risk.

#3 – Financial Risk

Financial risk refers to the danger in which the outcome of the event is
measurable in terms of the money, i.e., any loss that could occur due to the
risk can be measured by the concerned person in monetary value. An example
of the financial risk includes a loss to the goods in the warehouse of the
company due to the fire. These risks are insurable and are generally the main
subjects of the insurance.

#4 – Non-Financial Risk

Non-Financial risk refers to the risk in which the outcome of the event is not
measurable in terms of the money, i.e., any loss that could occur due to the
risk cannot be measured by the concerned person in the monetary value. An
example of the non-financial risk includes the risk of poor selection of the
brand while purchasing mobile phones. These risks are uninsurable since they
cannot be measured.
#5 – Particular Risk

Particular risk refers to the risk which arises mainly because of the actions or
the interventions of the individual or the group of some individuals. So, the
origin of the particular risk by individual-level and impact of the same is felt at
a localized level. An example of a specific chance includes an accident on the
bus. These risks are insurable and are generally the main subjects of the
insurance.

#6 – Fundamental Risk

Fundamental risk refers to the risk which arises due to the causes which are
not under the control of any person. So, it can be said that the fundamental
risk is impersonal in its origin and the consequences. The impact of these risks
is essentially on the group, i.e., it affects the large population. The fundamental
risk includes risks on the group by events such as natural calamity, economic
slowdown, etc. These risks are insurable.

#7 – Static Risk

Static risk refers to the risk which remains constant over the period and is
generally not affected by the business environment. These risks arise from
human mistakes or actions of nature. An example of static risk includes
the embezzlement of funds in a company by its employees. They are generally
easily insurable as they are easy to measure.
#8 – Dynamic Risk

Dynamic risk refers to the risk which arises when there are any changes in the
economy. These risks are generally not easy to predict. These changes might
bring financial losses to the members of the economy. An example of the
dynamic risk includes the changes in the income of the persons in an economy,
their tastes, preferences, etc. They are generally not easily insurable.

BY
ANIL KUMAR K T LLB COACH