“Life insurance is a contract to pay a certain sum of money on the death of a person in consideration of the

due payment of a certain annuity for his life calculated according to the probable duration of life.”9 can be
summed up as under: (i) It is a contract relating to human life (ii) There need not be an express provision that
the payment is due on the death of the person. (iii) The contract provides for payment of lump sum money.
(iv) The amount is paid at the expiration of certain period or on death of the person.

Life insurance: Dolby vs London ass company. Not contract of indemnity life fire, marine, etc but a contract
to pay a definite sum in consideration of annuity paid during the life. Lic vs vishwanantham verma. Insured
specified sum called premium in lieu of which insurer promise to pay lump some money upon happening of
particular event contingent upon human life. Hub. Wife. Reed vs royal exchange . hus is legally bound to
support his wife and wife is dependent on her insurance and hence has insurable interest in the life of her
hus .wif has an I.I in life of hus. Child nd parent. Chandhula vs.lic. father insured policy for minor son after
attaining majority, son has to a adopt a policy , then the policy can be enfore. Court held that strict ad herence
to the clasue only a son can enforce the policy. Debtor and creditor. Yaraben vs lic. Life insurance policy died
within 4 ,mth 12 days suffering from peptic ulcer but unwanted of it. Hospital seat. He used to vomit blood.
Court held that fraudulent statement as he did not do with interterm court ordered for enforcement of
policy. Principal of indemnity:no ruleof contribution in the life insurance,accident/death related/ condition
to be fullfiled to act 1.proof of age 2.commencement of risk 3.payment of premium 4.grace period 5.resiual
clause 6.surrender of right.. banumathi vs lic. Court held that limitation period is calculated after the expiry
of seven years same as evidence actshe sould not be given as evidence act. But to period of four years fill
preminum is paid. Lic vs anuradha.. presumpation of death of disappeared person could start from the date
of compilation of 7 yrs. Sact case.. borrowed 10000 pound from another person . issured reviser right through
lic. 30000euro. If he died before paying debt than he would would get the benefit.s.33 deals with assignment
of insurance policy 1 .endorsement 2. Separate instrument..

1.Creation of trust.2. husband and wife. 3.Fathers. Proximate causes accident& accident died . etherimgton
vs lan coshier accident insurance.. court held that supported insurance company policy cannot be enforce.

The Insurance Ombudsman scheme was created by Government of India for individual policyholders to have
their complaints settled out of the courts system in a cost - effective, efficient and impartial way. The position
of Insurance Ombudsman was created by a Government of India Notification in November 1998. The main
function of this Ombudsman is to quickly dispose the grievances of insured customers and lessen the problems
involved in redressing complaints. This institution is vital and relevant to protect th e interests of policyholders
and also shape their belief in the system. The existence of an Insurance Ombudsman has helped generate and
sustain faith and confidence amongst both consumers and insurers alike. Ombudsmen are chosen from various
fields such as the Civil Services, Insurance Industry and Judicial Services. They are appointed for a term of
three years or till they turn sixty - five years of age. Currently there are twelve Insurance Ombudsmen
appointed in different parts of the country. They all have defined jurisdictions. The institution of Insurance
Ombudsman has been established for quick, efficient and cost effective resolution of the complaints of the
policy holders. The ombudsman can entertain complaints regarding partial or total repudiation of claims by an
insurer, disputes on premium paid or payable, disputes on the legal construction of policies with regard to
claims, delay in settlement of claims and non - issue of an y insurance document to customers after receipt of
premium. Appointment:The Redressal of Public Grievance Rules, 1998 (RPG Rules, for short) provide for
selection and appointment, jurisdiction and power of Insurance Ombudsmen and the manner of settlement of
disputes by the Ombudsman. As per the RPG Rules, the Insurance Ombudsmen are selected from among the
personnel of the insurance industry, judiciary and administration, who have retired at senior levels in their
respective areas. The selection is made by a high powered committee headed by the Chairman, IRDA. After
the selection by the committee, the Governing Body of the Insurance Council, which is a collective body of
all the insurance companies, appoints the Ombudsmen. In other words, the Ombudsmen are appointed by the
insurers. So, in a sense, the Insurance Ombudsman is an extension of the in - house grievance redressal
machinery of every insurance company. This is not to say that the Ombudsman is subordinate to any authority
or insurance company. On the contrary, the Ombudsman is independent and is not accountable to any insurance
company or authority insofar as the decisions are concerned . The Ombudsmen are appointed for a fixed tenure
of 3 years. Powers and Duties of Insurance Ombudsman: At present, there are Insurance Ombudsmen in 12
stations — Delhi, Guwahati, Ahmedabad, Chandigarh, Luck now , Bhopal, Kolkata , Bhubaneswar, Mumbai,
Hyderabad, Chennai and Cochi. Some Ombudsmen have jurisdiction over more than one State and or Union
Territory. For instance, Insurance Ombudsman , Hyderabad has jurisdiction over the complaints of the policy
holders in the States of Andhra Pradesh and Karnataka. The Ombudsmen have the power to decide the
procedure for disposal of complaints subject, however, to the requirement that they act fairly and equitably.
Usually, the Ombudsman hears both the parties to the dispute before arriving at a decision. This requirement
is not specifically mandated under the Rules but the requirement under the Rules to act fairly and equitably
enjoins the Ombudsman to adhere to the principles of natural justice, the most important of which is that the
parties are allowed the opportunity of being heard . The ombudsman can redress grievances in different ways
– make a recommendation if both parties to the dispute agree for mediation, make an award or grant exgratia.
If the complaint has no merit, dismissal, of course, is the result. The Ombudsmen can mediate and record their
recommendation on the dispute, if the insurer and the complainant agree for such mediation. The Ombudsman
has to make the recommendation within a period of one month from the receipt of the complaint. Where
mediation is not resorted to, the Ombudsman makes an award. The limitation is that the quantum of the award
should not exceed the loss suffered by the complainant as a direct consequence of the insured peril or Rs.20
lakhs, whichever is lower. The Ombudsman has the power to award payment of exgratia in suitable cases. The
award or order allowing exgratia has to be made in writing and it has to be a speaking order. The order has to
be passed within a period of three months from the receipt of the complaint. The Ombudsman’ s
recommendation upon mediation or award or order granting exgratia is binding on the insurer if the
complainant accepts the same. If the complainant does not accept , the recommendation or award or order
granting exgratia has no effect and the insurer doe s not have to implement the same. The complainant’s legal
remedies are unaffected by non - acceptance of the Ombudsman’s recommendation or award or order granting
exgratia. The ombudsmen do not normally find fault with the insurer. Rather , their ro le is confined to
adjudication of the complaint filed by a consumer, which they stick to. They are aware that insurance is a
business like any other business and they do not expect the insurer to be charitable. The ombudsmen hear the
parties to the dispute and decide the complaints in favour of the complainants if they are of the view that the
insurer’s decision is perverse or unreasonable or untenable. They, however, avoid the pitfall of rewriting the
policy for the insured. If the ombudsmen direct the insurers to pay compensation where there exists no liability,
they would be harming the business model of the insurer. After all, insurance provides indemnity against an
event which may happen and not against an event which must happen. Nevertheless, a policy holder cannot be
denied benefit under the policy by placing emphasis on an obtuse interpretation of a restrictive clause of the
policy. The Insurance Ombudsmen, therefore, have to do a balancing act and while doing this they press their
administrative and legal experience into service and blend it with common sense. The Ombudsmen have the
power to decide what complaints can be entertained and what cannot be. Their decision in this regard is final.
Rule 12 of the RPG Rules lists the complaints that the Ombudsman may receive and consider. The complaints
listed under the aforesaid Rule are repudiation, full or partial, of claims; disputes relating to the premium paid
or payable; disputes on the legal construction of the policies; delays in settlement of claims and non - issue of
policy documents. Most of the complaints received by the Ombudsman relate to repudiation of claims. Even
where the complaints are otherwise entertainable as per Rule 12 of the RPG Rules, the Rules exclude some
complaints from the ambit of the Ombudsman. A complainant cannot approach the Ombudsman straightway
without exhausting the internal grievance redressal mechanism of the insurer. In other words , a complainant
has to first make a written representation to the insurer. If the complainant is not satisfied with the reply of the
insurer or if no reply has been received within one month from the insurer, only then can a person make a
complaint to the Ombudsman. The second limitation is that the complaint has to be filed within one year after
the insurer has rejected the representation or sent the final reply. The third limitation is that a complaint the
subject matter of which is pending before or has been decided by a court, or Consumer Forum o r arbitrator
cannot be entertained by the Ombudsman. The rationale behind this is that the consumer has to opt for dispute
resolution first by the Ombudsman, which is quick, cost effective and impartial. If, however, the consumer is
not satisfied with the decision of the Ombudsman, the other legal remedies can be pursued. The limitation is
that if the legal remedies are resorted to first in regard to a complaint, the consumer cannot knock at the door
of the Ombudsman with the same complaint. There also is a limitation on the quantum of compensation that
could be awarded by the Ombudsman. The monetary limit for an award or exgratia under the Rules is Rs.20
lakhs. The Ombudsman also cannot award compensation for mental agony, suffering and so on. An inherent
limitation is that the Ombudsman cannot rewrite a policy (contract) in order to suit the interest of either party.
Instead , the policy is treated as sacrosanct, the terms of which bind the parties and this premise is not disturbed
by the Ombudsman . Important Points: Before filing complaint in Ombudsman The Insurance Ombudsman
will not accept your complaint until you have first filed a complaint with IRDA. IRDA will not accept your
complaint until you have first filed a complaint with your Insurance Company. Please note that all complaints
have to be clearly marked as complaint and should not be mere requests. You must file the complaint with the
ombudsman within a year of the rejection of your claim by the insurer. The ombudsman intervenes only if
you've n ot moved any court or approached a consumer forum. Ombudsman's powers are restricted to
insurance contracts of value not exceeding Rs. 20 lakhs. Procedure for Filing a Complaint before the
Ombudsman: The procedure for filing a complaint before the Ombudsman is simple. Paper work is kept to the
minimum. There is no fee. The complainant does not require the assistance of professionals while filing the
complaint. The hearing is conducted in an informal manner where procedure is kept to the bare minimum.
Here again, professional assistance is not required. The decision on the complaint is rendered quickly. After
obtaining the decision of the Ombudsman, the consumers have the choice to accept the decision or reject it. If
the complainant rejects the decision, other legal remedies are not affected. But once the complainant accepts
the decision, the insurer has to implement the decision within 15 days of receipt of the complainant’s
acceptance of the decision. The decision of the Ombudsman is binding on the insurer and has to be
implemented within 15 days if the complainant accepts the verdict .

proximate cause:Proximate cause refers to an action that leads to an unbroken chain of events; events that end
with someone suffering a loss. Proximate cause is used to examine how a loss occurred and how many may
have played a role in causing the loss. Proximate cause refers to the initial action that caused a loss. The starting
point in the chain of events that led to a loss. As the well known maxim of lord Bacon runs: “It were infinite
for the law to consider the causes of causes and their impulsions one of another therefore it contended itself
with the immediate cause” and rejects all causes preceding the proximate cause as too remote. Sometimes the
direct cause is easy to determine; someone throws a ball through a window and breaks a window. In this case,
the direct cause is the act of throwing and it is easy to make the connection between the cause and the loss.
However, if a child lights a firecracker, then fearing that the firecracker will explode in his or her hands, tosses
the firecracker to a second child. The second child also fears the impending explosion and proceeds to toss the
firecracker to a third child. This third child is the unlucky recipient of the firecracker at the precise moment of
explosion; a loss occurs as the child is injured. The question of proximate cause becomes important in
determining who is responsible for the injuries to the third child. Direct cause is very easy to connect to the
loss. The second child tossed the firecracker to the third child knowing that there would be an explosion. This
act demonstrates either malicious intent or at least a degree of wanton disregard for another’s safety. The
second child is then directly responsible for the third child’s injuries; the direct cause of loss. Perils of sea:
Sometimes the direct cause is easy to determine; someone throws a ball through a window and breaks a
window. In this case, the direct cause is the act of throwing and it is easy to make the connection between the
cause and the loss. However, if a child lights a firecracker, then fearing that the firecracker will explode in his
or her hands, tosses the firecracker to a second child. The second child also fears the impending explosion and
proceeds to toss the firecracker to a third child. This third child is the unlucky recipient of the firecracker at
the precise moment of explosion; a loss occurs as the child is injured.

perils of sea: A ship was insured against the peril of the sea by a time policy containing a warranty against all
consequences of hostilities. The ship on its voyage was torpeodoed by a German submarine. She was towed
near to the port where she was moored inside the outer breakwater. There she remained for two days taking to
ground at each ebb tide but floating again with the flood and finally her bulkheads gave way and she sunk. The
Court held that torpedoing was the proximatecause of the loss and the underwriters were protected by the
warranty against all consequences of hostilities. If it can be said that there are two real causes of a loss,
discovering the cause which is the proximate cause is not always an easy matter. In a leading marine insurance
case, Leyland’s Shipping Co. v. Norwich Fire Insurance Co, a ship was insured against the peril of the sea by
a time policy containing a warranty against all consequences of hostilities. The ship on its voyage was
torpeodoed by a German submarine. She was towed near to the port where she was moored inside the outer
breakwater. There she remained for two days taking to ground at each ebb tide but floating again with the flood
and finally her bulkheads gave way and she sunk. The Court held that torpedoing was the proximate cause of
the loss and the underwriters were protected by the warranty against all consequences of hostilities. The point
is that the original cause predominates and is regarded as the real cause of the loss unless it was merely
facilitating a subsequent cause which totally changed matters. greviance redressal:Insurance industry is
essentially a service industry where in the present context, the customer expectations are ever rising and
dissatisfaction from the standard of services rendered is ever present. Despite there being continuous product
innovation and significant improvement in the level of customer services with the use of modern technology,
the industry suffers badly in terms of customer dissatisfaction and poor image. Alive to this situation the
Government and the Regulator have taken a number of initiatives. These initiatives include institution of
Insurance Ombudsman 1 , in 1998 and Protection of Policy Holders Interests in 2002 2 . In this context, it is
worth noting that the KPN Committee in 2005 has recommended for continuation of the institution of
Insurance Ombudsman 3 . However, the Law Commission has recommended for establishment of ‘Grievance
Redressal Authority’ (GRA) by replacing the Insurance Ombudsman 4 and transfer of all disputes pending
with the Consumer Redressal Agencies . The Law commission has further recommended that an ‘Insurance
Appellate

grievianceredressal: Insurance industry is essentially a service industry where in the present context, the
customer expectations are ever rising and dissatisfaction from the standard of services rendered is ever present.
Despite there being continuous product innovation and significant improvement in the level of customer
services with the use of modern technology, the industry suffers badly in terms of customer dissatisfaction and
poor image. Alive to this situation the Government and the Regulator have taken a number of initiatives. These
initiatives include institution of Insurance Ombudsman 1 , in 1998 and Protection of Policy Holders Interests
in 2002 2 . In this context, it is worth noting that the KPN Committee in 2005 has recommended for
continuation of the institution of Insurance Ombudsman 3 . However, the Law Commission has recommended
for establishment of ‘Grievance Redressal Authority’ (GRA) by replacing the Insurance Ombudsman 4 and
transfer of all disputes pending with the Consumer Redressal Agencies 5 . The Law commission has further
recommended that an ‘Insurance Appellate Tribunal’ (IAT) be constituted to hear the appeals against the
decisions/ awards delivered by the Grievance Redressal Authority and the Insurance Adjudicators appointed
by the Insurance Regulatory and Development Authority (IRDA) whose appeals will also be heard by IAT.
Despite the fact that insurance industry has got a lot of legislations, rules, regulations, for formal grievance
redressal, the mechanism is not satisfactory and effective enough to cope up with ever increasing volume of
grievances turning into complaints, and finally in fully blown up legal disputes. The flow chart I & II illustrate
the existing redressal mechanism and suggested redressal mechanism for the insurance Industry.

IRDA -In other modules of this course you have studied the meaning of insurance and its importance and how
it plays a very important role in economic development of the country. By now you must be well versed that
in insurance business, there is a contract between individuals or group or businessmen and insurance
companies. The duration of these contracts varies from one year to thirty years or more and volume of such
contracts are also very large.

As you know the insurance contract is of promises or assurances by the insurance companies to compensate
the insured in case of mishappening but nothing is tangible. When the product is intangible (which can not be
seen or touch) and volume of such contracts is huge then the disputes do arise in any industry. To settle these
disputes the Government of any country appoints regulator and also enforces the law which controls the
industry.Corporate body by the aforesaid name which means it will act as group of persons, called members,
who will work jointly not as an individual person like Controller of Insurance.

Having perpetual succession which means any member may resign or die but the Authority will work.

A common seal with power to enter into a contract by affixing a stamp on the documents.

Sue or be sued means the Authority can file a case against any person or organization and vice versa.
Insurance Regulatory & Development Authority Act

Legal Framework

Notes

by a majority of votes by the present and voting. In case of equal voting the decision of Chairperson of that
meeting will be final.

InvalidationofproceedingsofAuthority (Section 11)

The proceedings of Authority will not become invalidate ( not valid in the eyes of law) due to following
reasons:-

Defects in the formation of the Authority.

 Defect in appointment of any Member.

Officers & Employees of Authority (Section 12)

The Authority may appoint officers and employees as it considers necessary for the efficient discharge of its
functions. The terms & conditions of such officers shall be governed as per the regulations made under this
Act.

Transfer of Assets, Liabilities etc (Section 13)

As stated above that initially the Authority was formed under the name “Insurance Regulatory Authority
(IRA)” and later on the name was changed to “Insurance Regulatory & Development Authority.”(IRDA)
Therefore the assets and liabilities of IRA will be transferred to IRDA on the date of establishment of the
Authority.

Duties, Powers & Functions of Authority (Section 14)

Duties: The Authority shall have the duty to regulate, promote and ensure orderly growth of the Insurance
business and re- insurance business subject to the provisions of any other provisions of the act.Specifying
requisite qualifications, code of conduct and practical training for insurance brokers , agents, surveyors, Third
Party Administrator ;

(d) Specifying the code of conduct for surveyors and loss assessors (Who assess the loss of policyholder in
case of General Insurance);

(e) Promoting efficiency in the conduct of insurance business;

(f) Promoting and regulating professional organisations connected with the insurance and re-insurance
business;

(g) Levying fees and other charges on insurance companies, Agents, Insurance Brokers, Surveyors and Third
party Administrator;summary:The main aim to form IRDA is to create a regulator which will regulate and
develop the insurance sector in the country and control all individuals or organizations who are directly or
indirectly involved with the insurance sector. The Authority has the powers to issue regulations related to
insurers, insurance intermediaries, surveyors, third party administrators for their registration, renewal of their
license and review their workings for smooth functioning of insurance sector. The Authority also protects the
interest of the policyholders for whom the insurers are issuing the policies. With this the Authority does not
become supreme as it is accountable to the Central Government.

Essential Remedies Available to Consumers under Indian Consumer Protections Act

Under this Act, the remedies available to consumers are as follows:
(a) Removal of Defects:
If after proper testing the product proves to be defective, then the ‘remove its defects’ order can be passed by
the authority concerned.
(b) Replacement of Goods:
Orders can be passed to replace the defective product by a new non-defective product of the same type.
(c) Refund of Price:
Orders can be passed to refund the price paid by the complainant for the product.
(d) Award of Compensation:
If because of the negligence of the seller a consumer suffers physical or any other loss, then compensation for
that loss can be demanded for.
(e) Removal of Deficiency in Service:
If there is any deficiency in delivery of service, then orders can be passed to remove that deficiency. For
instance, if an insurance company makes unnecessary delay in giving final touch to the claim, then under this
Act orders can be passed to immediately finalise the claim.
(f) Discontinuance of Unfair/Restrictive Trade Practice:
If a complaint is filed against unfair/restrictive trade practice, then under the Act that practice can be banned
with immediate effect. For instance, if a gas company makes it compulsory for a consumer to buy gas stove
with the gas connection, then this type of restrictive trade practice can be checked with immediate effect.
(g) Stopping the Sale of Hazardous Goods:
Products which can prove hazardous for life, their sale can be stopped.
(h) Withdrawal of Hazardous Goods from the Market:
On seeing the serious adverse effects of hazardous goods on the consumers, such goods can be withdrawn
from the market. The objective of doing so that such products should not be offered for sale.
(i) Payment of Adequate Cost:
In the end, there is a provision in this Act that the trader should pay adequate cost to the victim concerned.

Subrogation is the act of one party claiming the legal rights of another that it has reimbursed for losses.
Subrogation occurs in property/casualty insurance when a company pays one of its insured’s for damages, then
makes its own claim against others who may have caused the loss, insured the loss, or contributed to it.
For Example: Suppose another driver runs a red light and your car is totaled. You have insurance on your car,
so you call your insurance carrier and they pay you for all of your expenses related to the accident. Your
insurance company, realizing that the other driver had an insurance policy, then seeks reimbursement from the
at-fault party’s insurance carrier. Your insurer is “subrogated” to the rights of your policy and can “step in
your shoes” to recover any amount paid out on your behalf. This is the definition of subrogation.Why it is
important to you
Why is subrogation becoming so important in the insurance industry and how can it benefit you, the
policyholder? Subrogation is important because any monies recovered through the subrogation process go
directly to the insurance company’s bottom line. The benefits of subrogation have been demonstrated in
company performance. This is according to the Ward Financial Group, a firm that researches property/casualty
operations and identifies operational benchmarks that distinguish high performing companies. According to a
study by Ward, companies that achieved superior operating results subrogated claims at about twice the rate
of average companies and recovered substantially higher percentages of their loss payments through
subrogation. A company with an effective subrogation department can offer lower premiums to their
policyholders.