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Assignment Report On Insurance Law in India: Acknowledgement
Assignment Report On Insurance Law in India: Acknowledgement
Insurance, in law and economics, is a form of risk management primarily used to hedge
against the risk of a contingent loss. Insurance is defined as the equitable transfer of the
risk of a loss, from one entity to another, in exchange for a premium.
A means by which individuals can have fewer expenses and more financial coverage in
the event of death or health issues that cannot be foreseen occurring in the future.
In simple word we can say insurance is a contract in which one party agrees to compensate
another party for any losses or damages caused by risks identified in the contract in exchange for
the payment of a lump sum or periodic amounts of money to the first party.
Insurance Law
Insurance law is the name given to practices of law surrounding insurance, including insurance
policies and claims.
Also we can define this branch as law deals with property, life, and liability insurance; fire and
automobile insurance forms; and the regulation of insurance.
The history of life insurance in India dates back to 1818 when it was conceived as a means to
provide 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
lead planning and development.
The (non-life) insurance business continued to thrive with the private sector till 1972. Their
operations were restricted to organized trade and industry in large cities. The general insurance
industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped
into four companies- National Insurance Company, New India Assurance Company, Oriental
Insurance Company and United India Insurance Company. These were subsidiaries of the
General Insurance Company (GIC).
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 by 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. LIC formed by an Act of Parliament- LIC Act 1956- with a capital
contribution of Rs. 5 crore from the Government of India.
1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all classes of
general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency margins
and the Tariff Advisory Committee set up.
1972: The general insurance business in India nationalized through The General Insurance
Business (Nationalization) Act, 1972 with effect from 1st January 1973. 107 insurers
amalgamated and grouped into four companies- the National Insurance Company Limited, the
New India Assurance Company Limited, the Oriental Insurance Company Ltd. and the United
India Insurance Company Ltd. GIC incorporated as a company.
The Insurance Act, 1972 and the General Insurance Business (Nationalization) Act, 1972 govern
Fire and Marine Insurance, while the Indian Marine Insurance At, 1963 governs marine
insurance in the country. These laws contain provisions relating to the constitution, management
and winding up of insurance companies and the conduct of insurance business of all types. All
insurance business in India has been nationalized.
Contract of Insurance
A Contract of insurance is a contract by which one party undertakes to make good the loss of
another, in consideration of a sum of money, on the happening of a specified event, e.g. fire
accident or death. Law recognizes insurance as a system of sharing risk too great to be borne by
one individual.
FIRE INSURANCE
Fire insurance is a contract to indemnify the insured for destruction of or damage to property or
goods, caused by fire, during a specified period. The contract specifies the maximum amount,
agreed to by the parties at the time of the contract, which the insured can claim in case of loss.
This amount is not, however, the measure of the loss. The loss can be ascertained only after the
fire has occurred. The insurer is liable to make good the actual amount of loss not exceeding the
maximum amount fixed under the policy.
CAUSA PROXIMA
It is a rule of law that in actions on fire policies, full regard must be had to the causa proxima. If
the proximate cause of the loss is fire, the loss is recoverable. If the cause is not fire but some
other cause remotely connected with fire, it is not recoverable, unless specifically provided for.
Fire risks do not cover damage by explosion, unless the explosion causes actual ignition, which
spreads into fire. The cause of the fire is immaterial, unless it was the deliberate act of the
insured.
STEPS TO BE TAKEN IN FIRE INSURANCE CLAIMS
• It is the duty of the insured, or any other person on his behalf, to give immediate notice of
fire to the insurance company so that they can safeguard their interest, such as, deal with
the salvage, judge the cause and nature of fire and assess the extent of loss caused by the
fire.
• Failure to give notice may avoid the policy altogether.
• The insured is further required by the terms of the policy, to furnish within the specified
time, full particulars of the extent of loss or damage, proof of the value of the property
and if it is completely destroyed, proof of its existence.
• Delivery of all these details to the company is a condition precedent to the claim of the
assured to recover the loss. If the assured prefers a fraudulent claim, whether for whole or
part of the policy, he would forfeit all benefits under the policy, whether or not there is a
condition to this effect in the policy. Generally, the fraud consists in over -valuation, but
over-valuation due to mistake is not fraudulent. In a majority of fire insurance claims, the
expert assessors of the company are able to arrive at mutually acceptable valuation.
MISCELLANEOUS OR LIABILITY INSURANCE
'Miscellaneous Insurance' refers to contracts of insurance other than these of Life, Fire and
Marine insurance. This branch of insurance is of recent origin and it covers a variety of risks.
1. Personal Accident Insurance - This means insurance for individuals or groups of person
against any personal accident or illness. In India this type of insurance is done by the General
Insurance Corporation. The risk insured in personal accident insurance is the bodily injury
resulting solely and directly from accident caused by violent, external and visible means.
2. Property Insurance - Property risks relate to burglary, house breaking, theft, crop insurance,
etc. Any property, movable or immovable, present or future, vested or contingent can be insured
from my losses by accidents other than fire and marine adventure. The most popular in this
branch is burglary insurance.
3. Liability Insurance - Just as a person can insure himself against the risk of death and personal
injury, or damage, determination or destruction of property, there can also be an insurance
against the risk of incurring liability to third parties. The risk of liability arising out of the use of
property comes under the category commonly called "liability insurance". It includes --
i. Public Liability Insurance: That is, insurance against a liability imposed by law. For
example, a house owner may obtain an insurance against his liability to invitees or
licensees, arising from body injury or damage to property.
ii. Professional Negligence Insurance: These policies give professional indemnity cover to
accountants, solicitors, lawyers, from any loss or injury due to any negligence in the
conduct of their professional duties.
iii. Compulsory Insurance: The ESI Act makes it compulsory for the employers (covered
under that Act) to insure their workmen by providing certain benefits to them in the event
of their sickness, maternity and employment insurance. The employees insured are
entitled to (a) Sickness benefit, (b) Maternity benefit, (c) Disablement Benefit, and (d)
Dependent's benefit.
iv. Employer's Liability Insurance: The liability of an employer under the modern labor laws,
has considerably extended and the employers are tempted to take out insurances against
such liabilities. For examples, when the employees retire, substantial amount become
immediately payable by way of gratuity, commuted pension, leave salary, compensation,
etc. and also the uncommitted pension becomes payable in future. Employers often take
insurance policies which assure payment of such amounts, as and when these becomes
payable.
v. Guarantee Insurance: The main types of policies included in guarantee insurance are a)
insurance for performance of contract, policies, the guarantor / underwriter insures the
promisee or employer against the loss arising by non-performance by the promisor or the
dishonesty of the employee.
Fidelity policies are the most common type of guarantee policies, taken under contracts of
employment where the employee has an opportunity to be dishonest. Such policies cover the risk
of losses arising by theft or embezzlement of money or securities, or by fraud, on the part of
employees.
4. Motor Vehicle Insurance - A policy for motor vehicle insurance is, ordinarily, a combined
insurance against the damage to the motor vehicle and its accessories, death of or injury to the,
occupant of the vehicle and also against the risk of liability for injury to, or the death of, third
parties caused by the driver's negligence.
g) Liability: The insurer will indemnify in respect of sums which the insured becomes legally
liable to pay as
i. Compensation and litigation expenses incurred by the insured , in connection with
accidental death of or bodily injury to any person other than an employee, and / or
accidental damage to property caused by or through the fault or negligence of the insured
or his family member,
ii. Compensation to the insured employees under the Fatal Accident Act/ Workmen's
compensation Act,
h) Business Interruption: The insurer undertakes to indemnify for losses arising out of business
interruption i.e. cessation of normal commercial activity on account of or as a direct result of fire
and allied perils (covered in clause "a" above)
2) FIRE POLICY "A"
Under this policy the insurer undertakes to indemnify in respect of any loss of, or damage to, the
property insured, caused by --
a. Fire
b. Lightning
c. Explosion / Implosion excluding damage to boilers, economizers or other vessels in
which steam is generated,
d. Riot , strike and malicious damage,
e. Impact damage by any rail/road vehicle or animal,
f. Aircraft and other aerial and / or space devices and / or articles dropped there from,
g. Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation,
h. Subsidence and landslide ( including rockslide) damage,
i. Earthquakes fire and shock.
Under the provisions of Motor Vehicles Act all the vehicles which are plying in public places
shall have at insurance policy at least to cover third party liability as specified under the Act.
There are two types of policies available for motor vehicles - third party insurance -policy A and
comprehensive insurance policy- policy B.
Third party insurance policy covers only the inter-alia liability of the vehicle owner for loss or
damage to life or property of the third parties whereas comprehensive insurance policy covers in
addition to third party liability, loss or damage to the vehicle itself by way of accident, theft, etc
and specified perils.
Whether the insurance premiums are same or different amongst four Indian companies?
The premium rates for motor vehicle insurance in India are governed by Tariffs which is same
for all the companies operating in India.
For what value the car is to be insured - Depreciated value or reinstatement value?
The car is neither to be insured for reinstatement value nor for depreciated value. It is to be
insured for second-hand value in the local market for a similar type of car for a similar model. In
the event of loss, the liability of insurance company is the maximum compared to the market
value or the amount of insurance whichever is less.
How much would the insurance company pay in the event of an accident?
In case of an accident, the insurance company pays for cost of damaged parts which are replacing
and the labour cost to repair the vehicle. As per the revised regulations, depreciation is not
deducted from the cost of the parts except for the tyres and tubes for which 50 percent
depreciation is deducted.
What are the different types of covers that are granted under Motor Insurance?
There are two types of insurance cover for each class of vehicles:
“A” Policy:
This covers the insured’s liability to third parties for death and bodily injury caused by an
accident involving the motor vehicle. This refers to the minimum risks that are to be covered
under the Motor Vehicles Act 1938 (Act Liability).
“B” Policy:
Is wider in scope and covers not only accidental damage to the insured’s own vehicle, but also
liability to third parties for bodily injury and / or property damage caused as a result of an
accident involving the insured vehicles (Own Damage Losses and Act Liability). The policy can
also be extended to cover additional liabilities (as provided in the Tariff)
What briefly is the risk covered under the Own Damage Policy?
The insurance company will indemnify the insured persons against loss or damage caused to the
insured vehicle by any of the following:
The insurance company covers any amount which is legally required to be paid by the insured
person, to third parties on account of their death, bodily injury or damage to their property arising
out of the use of the insured car. The insurance company also indemnifies the legal costs and
expenses incurred by the claimant, if the insured becomes legally liable to pay them.
The insurance company will further indemnify any legal liability payable by the insured to the
occupants in the car (insured vehicle) provided they are not carried for hire or reward and are not
employees / family members of insured. The indemnity under this policy is available to any
driver who is driving the car if he has been permitted to do so by the insured and provided such
driver does not have any other similar cover.
The Certificate of Insurance issued by the insurers in relation to every vehicle is the only
evidence acceptable to the police authorities to show that valid insurance exists. This document
has to be produced when demanded by an authorized police officer.
The Certificate of Insurance cannot be backdated. Hence, if a Policy is not renewed on or before
the expiry date, the Certificate of Insurance in respect of new Insurance will be effective only
from the date of New Insurance. For every renewal, a fresh certificate must be obtained. If there
is any alternation in the risk during the currency of the insurance, the old certificate should be
surrendered and a fresh one to be obtained. Duplicate Certificate in lieu of defaced, mutilated or
lost certificates can be obtained on payment of prescribed fee and after production of an affidavit
to that effect.
What is expected of the insured in the event of an accident involving damage to the vehicle
and/or injury to third party?
When an accident takes place, a report should be immediately filed with the insurance company
and a set of claim forms submitted to them. An estimate for repairs and/or replacements has also
to be prepared and submitted. The insurance company may then appoint an independent
Surveyor who will also value the damage and hold discussions with the repairers and arrive at the
amount at which the claim will be settled.
On completion of the survey, the repair work can be undertaken. When the relevant bills are
produced, settlement will be made under the Policy. The claim amount may be paid either
directly to the repairer or to the Insured if the latter has already made payment to the repairer and
holds proof of the same.
In case of settlement of claim either for total loss of the vehicle or for replacement of certain
items, such damaged vehicle or parts belong to the insurance company. They may arrange for
disposal of the same in the best manner possible.
No settlement should be made with the third parties for any compensation to the latter and no
commitment should be entered into with regard to the Insured’s liability with the third parties.
All dealings with the third parties will be only with the knowledge and approval of the Insurance
Company. Any claim from third parties will have to be suitably defended in consultation with the
Insurance company and expenses for such defense will be payable by the insurance company if
incurred with their consent.
MARINE INSURANCE
The contract of marine insurance is generally affected through the agency of insurance brokers
employed by the insured. The broker prepares a brief memorandum of the risks to be covered
and takes it to a number of individual insurers, called underwriters, each of whom initial the note
for the amount he is prepared to underwrite. The document, known as "The slip, " contain
information such as the name of the ship, the date of voyage, the description of the risk, the sum
insured and the rate of premium. "The Slip" is in practice a complete and final contract.
However, a contract of marine insurance must be embodied in a marine policy in accordance
with the Act.
ASSIGNMENT OF POLICY
A marine policy is assignable by endorsement, or in any other customary manner, and the
assignee can sue on it in his own name subject to any defense which would have been available
against the person who affected the policy. The assignment may be made either before or after
the loss, but an assured who has parted with or lost his interest in the subject-matter insured
cannot assign.
Loophole:
Contract - a binding agreement between two or more persons that is enforceable by law.
If you have home insurance, it is likely that your plan is a standard one that resembles most home
insurance plans around the country. Generally, it will most likely cover structural damage to your
home and other structures on the property (such as a shed or garage), personal injury liabilities
you incur if someone is hurt on your property, damage to objects you store in your home, and
extra costs of living that you might incur if your home becomes uninhabitable.
These basic home insurance plans, however, are not without loopholes. Certain events that may
fall under one of the categories listed above may not be covered if the cause is one that the
insurance company specifically excludes.
Unfortunately, most people are unaware of home insurance loopholes until it's too late and they
are trying to get reimbursement for a claim.
A common loophole in your home insurance plan has to do with structural damage caused by
termites. Perhaps you just learned that the foundation of your home has been destroyed by
termites and needs to be replaced. Most insurance companies will not cover this because the
termites were most likely there before you purchased your home.
Another loophole has to do with coverage of your personal belongings. You need to make sure
that your home insurance policy covers personal effects in the first place. Many policies do not.
Even if your homeowner’s insurance policy does cover personal property, people who have lost
everything due to a disaster are shocked to find that the insurance company will not reimburse
them because they could not produce receipts for their personal property. Sometimes the home
owner did have receipts, but the receipts were destroyed along with the home.
A technique used to bite you where it hurts just after the ceiling comes down… You have an
excess of Rs.5000 on some of your policy but Rs.12500 on other parts… watch out for different
excesses on different parts of your cover!
Also used to keep the price low. Go to a price comparison site (you know the ones!) and look for
the lowest price… check what excess it has then go to the site… is it still the same?
2. Premium
Once this used to mean the correct payment to cover your risk, now it just means price!
3. Comprehensive Cover
Comprehensive. It’s just a word… this sort of cover doesn’t cover a lot of things … “acts of
God” for example, and “Riots and civil commotion”. That’s because insurance companies are not
prepared to go bust just to make a point. The onus is on you to check what is covered.
Also watch out for little things like spectacles cover on your home policy or how much your
stereo is covered for on your motor policy… Some companies give you a very low level of cover
for this sort of thing and you need to get it right. After all, ever tried getting a new car stereo in
your Merc for Rs.3500?
4. Continuous Authority
A good one to watch out for, this means they will just carry your policy on at renewal instead of
cancelling it, so you had better tell them if you want them to stop taking your cash. A phone call
should do, though, even after renewal they will still let you cancel so long as you call in the first
few weeks.
6. Assumptions
Assumptions are a tactic used by many insurers to keep their headline premium low… they may
“assume” you have thirty grand of contents or that your house is not near water or near a tree.
They may also assume your car has never been modified and that you have never had a speeding
ticket.
The thing is, they don’t expect you to accept their assumptions. You are still legally required to
declare all these things to them, so you had better keep an eye out for what they assume because
if you don’t correct them you will get a nasty surprise when you come to claim!
This fellow may come to see you when you make a claim – his sole purpose is to keep the cost of
the claim as low as possible.
These guys always know where you can buy a genuine Picasso for a fiver! Be careful not to
upset one, make them tea and co-operate because it’s like having the Customs men round. You
are in their hands.
8. Protected NCD
Means you don’t take a step back from your full NCD if you have to make a claim. The question
is:- how often do you claim and how much does it cost? It’s worth looking back over your last 10
years record to work out whether you are going to benefit.
9. Comparison Sites
These advertise on the TV and it looks perfect. You enter one quote and get 30 prices.
The trouble is, the prices often change when you click any of the links. You get to the insurer’s
site and the premium goes up, up and away! So… do they live up to the hype? Not yet, says
InsuranceStall!
She also knows a dealer on the Portobello Road who can replace your chandelier for a fiver. She
can basically always knock down the cost of your goods, and if the Insurer wants to offer you a
cheque for the lot, her job is to keep that cheque down to a minimum.
An innocent enough question, you may think. It’s the insurance company, right?
Many insurance companies offer a full service. You call them up with your claim and they get
someone over immediately who organizes all the workmen and everything gets moving.
Many other companies, however, will just send you a claim form and leave the rest to you. Let
me tell you if your ceiling has caved in and you need a plumber, a builder and an electrician in
the next 24 hours; you may need to have crossed paths with a dozen black cats to make this
happen. You may also need a copy of the Yellow Pages and a lot of 20 pence pieces…. Well,
you get the idea.
In short, it may be wiser to find out which type of company you are dealing with before you hit
“Buy Now” button.
You only find out when you claim. For Motor it can be even worse. Your car is stolen with your
camcorder in the boot but when you claim for the cam they say “it’s not covered, you should
claim for that on your House policy” and then you go back and, may find it’s not covered there
either.
When you buy your House cover look really carefully to see what they call a high risk item.
Almost every company seems to differ. At one company a high-risk item can be anything over
Rs.200, 000 at another it’s anything that is highly prices AND easy to steal, so your piano
doesn’t fall into that category.
5. Collections
This is a great one. So, you have a couple of hundred CD’s and some kid comes along and steals
the lot. Are they covered? Well, at some companies they will only be covered if you declared
them as a collection when you bought your policy. Do you think the sales agent point that out
and asks how many CD’s have you got? Not always.
Life Insurance
Life insurance contract may be defined as the contract, whereby the insurer in consideration of a
premium undertakes to pay a certain sum of money either on the death of the insured or on the
expiry of a fixed period whichever is earlier. The definition of Life insurance contract is
explained in Insurance Act, 1938 by including annuity business.
2. Term Policy
This policy covers the risk only, during a particular period. The sum assured is payable only if
death happens during the term. Under this policy premium rate is lower than any other policy.
Nowadays in order to attract more people, policies are issued with the condition that the
premium paid will be returned after the term is over, if death does not occur.
Nomination
A policyholder would like that in the case of the death, the policy money should not be held up
for want of succession certificate or letters of administration. This would take much time and
cost. This problem can be solved by effecting nomination or assignment of life insurance policy
in the name of any one in his family or relatives. Section 39 of the Insurance Act, 1938 has
regulated nomination of life policies to enable the policyholder to seek prompt payment of claim
in the event of his death. According to Section 39 of the Insurance Act, 1938, nomination is the
process of appointing or nominating a person or persons by the insured, to receive the payment
of the policy, in the event of death. The person who is authorized to receive the payment of the
policy is called nominee. If the policy matures by expiry of time, the policy amount is payable to
the insured himself and not to the nominee. The nomination can be done only by the insured. If a
policy is insured on the life of another person on a proposal made by a third person, such a
proposer is not entitled to make a nomination. It enables the insurer to know in advance to whom
he should make the payment of claim in the event of death of the insured. Further, the nominee
need not obtain a letter of administration from the court to claim the policy money.
The case of Ms. Natasha Derek and her relative. She says; my car was hit by a relative when it
was parked in my driveway. This relative doesn't carry any insurance on her car. So, I have filed
the claim with my insurer. They now want me to pay the Rs.40, 000 deductible. This is quite a
big amount for me and I wasn't at-fault. Can I avoid paying this high deductible? Can I sue my
relative who doesn't have a carrier?
Atal Yassenzai says; if the insurance company is putting stress on me and withholding
information from me, it was their client who hit my vehicle he was cited a ticket. For being left
of center he was flying down the road in a double yellow zone traffic was stopped 2 lanes and he
had to go around them in order to hit me. He has a witness and he and his so called witness are
saying that I pulled out of a lot that I was never in. Lucky for me I kept my proof of purchase and
they even have me on camera with the traffic stopped. Anyway his insurance company is treating
me like I am a criminal and will not tell me anything which in turn is really stressing me out. So
can I sue if I want to .I did try to be nice but his agent really makes me angry and stresses me out.
I am just worn out from dealing with her.
Stop talking to the insurance adjuster who is stressing you out. You are under no legal obligation
to communicate with him/her. All information they need, they can obtain from the crash report.
Further, they are under no obligation to tell you anything since you are not their client. Deal with
your own insurance company and let them handle it on your behalf; that's why you pay them.
As far as suing them probably not, because you have no element of damages unless
communicating with them has sent you to the doctor with stress-related issues and you're on
medication, simply saying "it stresses me out" will get you nothing. In most cases you can only
sue the person that hit you, the insured. The insurance company hires a lawyer to defend them,
and then pays any settlement or verdict. Some places allow you to sue the insurance company
directly for negotiating in bad faith. For example: a person rear ends you, the cops show up and
cite the person, and you have 4 crore in med bills and the insurance company offers you $5. Then
you could sue the person that hit you and the insurance company (for bad faith).
2. www.bogoroch.com
3. www.ampminsure.com
4. www.google.com