LAW OF INSURANCE [Unit No Topic Growth of Insurance Business in India - Institution of Insurance and Economie Development - Definition of Insurance - ~ Differences between Contract of Indemnity Contingent, Wager and Insurance - Principle of utmost good faith Page No. 2-7 u "| Rinds of Insurance - Insurable interest ~ Premiam — Risk Certificate of Insurance - Doctrine of Subrogation and Contribution - Rights and Liabilities of Insurer and Insured person - Life Insurance Contract- Personal Accident Insurance - Establishment and Functioning of LIC 8-18 Nature and scope of Marine Insurance - Classification of marine | insurance - Kinds of marine policies - Voyage -Loss- the perils of the sca - implied warranties in marine insurance contract - Assignment of Marine Policy 19-30 Vv ‘Nature of Fire Insurance Contract - Meaning f the word ‘fire — | Scope of Fire Policy, Convener note - Right to contr8ibution and right to average - Principle of Reinstatement - Double insurance and reinsurance,- Doctrine of Approximation- Burglary Insurance 31-36 Social control on insurance Business - Purpose of compulsory insurance-RIGHTS OF third parties - Powers and Functions of the Insurance Regulatory and Development Authority Law of insurance 37-44UNIT-I Prior to 1912 Insurance companies were governed by the provisions of the Indian Companies Act 1882. Based on 1909 of English Insurance Companies Act Indian Life Insurance Companies Aet and Provident Insurance Societies Act was passed in 1912 to control only life insurance. But it has some defects as it did not restricted on investments of insurance funds and foreign companies were exempted from submitting particulars regarding their business in India ete. Hence, the Government of India passed the ition in 1928 to collect statistical information pertaining to total insurance business in force, new 88, and amount of claims paid; and a summary of classified assets held by all life insurance companies operating in India, In 1935 Mr-Sushil Chandra Sen, a well-known Caleutta solicitor was assigned a special duty to report on the amendinents necessary to modernize insurance legislation in India. Advisory committee made several changes and accordingly the Government of India introduced the Bill and passed as the Insurance Act of 1938, which came into force on 1" July, 1939. It was comprehensively amended in 1950. After nationalization of the life insurance business ‘the Life Insurance Corporation of India Act’ was passed, this came into force on Ist September 1956. “The Marine Insurance Act” was passed in 1963: and after nationalization of general insurance business, “the General Insurance Business Nationalisation Act” was passed in 1972. INSTITUTION OF INSURANCE, 1 Reforms: 1993, due to liberalization in all economic sectors, a Committee headed by R.N.Malhotra, former inance Secretary and ex- RBI Governor was formed to evaluate the Indian insurance industry and to recommend its future directions. The Committee submitted its report on 7° January 1994 to Union Finance Minister recommending many changes including its privatization. ‘+ Structure: Government staké should be brought down to 30% and insurance companies should be given greater freed + Competition: Private companies with 2 minimum paid up capital of Rs.1 billion should be allowed to enter into insurance sector. Foreign Companies may be allowed in collaboration with domestic companies. GIC & LIC should be separated, Each State should have one State Level Life Insurance Company + Regulatory Body: To replace existing “Controller of Insurance’ with a “Provisional Insurance Regulatory and Development Authority IRDA)’ + Investinents: Investments of LIC fund in government sectors should be reduced from 75% to 50% and GIC to reduce its investments to 5% in each company. © Customer Services: LIC should pay interest on delay payments/seitlements beyond 30 days. Update technology and introduce unit linked pension plans ete. 2. Economic Development ~ India needs to give due priorities in various issues like infrastructure, public sector reform, agricultural and rural development, labour regulations, health ete © Agriculture - crop insurance, insurance’on farm implements, high yield variety seeds, micro irrigation ~ drip & sprinklers, irigation bore-wells, tractors, electrification etc. Law of Insurance Page 2© Industrial output — insurance on industries, machines, infrasture, goods, fast moving consumer goods (FMCG), transportation, employer & employees, I party insurance ete * Services — health insurance, transportation insurance ( airways insurance, railway insuranee, fire insurance, motor vehicle insurance); insurance to unorganized sector workers - NREGA labou insurance to functions! marriages, festivals — II party insurance during Vinayaka chouthi celebrations ere % Banking & Financing — through economic liberalization & globalization banks entered into insurance business. Definition of insurance: Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves ayainst the risk The definition of life insurance contract is that one party agrees to pay a given sun upon the happening of # particular event contingent upon the duration of life in exchange of the payment of consideration. ‘The company who guarantees the payment is called Insurer, the amount given is called the Policy amount, the person on whose life payment is guaranteed is called Insured or Assured. ‘The particular event on which payment is to be given may be peril/ accident/ damage! injury/ death or life. The consideration is called Premium, The document evidencing the contract is called Policy. ‘The Science of Life Insuranes:_ LIC is the combined business of the law of mortality and interest. This means, LIC has to pay’ on the death of Insured or on the maturity of the term. LIC fixes premium amount basing on the age and probability of death, Premium amounts were carefully invested in companies so as to raise money to meet the claims, interests on delays and expenses of the organization, Law relating to insurance: As there will be conflicts between insurer and insured in claiming and settling the amounts there is a need 10 develop a Law. To safeguard policy-holders various provisions have been designed in the Insurance Act. Insurance involves other branches of law ie law of property, Taw of torts and law of ageney ete. Only Central Legislation can enact or amend rules and regulations pertaining to Law of Insurance. “As such itis uniform throughout India. Law of Insurance rules will be made’in accordance to Law of the Lend, Ex, The foreign exchange rexulation is applicable to the insurance law. Natiore of Insurance contract: 3. Itisan “aleatory contract, ii, I is a contract of ‘utmost good-faith’ tis a contract of ‘indemnity’ and iv. Itis a contract of ‘wager’ ture of Life Insurance Contra Unilateral contract: Ii is @ contract where only one party to the contract makes legelly enforceable promise. Insured will have legally enforceable promise on payment of periodic premiums. Only insurer is forced to pay policy amount, whereas insured may continue to pay premium or may not, It is the option of insured, insurer cannot force insured to continue the payinent of the premium, But insurer can cancelrepudiate the contract by retuming the part payment or surrender value amounts after deducting charges, Law of Insurance * Page 3