SVKM’s NMIMS

Kirit P Mehta School of Law, Mumbai

Project Submitted
On

WARRANTY, CONDITIONS, AND STIPULATIONS OF

INSURANCE CONTRACTS

In compliance to partial fulfillment of the marking

scheme, for Trimester 9 of 2016-2017, in the subject of

BANKING AND INSURANCE LAW

Submitted to

Prof. Joyeeta Banerjee

ADARSH HIMATSINGHKA
A032
THIRD YEAR
BBA LLB (HONS.)
 INTRODUCTION

WHAT IS AN INSURANCE CONTRACT?

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. Insurance policy is a legal contract & its formation is subject to the
fulfillment of the requisites of a contract defined under Indian Contract Act 1872.

Central to any insurance contract is the insuring agreement, which specifies the
risks that are covered, the limits of the policy, and the term of the policy.

Additionally, all insurance contracts specify:

 Conditions, which are requirements of the insured, such as paying the premium or
reporting a loss;
 Limitations, which specify the limits of the policy, such as the maximum amount
that the insurance company will pay;
 Exclusions, which specify what is not covered by the contract.

A warranty in an insurance policy is a promise by the insured party that statements

affecting the validity of the contract are true. For example, to obtain a health
insurance policy, an insured party may have to warrant that he does not suffer from
a terminal disease. If a warranty made by an insured party turns out to be untrue, the
insurer may cancel the policy and refuse to cover claims.

Conditions in an Insurance contract are those Circumstances under which an

insurance contract is in force. Breach of the conditions is grounds for refusal to pay
the loss.
ESSENTIALS OF COMMERCIAL CONTRACT

1. Elements of General Contract:

a) Offer & Acceptance
b) Consideration
c) Legal capacity to contract or competency
d) Consensus “ad idem”
e) Legality of object
2. Elements of Special Contract relating to Insurance:
a) Life Insurance
1. Utmost Good Faith (Uberrima Fides)
2. Insurable Interest
b) General Insurance
1. Utmost Good Faith (Uberrima Fides)
2. Insurable Interest
3. Indemnity
4. Subrogation
5. Proximate Cause

The common law of contract proceeds on the basis that not all obligations created by
an agreement are of equal significance or importance to the parties. The orthodox
classification of contractual terms categorizes such obligations as either ‘conditions’
on the one hand, or ‘warranties’ on the other. A condition is an essential term of the
contract and is fundamental in nature,1 the effect of its breach is to entitle the
innocent party to terminate the contract and sue for damages. A warranty, however, is
a subsidiary promise, the breach of which entitles the innocent party to damages only
and not to terminate the contract.2

GENERAL ANALYSIS

The word condition may also carry a different meaning insofar as such a term may be
either a condition precedent or a condition subsequent. A condition precedent is a
term ‘which must be fulfilled before any contract is concluded at all’.3 In this sense it
has been described as a pre-condition, ‘something which must happen or be done
before the agreement can take effect’.4 Although the contract crystallizes as soon as
the parties conclude their agreement, if the contingent event does not occur, the
contract does not become operative.5 It should be noted that a condition precedent is
not restricted to the situation where the contract provides for a third party to perform
some specified act, but may also arise where one of the contracting parties themselves
is required to carry out some act.6

A condition subsequent operates to bring an existing contract to an end upon the

occurrence of a stipulated event.7 However, whether a particular term can be
accurately designated a condition subsequent as opposed to a condition precedent is
often nothing more than an etymological exercise. Nevertheless, the significance of
the condition subsequent is more readily seen in the context of insurance contracts
where it has become subsumed in the more appropriate terminology of the promissory
warranty and clauses descriptive of risks.8

A warranty in insurance is a statement or condition incorporated in the contract

relating to the risk, which the applicant presents as true and upon which it is presumed
that the insurer relied in issuing the contract. Marine insurance, the rst branch of
insurance to develop commercially, evolved the doctrine of warranty. The Marine
Insurance Act, 1906 (England), gives the following de nition of a warranty:
“A warranty is a statement by which the assured undertakes that some particular thing
shall or shall not be done, or that some condition shall be ful lled, or whereby he
affirms or negatives the existence of a particular state of fact.” This Act states further
that “A warranty as above defined is a condition which must be exactly complied
with, whether it be material to the risk or not.”

The nature of insurance depends on the nature of the risk sought to be protected. The
chief and classical varieties of insurance contracts are (i) life, (ii) re, (iii) marine and
in the modern times new varieties have been added from time to time like liability
insurance, third party risk. In fact, in modern times, the happening of any event may
be insured against at a premium directly proportional to the risk involved on its
happening. An element of uncertainty must be present in the course of the happening
of the event insured against; in some cases, in almost all non-life insurance contracts,
the happening of the event itself is uncertain while in life insurance the event insured,
that is, the death of an individual is a certain event, but the uncertainty lies in the time
when it happens.

The fundamental function of insurance is to shift the loss suffered by a sole individual
to a willing and capable professional risk-bearer in consideration of a comparatively
small contribution called premium. In this process the professional risk-bearer, the
insurer collects some small rate of contribution from a large number of people and if
there is any unfortunate person among them, the risk-bearer, the insurer relieves the
sufferer from the effects of the loss by paying the insurance money. Thus it serves the
social purpose; it is “a social device whereby uncertain risks of individuals may be
combined in a group and thus made more certain; small periodic contribution of the
individuals providing a fund out of which those who suffer losses may be reimbursed.
The insurers collect the contributions of numerous policyholders and those funds are
invested in organized commerce and industry. They help the running of giant
industries and mobilize the capital formation.

DIFFERENCE BETWEEN ASSURANCE AND INSURANCE

The terms “Assurance and Insurance are commonly used in insurance contracts. On
historical point of view, the word “Assurance is more older used in all types of
insurance contracts by the end of 16th century. But, from the year 1826, this term is
used to indicate life insurance only and the word “Insurance” for all other types of
insurance like marine, fire, etc. This is because that in life insurance, there is an
assurance from the insurer to make payment of the policy either on the maturity or on
death. Thus, the word “Assurance” indicates certainly on the other hand, the word
insurance is used against indemnity insurance, the insurer is liable to indemnity only
in case of loss to property or goods, otherwise not4. In brief, the differences between
the two terms are given in the following table below.
Difference between Assurance and Insurance (or Life Insurance and indemnity
(General/Non life) insurance.
TABLE1.1
DIFFERENCES BETWEEN ASSURANCE AND INSURANCE
Basis of
Assurance Insurance
Difference
This term is used only in life insurance This term is used for all
1. Scope and therefore the scope is comparatively other types of insurance and
limited. therefore, the scope is wider.
The life insurance contract is a continuing It is not certain that the
2. Renewal
contract and it will not lapse unless the event insured against may
of Policy
premium is regularly paid. happen or not.
The element of investment is present in It lacks the element if
3. Element of assurance since there is certainly of investment since there is no
investment receiving payment either on death or on certainty of receiving
maturity of the policy. payment.
The insurer gives assurance to the insured The insurer only promises to
4. Assurance to pay the claim in any case, either on secure the property in case
maturity or death. of actual loss.
The policy amount is paid to the assured The payment of claim is
5. Amount of in full on the maturity or on death along subjected to the element of
Claim with bonus, etc. announce by the actual loss but not more than
insurance company from time to time. the insured sum.

In a life policy, the insurable

In indemnity insurance the assured is
6. Insurable interest is one that required by
required to have an insurable interest
Interest law and such interest is not
in terms of policy.
measurable in terms of money.
The word “Assurance”
The word ‘insurance’ only
7. Relationship indicates a relationship with
represents the behavior of insurance.
principle of insurance.
Principle of indemnity does not
8. Principle of Principle of indemnity is the basis of
apply in life assurance. The
indemnity insurance contracts.
sum
 assured is unrespectable of any
profit or loss and the full extent
of the amount insured.
payable
9. Certainity of The event is bounded to happen It is not certain that the event insured
event sooner or later. against may happen or not.
In insurance, the policy amount is
Insurance policy for any
restricted to market value of assets;
10. Insured amount or any number of
not more than that. This is because
Sum policies can be taken in this
that indemnity cannot be more than
case.
the value of asset.
11. Certainly of Payment of claim either on There is no certainly to receive
payment of maturity of the policy or on payment since it is paid only in case
claim death of the assured is certain. of loss of the property insured.

NATURE AND CHARACTRISTIC OF INSURANCE

Insurance follows important characteristics – These are follows

1) SHARING OF RISK
Insurance is a co-operative device to share the burden of risk, which may fall on
happening of some unforeseen events, such as the death of head of family or on
happening of marine perils or loss of by fire.

2) CO-OPERATIVE DEVICE
Insurance is a co-operative form of distributing a certain risk over a group of persons
who are exposed to it. A large number of persons share the losses arising from a
particular risk.

3) LARGE NUMBER OF INSURED PERSONS

The success of insurance business depends on the large number of persons insured
against similar risk. This will enable the insurer to spread the losses of risk among
large number of persons, thus keeping the premium rate at the minimum.
4) EVALUATION OF RISK
For the purpose of ascertaining the insurance premium, the volume of risk is
evaluated, which forms the basis of insurance contract.

5) AMOUNT OF PAYMENT
The amount of payment in indemnity insurance depends on the nature of losses
occurred, subject to a maximum of the sum insured. In life insurance, however, a
fixed amount is paid on the happening of some uncertain event or on the maturity of
the policy.

6) PAYMENT OF HAPPENING OF SPECIFIED EVENT

On happening of specified event, the insurance company is bound to make payment to
the insured. Happening of specified event is certain in life insurance, but in the case of
fire, marine of accidental insurance, it is not necessary. In such cases, the insurer is
not liable for payment of indemnity.

7) TRANSFER OF RISK
Insurance is a plan in which the insured transfers his risk on the insurer. This may be
the reason that may erson observes, that insurance is a device to transfer some
economic losses would have been borne by the insured themselves.

8) INSURANCE IS NOT CHARITY

Charity pays without consideration but in the case of insurance, premium is paid by
the insured to the insurer in consideration of future payment.

9) A CONTRACT
Insurance is a legal contract between the insurer and insured under which the insurer
promises to compensate the insured financially within the scope of insurance policy,
the insured promises to pay a fixed rate of premium to the insurer.

10) BASED UPON CERTAIN PRINCIPLE

Insurance is a contract based upon certain fundamental principles of insurance, which
includes utmost good faith, insurable interest, contribution, indemnity, cause proxima,
subrogation etc, which are operating in the various fields of insurance.

11) REGULATION UNDER THE LAW

The government of every country enacts the law governing insurance business so as
to regulate, and control its activities for the interest of the people. In India General
Insurance Act 1972 and the Life Insurance Act 1956 are the major enactment in this
direction.

12) WIDE SCOPE

The scope insurance is much wider and extensive various types of policies have been
developed in the country against risk of fire, marine, accident, theft, burglary, life, etc.

13) INSURANCE FOR PURE RISK ONLY

Pure risks give only losses to the insured, and no profits. Examples of pure risks are
accident, misfortune, death, fire, injury, etc., which are all the sided risks and the
ultimate results in loss. Insurance Companies issue policies against pure risk only, not
against speculative risks. Speculative risk have chances of profit of losses.

14) BASED ON MUTUAL GOODWILL

Insurance is a contract based on good faith between the parties. Therefore, both the
parties are bound to disclose the important facts affecting to the contract before each
other. Utmost good faith is on of the important principles of insurance.

INSURANCE LAWS IN INDIA

There are mainly four laws are concerned with the insurance business of India are as
follows.
1. Insurance Act, 1938
2. Life Insurance Corporation Act, 1956
3. General Insurance Business (Nationalization) Act, 1972
4. Insurance Regularity and Development Authority Act, 1999 (IRDA)
 LEGAL ANALYSIS

This section is important under the insurance Act, as it places restrictions on the
right of the insurer to repudiate his liability under the policy. According to the
provision life insurance policy cannot be called in question after the expiry of
two years from the date on which it was effected on the ground of mis-statement
in the policy unless it is shown that all the three conditions enumerated under
S.45 are satisfied, viz.

1. The statement must be on a material fact.

2. There has been suppression of the material fact which it was material to disclose, or
been fraudulently made by the policy holder, and
3. The policyholder must have known at the time of making the statement that it was
false or that it suppressed facts, which it was material.

(a) Existence of risk:

It is indispensable to every contract of insurance that the subject matter should be
exposed to the contingency of loss or risk. Risk involves the happening of an
uncertain event adverse to the interest of the assured. In marine insurance the ship or
cargo is exposed to the loss by perils of the sea. In re insurance the risk is destruction
of property by re. In life insurance the risk in the death of the assured is, though a
certainty, uncertain as to the time of its happening.
In an abstract sense risk may be construed as the chance of loss. It can either be an
uncertainty as to the outcome of some event or events, or loss as the result of at least
one possible outcome. In any case, the promise of the insurer is to save the assured
against the uncertain consequences.

(b) Indemnity, the key principle:

Insurance is essentially a contract of indemnity. All the claims of the assured will be
adjusted only with reference to the actual loss sustained by him. Thus it is implicit in
every contract of insurance that the assured in case of a loss against which the policy
has been made shall be fully indemnified but shall never be more than fully
indemnified.
In assessing the amount payable on a contract of insurance, the principle of indemnity
though a guiding principle, is not an unqualified one. It is common that insurers limit
their liability to a particular amount of money known as the ‘sum assured.’ In case of
loss, the ‘sum assured’ is all that the assured is entitled to even if the value of the
thing is far in excess of it. But in all other cases, excepting the valued policies (in
Marine Insurance) the insurer is liable to indemnify only to the tune of the actual loss,
even though the ‘sum assured’ is a higher amount. In ‘valued policies,’ the parties
agree that the value of the subject matter shall be agreed. The object of the valued
policies is to avoid dispute after the loss occurs as to the quantum of the assured’s
interest.
In contracts of life insurance, personal accident and sickness insurances and in some
forms of contingency insurance, the loss is seldom measured in monetary terms. They
are to be distinguished from contracts of indemnity like marine and re insurance. It is
now well established that life insurance in no way resembles a contract of indemnity.

Life insurance may properly be considered as an investment of money because it

enables to secure an ultimate fund to those persons who have no greater opportunity
of making savings or which left to themselves they would have found it beyond their
means. Yet, the objective of a contract of life insurance is mainly to provide for the
risk of death happening at an uncertain time. Though to consider it as a sort of
investment holds good in some cases, it is departing from the essential feature of
insurance security against risk. It is, therefore observed that a life policy is not a
contract of indemnity. Generally a contract of indemnity is entered into for the sole
purpose of making good a loss incurred. The value of a life, however, is incapable of
estimation and except, in a limited sense, cannot be “made good” by insurance. An
important distinction, which thus arises, between life insurance and other forms of
insurance is that the principle of “subrogation,” under which the insurer (i.e., the
company) takes the right of recovery against the third party causing the loss, has no
application to life insurance.

(c) Insurance and wager not identical:

The fundamental principle of indemnity on which the greater part of the law of
insurance is based, prima facie, negatives any treatment of insurance on par with
wagering contracts. Wagering contracts are those, wherein “two persons, professing
to hold opposite views touching the issue of a future uncertain event, mutually agree
that, dependent upon the determination of that event, one shall win from the other,
and that other shall pay and hand over to him, a sum of money or stake.” Again, “the
distinction between a wagering contract and one which is not a wager depends upon
whether the person making it has or has not an interest in the subject matter of the
contract.” That means, “if the event happens the party will gain an advantage, if it is
frustrated he will suffer a loss.” Probably, the common feature of the two types of
agreement – the element of uncertainty, gave rise to the misconception of insurance in
terms of a gamble.

Insurance can be only with reference to a previously existing risk and unlike a wager
it does not create risk with its inception. The interests of the parties in a pure wager
are centered round the fact that they have contracted to pay each other certain sums on
the happening or otherwise of a certain event thereby bringing into being risk not of
previous existence. In the case of insurance, the individual subjected to the risk before
negotiations, obtains security and to that extent there will be a shifting of risk rather
than a creation of it. Therefore, to say that insurance accomplishes the reverse of a
wagering contract seems to be correct proposition.

1. Most contracts of insurance are usually annual contracts and the insurers have
option to refuse renewal at the end of each and any period of insurance. In
some cases the insurer reserves to him the right to terminate the insurance any
time on a proportionate return of premium in respect of the unexpired period
of the risk. Life assurance contracts are, in the main, long-term contracts, and
in the absence of any fault or any aw the insurer has no option to cancel the
insurance.
2. The risk insured against under a re, accident or marine insurance contract may
or may not occur but the event insured against under life assurance contract is
bound to happen.
3. From the above we see that the general contract of insurance continues to be a
contract of indemnity, but life insurance is considered as an assurance
contract. Regarding the life insurance contract, McGillivray says, “the contract
of insurance may be to pay on the happening of the event insured against, a
 certain or ascertainable sum of money irrespective of whether or not the
assured has suffered loss or of the amount of such loss if he has suffered any.”

(d) Insurable Interest:

The next test for a valid insurance contract is the existence of insurability interest. The
‘insurable interest’ may be thus:
“Where the assured is so situated that the happening of the event on which the
insurance money is to become payable would, as a proximate result involve the
insured in the loss or the diminution of any right recognized by law or in any legal
liability, there is an insurable interest to the extent of the possible loss or liability.”
Here again we see that such interest should exist at the time of happening of the event
in the general insurance contracts, but is not necessarily so in the case of the life
insurance contracts. This is because the former is a contract of indemnity and the
latter is a contract of assurance. Taking an example of re insurance, it is clear that an
insured person suffers no loss under a policy if at the time of loss or damage to the
property he has no interest in it either as full or partial owner.

The concept of insurable interest primarily appears to be an invention of the courts. It

may be necessary for the assured to show interest but common law contains no
general prohibition of contracts in which no insurable interest exists. It was perhaps
introduced to curb insurances by way of wager, and obtained statutory recognition.
The presence of insurable interest is insisted for two reasons: (1) the assured cannot
be taken to have suffered any damage if he has no interest in the property insured at
the time of loss. (2) Secondly, if the interest of the assured is limited to something less
than the full value of the subject- matter, no greater damage than his interest in the
subject matter will result. In both cases the interest in the subject matter is required by
the terms of the contract itself since the promise of the insurer will be only to
compensate the actual loss.
To have insurable interest, it is essential that there should be some contractual or
proprietary right, whether legal or equitable so long as it is enforceable in the courts.
Accordingly the main principles determining the existence of insurable interest are (a)
the interest must be enforceable at law; (b) the continued existence of the interest will
be beneficial to the assured. Strict legal or pecuniary interest is not necessary.
Equitable interest is sufficient to give rise to insurable interest.
(e) Principle of utmost good faith:
In the case of ordinary commercial transaction the legal maxim “caveat emptor”
(meaning “let the purchaser beware”) prevails. In the absence of an enquiry the other
party to the contract is under no obligation voluntarily to furnish detailed information
regarding the subject matter of the contract. It is, however, understood that the other
should not mislead one party to the contract by any false declaration. All the same it is
open to both the parties to the contract to satisfy them and each party is entitled to
make the best bargain that he can make.
As a contrast to such commercial contracts the insurance contract is dominated by the
legal maxim “the utmost good faith”. The observance of utmost good faith by the
parties is vital to a contract of insurance. Insurance is called an UBERRIMAE FIDEI
contract because the parties are required to conform to a higher degree of good faith
than in the general law of contract. Good faith and honesty though principles of equity
and justice are equally applicable to every agreement; yet, in contracts other than
insurance, the parties are free to settle their own terms. In a contract of sale of goods
CAVEAT EMPTOR is the principle and the seller has no obligation to make known
to the purchaser all facts that might affect his decision. But in insurance there is
something more than an obligation to treat the insurer honestly and frankly.
Insurance being a device of risk transference stands on a separate basis. The non-
disclosure of a material fact by the assured whether fraudulent or innocent, has the
same effect of avoiding the contract.
 CASE LAW ANALYSIS

As is evident from much of the case law on the place of conditions and warranties in
the general scheme of contract law there has been considerable judicial debate over
whether the dichotomy amounts to nothing more than an over simplistic approach to
determining the importance of contractual terms. This has seen the recent emergence
of a third category of terms, namely innominate or intermediate terms. Whether a
party may terminate the contract in the event of breach of an innominate term lies
within the discretion of the court. In this way, such terms operate as a flexible device
whereby termination is made to depend upon the court’s view of the seriousness of
the consequences flowing from the breach. Nevertheless, the classification of
contractual terms as major (conditions) or minor (warranties) obligations has
withstood the rigors of judicial challenge and continues to represent the orthodoxy.
Insurance companies have brought numerous changes into effect over the years after
consumer courts have ruled against them.

The Supreme Court in, “M/s. INDUSTRIAL PROMOTION & INVESTMENT

CORPORATION OF ORISSA LTD. V. NEW INDIA ASSURANCE
COMPANY LTD. & ANR” Has reiterated that Contract of Insurance should be
construed strictly and it is only when there is any ambiguity or doubt the clause in the
policy, it should be interpreted in favor of the insured.
In the instant case, the insurance policy provided cover against loss or damage by
burglary or housebreaking i.e. (theft following an actual, forcible and violent entry of
and/or exit from the premises). The insurance company rejected the claim of a
company, stating that there is no forcible and violent entry. The insured company had
preferred a complaint before MRTP commission, which rejected it. The company
preferred appeal.

The Apex Court bench comprising of Justices Anil R. Dave and L. Nageswara Rao
upholding the order of MRTP commission observed that as per the Insurance contract
forcible entry is required for a claim to be allowed under the policy for burglary/house
breaking.

The Bench observed: “It is well-settled law that there is no difference between a
contract of insurance and any other contract, and that it should be construed strictly
without adding or deleting anything from the terms thereof. On applying the said
principle, we have no doubt that a forcible entry is required for a claim to be allowed
under the policy for burglary/house breaking.”

The Court further observed: “If there is any ambiguity or doubt the clause in the
Policy should be interpreted in favor of the insured. But we see no ambiguity in the
relevant clause of the policy and the rule of contra proferentem is not applicable.

BHAGWATI BAI V. LIC1

Facts: The plaintiff is (beneficiary of the policy) and her husband late Mulchand
insured himself with the defendant on 28.3.1972 for the sum of Rs. 25000/-. He also
had filed a proposal form and personal statement on the same date and died within a
month on 16.4.71. The division manager refused the claim by the appellant on the fact
that he had concealed the fact that before filing for the present policy he had 3
policies in March 1965, which had lapsed in March 1970.

Issues: Now, it’s to be observed under 2 broad issues:

1) Whether the deceased deliberately concealed the fact of the existence of
earlier 3 policies in hand?
2) Was the fact concealed material to the bearing of risk undertaken by the
company i.e. if it would still have insured the life of the insurer if the corpn.
was made aware of the facts alleged to be concealed.

Judgment: The court applied section 17 and 19 of the contract act, 1872 and held the
insurer cannot repudiate the liability by showing some inaccuracy or falsity of the
statement, nor can avoid the policy for a material representation if it has no bearing on
the risk.
The National Consumer Disputes Redressal Commission has ruled that any delay in
the notification of theft to the Police or the insurer in motor vehicle policies is fatal to
the claim in its judgment of 4 December 2014.

1
AIR 1984 M.P 126.
HDFC ERGO General Insurance Co v Bhagchand Saini

Facts:
The insured informed the insurer of theft of his vehicle after a delay of 3 months. The
information to police was after a delay of 2 days. The insurer repudiated the claim on
the ground that the enormous delay in notification was in violation of policy
conditions.
The insured filed a complaint before the District Forum which allowed his claim on a
non-standard basis by applying the principle laid down by the Supreme Court in
Amalendu Sahoo v OIC AIR 2010 SC 2090, where the Supreme Court had directed
payment of 75% of the claim in case of an accident of a vehicle which was registered
for private use but was being used for commercial purposes. The State Commission of
Rajasthan upheld the order of the District Forum and the Insurer preferred a Revision
before the National Commission.
National Commission's Decision:
1 Any delay in informing the police of the theft of a vehicle was ruled to be fatal
to the claim and information must be given immediately, "..the word
immediately has to be construed, within a reasonable time having due regard
to the nature and circumstances of the case."
2 The National Commission relied upon the Supreme Court judgment in the
matter of OIC v Parvesh ChanderChadha (Civil Appeal No 6739 of 2010) to
state:
"On account of delayed intimation, the appellant was deprived of its legitimate right
to get an inquiry conducted into the alleged theft of the vehicle and make an endeavor
to recover the same."
3 The National Commission noted that a minor delay was also held to be
justification for denial of the claim by a previous judgment of the National
Commission itself:
"In the above case, a delay of 2 days in lodging the FIR and delay of 9 days in
reporting the matter to the Insurance Company was found fatal."

We acted on behalf of the insurer in the matter and were successful in overturning the
judgment of the State Commission.
 CONCLUSION

OPPORTUNITIES AND CHALLENGES

Insurance is 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 on the happening of certain event. Insurance
indemnifies assets and income. Every asset (living and non living) has a value and it
generates income to its owner. The income has been created through the expenditure
of effort, time and money. Every asset has expected life time during which it may
depreciate and at the end of the life period it may not be useful, till then it is expected
to function. Some times it may cease to exist or may not be able to function partially
or fully before the expected life period due to accidental occurrences like burglary,
collisions, earthquakes, fire, flood, theft etc. these types of possible occurrences are
"risks". Future is uncertain; no body knows what is going to happen? It may or may
not? Insurance is the concept of risk management the need to manage uncertainty on
account of above stated risks. Insurance is a. way of financing these risks either fully
or partially. Insurance business in India can be broadly divided into two categories
such as Life Insurance and General Insurance of Non-life Insurance.
In the coming years, insurers would face the most difficult challenge to provide
returns as compared to other financial options. Return on investment are going down,
therefore there is pressure on insurance companies to produce better operational
results to safeguard the interest of insuring public investment regulation should ensure
that both security and profitability requirement are respected. It should promote the
diversification, spread and liquidity of investment portfolios as well as the maturity
and currency matching of assets and liabilities. Regulation must include a list of
admitted assets on which ceilings may be set and requirement on the way in which
investment should be valued. Public insurance companies have been showing their
persistent faith in government securities. Investment management should consider
increasing investment in equity as the long-term option, especially when the stock
market is doing well by substantial positive results. IRDA should allow securitized
assets as an eligible investment option, with the objective to achieve optimization of
return and immunization of risk, there is need to replace of traditional approach of
investment with the dynamic quality initiatives.
The investment management of fund require multifaceted skills for assessing the
characteristics of the liabilities, aspirations of the policy holders and other factors
which have a bearing on the investment policy for identifying relevant asset allocation
strategies, and/or assets and putting strong organization in place for efficient
management of funds.

The future growth of insurance industry depends on continuing macros anomic

stability, sound irrigation and avoidance of company failures and scandals that would
more the good reputation of the industry.
Two new draft insurance bills are under consideration. These aim to modern it’s the
legal team work and address most of the current gaps in regulation and the
responsibilities of directors, on internal control and risk management systems, and on
the duties of actuaries and auditors. They also require the creation of separate
subsidiaries for engaging in loan term and general insurance. The fallowing are the
same challenges needed to be taken by the insurance sector to improve services.

This chapter deals with an overview of insurance sector The chapter covers
introduction of insurance with number of terms of insurance like risk insured, insurer,
beneficiaries, control etc. The chapter also reveals the history of general insurance in
world as well as in India, back ground and definition of general insurance, importance
and function of general insurance, Advantages and limitations insurance. The chapter
reveals basic principles of insurance, nature of insurance business, classification of
insurance and the organizational set-up and management of general insurance public
sector companies, The chapter deals with the regal framework of Insurance, the policy
of general insurance companies, products of general insurance companies and finally
the opportunities and challenges before the insurance industry in India as well as in
the world.
 BIBLIOGRAPHY

BOOKS
1. Dr. Avtar Singh, “Principles of Insurance Law” , 17th ed., 2002, Wadhwa &
Co., Nagpur.
2. "Insurance Theory and Practice" Prentice - Hall of India Private Limited, New
Delhi, 2006.
3. “Insurance”, RSBA Publications, Jaipur B.S., 1998.
4. Brij Anand Singh, ‘New Insurance Law’, University Book agency, 4th ed.,
2000, Allahabad.

WEBSITES
1. www.nationalinsurance.com
2. www.orientalinsurance.nic.in
3. www.newindia.co.in
4. www.uiic.in