38.

a) Social Sector Obligation

The Insurance Regulatory and Development Authority of India (IRDAI) has mandated that
insurers undertake certain obligations to serve the rural and social sectors. The regulations
define the "social sector" to include the unorganized sector, informal sector, economically
vulnerable or backward classes, and other categories of persons, both in rural and urban
areas.
The definition of Rural for the purpose is as defined in Regulation 2 (c) of IRDAI (Obligation
of insurers to Rural and social sector) IRDAI has specified as rural areas. Rural sector” shall
mean any place as per the latest census which meets the following criteria--
(i) a population of less than five thousand;
(ii) a density of population of less than four hundred per square kilometer; and
(iii) more than seventy five per cent of the male working population is engaged in
agricultural pursuits.
The categories of workers falling under agricultural pursuits are as under:
(i) Cultivators;
(ii) Agricultural labourers
(iii) Workers in livestock, forestry, fishing, hunting and plantations, orchards and allied
activities.
The "unorganized sector" includes self-employed workers such as agricultural laborers, bidi
workers, brick kiln workers, carpenters, cobblers, construction workers, fishermen, hamals,
handicraft artisans, handloom and khadi workers, lady tailors, leather and tannery workers,
papad makers, powerloom workers, physically handicapped self-employed persons, primary
milk producers, rickshaw pullers, safai karmacharis, salt growers, sericulture workers,
sugarcane cutters, tendu leaf collectors, toddy tappers, vegetable vendors, washerwomen, and
working women in hills, among others.
The "economically vulnerable or backward classes" are defined as persons who live below
the ,poverty line.
The regulations mandate that insurers must cover a specified number of lives in the social
sector during the first five financial years of their operation. The targets increase
progressively, starting with 5,000 lives in the first year and reaching 20,000 lives by the fifth
year. The social sector obligations are aimed at extending insurance coverage to the
unorganized sector, informal sector workers, and economically weaker sections of society,
thereby promoting financial inclusion and social security. These obligations are part of the
broader objective of the IRDAI to ensure that the insurance industry contributes to the
development of the rural and social sectors, which have traditionally been underserved by
financial services.
The Employees State Insurance Act, 1948 provides for Employees State Insurance
Corporation to pay for the expenses of sickness, disablement, maternity and death for the
benefit of industrial employees and their families, who are insured persons. The scheme
operates in certain industrial areas as notified by the Government. Insurers play an important
role in social security schemes sponsored by the Government. Pradhanmantri Jan dhan
Yojna, RSBY-Rashtra Swasth Bhima Yojna. The crop insurance scheme (RKBY) is a measure
with considerable social significance. The scheme benefits not only the insured farmers but
also the community directly and indirectly. All the rural insurance schemes, operated on a
commercial basis, are designed ultimately to provide social security to the rural
families. Apart from this support to Government schemes, the insurance industry itself offers
on a commercial basis, insurance covers with an ultimate objective of social security.
Examples include Janata Personal Accident Scheme, Jan Arogya Scheme etc.
By mandating insurers to undertake social sector obligations, the IRDAI is leveraging the
insurance industry to provide risk protection and financial security to vulnerable sections of
the population. This aligns with the broader recognition that the provision of social security is
an obligation of the State, and insurance can serve as an effective tool to fulfill this
obligation.
b) Micro Insurance
Micro insurance is specifically intended for the protection of low -income people, with
affordable insurance products to help them cope with and recover from financial losses. The
need of insurance for underprivileged section cannot be avoided as this section of society is
more prone to many risks which ultimately leads to incapacity to face such uncertain
situations. Hence, the role that micro insurance plays thus becomes inevitable.
India has been seen to be a very exciting market and a pioneer in setting out the regulatory
framework for Micro Insurance in the world. Microinsurance promises to support sustainable
livelihoods of the poor. Liberalization of the insurance sector and Government Schemes has
created new opportunities for Microinsurance to reach the vast majority of the poor, including
those working in the informal sector.
Various efforts have been made in the past to address the distribution challenge in micro
insurance. The concept of ‘micro insurance agent’ introduced in 2005 was aimed at attracting
more intermediaries to this space and leverage upon the connect enjoyed by grassroots
organizations like cooperatives and SHGs with a large section of the low-income segment.
Although this initiative succeeded in enrolling large numbers of micro insurance
intermediaries, the volumes continue to remain modest – both in terms of premium
collections as well as lives covered.
One of the greatest challenge for microinsurance is the actual delivery to clients. Methods
and models for doing so vary depending on the organization, institution, and provider
involved. As Dubby Mahalanobis states, one must be thorough and careful when making
policies, otherwise microinsurance could do more harm than good. Tricky challenges In
general, there are four main methods for offering microinsurance the partner-agent model, the
provider-driven model, the full-service model, and the community-based model. Each of
these models has their own advantages and disadvantages.
 Partner agent model: A partnership is formed between the micro insurance(partner as
MFI) scheme and an agent (insurance companies), and in some cases a third-party
healthcare provider. The microinsurance scheme is responsible for the delivery and
marketing of products to the clients, while the agent retains all responsibility for
design and development. In this model, microinsurance schemes benefit from limited
risk, but are also disadvantaged in their limited control. Micro Insurance Centre is an
example of an organization using this model.
 Full service model: The microinsurance scheme is in charge of everything; both the
design and delivery of products to the clients, working with external healthcare
providers to provide the services. This model has the advantage of offering
microinsurance schemes full control, yet the disadvantage of higher risks.
 Provider-driven model: The healthcare provider is the microinsurance scheme, and
similar to the full-service model, is responsible for all operations, delivery, design,
and service. There is an advantage once more in the amount of control retained, yet
disadvantage in the limitations on products and services.
 Community-based/mutual model: The policyholders or clients are in charge,
managing and owning the operations, and working with external healthcare providers
to offer services. This model is advantageous for its ability to design and market
products more easily and effectively, yet is disadvantaged by its small size and scope
of operations.

The major challenges in microinsurance distribution are: -

 Small ticket size coupled with high transaction and service delivery costs.
 Absence of a business model that can attract good intermediaries.
 Capacity building of intermediaries.
 Lack of basic awareness and knowledge on how insurance works
c) Financial Inclusion –
Financial inclusion is increasingly being recognized as a key driver of economic growth and
poverty alleviation the world over. Access to formal finance can boost job creation, reduce
vulnerability to economic shocks and increase investments in human capital. Without
adequate access to formal financial services, individuals and firms need to rely on their own
limited resources or rely on costly informal sources of finance to meet their financial needs
and pursue growth opportunities. At a macro level, greater financial inclusion can support
sustainable and inclusive socio-economic growth for all. Financial inclusion has been defined
as “the process of ensuring access to financial services, timely and adequate credit for
vulnerable groups such as weaker sections and low-income groups at an affordable cost”
The insurance sector plays a crucial role in promoting financial inclusion and providing
social security to the unserved and underserved segments of the population. The National
Strategy for Financial Inclusion (NSFI) 2019-2024 highlights several initiatives undertaken
by the insurance regulator IRDAI and the government to increase insurance penetration and
access to insurance products.
One key focus area has been increasing awareness about insurance products and their benefits
among citizens, especially in rural and semi-urban areas. This is being done through various
channels like corporate agents, Common Service Centers, and awareness campaigns. The aim
is to educate people about the importance of insurance and help them understand the products
better. To expand the availability of insurance products, the strategy emphasizes increasing
the number of delivery channels, including corporate agents, insurance marketing firms, and
Common Service Centers. This helps in last-mile connectivity and reaching out to remote
areas.
The government has also launched mass insurance schemes like Pradhan Mantri Jeevan Jyoti
Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY), which
provide life and accidental insurance cover at very low premiums to bank account holders,
including those covered under the Pradhan Mantri Jan Dhan Yojana (PMJDY). Introducing
insurance products like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan
Mantri Suraksha Bima Yojana (PMSBY) to provide affordable life and accidental insurance
cover to bank account holders. Promoting financial inclusion through the Pradhan Mantri Jan
Dhan Yojana (PMJDY), which offers accidental death cum disability insurance cover and
term-life cover to account holders. To build confidence and trust in the insurance system, the
institution of Insurance Ombudsman has been created to address and resolve grievances of
policyholders promptly. Special guidelines have also been issued to safeguard the interests of
health insurance policyholders.
Financial literacy initiatives are being undertaken in collaboration with insurance companies,
regulators, and non-governmental organizations to educate people, especially in rural areas,
about insurance products and their benefits. Overall, the NSFI strategy aims to promote
financial inclusion in the insurance sector through a multi-pronged approach involving
awareness creation, increasing access points, leveraging technology, introducing affordable
products, strengthening grievance redressal mechanisms, and promoting financial literacy.
37. a) Insurance Ombudsman –
The Insurance Ombudsman scheme was created by the 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 Insurance Ombudsman offices are presently widespread
across 17 different locations in the country. The insurance ombudsman was established
through a government of India notification dated 11th November, 1998. The purpose of
establishing the insurance ombudsman is quick disposal of the grievances of the insured
customers and to reduce their problems with respect to such grievances. The insurance
ombudsman carries immense importance and relevance not only to protect the interests of the
policyholders but also to build their confidence.
The institution of insurance ombudsman in India was established through the Governing
Body of Insurance Council (GBIC) under the Redressal of Public Grievances Rules 1998.
Subsequently, the insurance ombudsman was set up after the government of India passed a
notification dated 11th November, 1998. Under the insurance ombudsman scheme, any
person who has a grievance against an insurer (insurance company), may himself or through
their legal heirs, nominee or assignee, make a complaint in writing to the Insurance
Ombudsman within whose territorial jurisdiction the branch or office of the insurer. Due to
the insurance ombudsman, it has become possible to generate and sustain the faith and
confidence among the insurers and the customers.
The insurance ombudsman is responsible to perform the following functions:
1. Conciliation
2. Award making
The ombudsman is empowered to receive and lodge complaints as per the personal lines of
the insurance from any person who has any grievance against any insurance company.
The complaint may relate to any grievance against the insurance company in the form of:
o Any partial or total repudiation of claims by an insurer

o Any dispute in respect to the premium paid or payable in terms of the policy

o Any dispute on the legal construction of the policies in sor far as such disputes
relate to claims
o Delay in claim settlement

o Non-issue of any insurance document to the clients even after receipt of

premium
The ombudsman’s powers are restricted to insurance policies whose value does not exceed
INR 20 lakhs. The awards passed by the insurance ombudsman must be honoured by the
insurance companies within three months.
When a complaint is settled by way of the insurance ombudsman, he is responsible to make
recommendations that he finds fair as far as the case is concerned. Such a recommendation
shall be made not later than 30 days and copies of the same are to be sent to both the
aggrieved party and the insurance company. If the aggrieved party accepts the
recommendations, they shall send a written communication within 15 days of the date of the
receipt accepting the settlement.
The insurance ombudsman passes an award within three months from the receipt of the
complaint from the insured. The awards are binding upon the insurer. If the insured is not
satisfied with the Ombudsman’s award, he can approach other authorities like the consumer
forums and court of law for his grievance redressal.
b) Employees State Insurance Act –
An Act to provide for certain benefits to employees in case of sickness, maternity and
employment injury and to make provision for certain other matters in relation thereto. The
Employees’ State Insurance Act, 1948 (ESI), enables the financial backing and support to the
working class in times of medical distress such as:
 Sickness.
 Maternity Leave.
 Disorders (mental or physical).
 Disability.
 Death.
It is a self-financed initiative, which serves as a type of social security scheme, to prevent the
working class from any financial problems arising out of the above medical issues.
Only those employees are covered under the ESI scheme whose monthly wages do not
exceed Rs.21,000 (Rs.25,000 in the case of a person with a disability). Employees’ State
Insurance Corporation (“ESIC”) is a statutory corporate body set up under the ESI Act 1948,
which is responsible for the administration of the ESI Scheme. The ESI scheme is a self-
financed comprehensive social security scheme devised to protect the employees covered
under the scheme against financial distress arising out of events of sickness, disablement or
death due to employment injuries. The Union Minister of Labour heads the ESIC as its
Chairman. The Central Government appoints a Director General as the Chief Executive
Officer of ESIC. The ESIC comprises members representing crucial interest groups,
including employers, employees, the Central and State Governments, representatives of the
Parliament and the medical profession.
The scheme under the ESI Act also applies to the following:
 Shops
 Restaurants
 Hotels
 Cinema theatres
 Road motor transport undertakings
 Newspaper establishments and undertakings
 Educational institutions
 Medical institutions
 Contract and casual employees of Municipal Corporations or Municipal Bodies.
Some features of ESI scheme –
  Complete medical care and attention are provided by the scheme to the employees
registered under the ESI Act, 1948 at the time of his incapacity, restoration of his
health and working capacity.
 During absenteeism from work due to illness, maternity or factories accidents which
result in loss of wages complete financial assistance is provided to the employees to
compensate for the wage loss.
 The scheme provides medical care to family members also. As of 31 March 2022, the
total number of beneficiaries covered under this scheme is 12.04 crore.
 Broadly, the benefits under this scheme are categorized under two categories:

 Cash benefits (which includes sickness, maternity, disablement - temporary

and permanent, funeral expenses, rehabilitation allowance, vocational
rehabilitation and medical bonus) and,
 Non-cash benefits through medical care.
 The scheme is self-financing and being contributory in nature. The funds under the
ESI scheme are primarily built out of the contribution from the employees and
employers payable monthly at a fixed percentage of wages paid.
 The employer is required to pay his contribution and deduct employees’ contribution
from wages and deposit the same with ESIC within 15 days from the last day of the
calendar month in which the contribution falls due. The payment can either be done
online or through
c) Motor Vehicles Act regarding third party insurance –

Usually, two party – insurance however, in some cases, there is a third party involved. The
best example of this would be Motor Vehicle insurance, where the claim of the driver who is
not insured is provided with coverage, despite not being covered under an insurance policy.
According to the Motor Vehicles Act of 1988, it is necessary for every driver on the road to
have insurance. The vehicle used can be for the purpose of social or domestic movement but
it has to be insured. In the case of National Insurance Co. Ltd V. Fakir Chand, it was held
that the term “third party” includes a wide scope of people. This includes another party
present in a vehicle or a passerby, who are the subject matters of the insurance contract.

At the time of the payment, the insured amount is paid directly to the injured, i.e., the third
party without falling on the hands of the insured. Since the amount of liability cannot be
directly calculated, only the legal liability is insured due to which the amount of premium to
be paid does not vary. Since it is fault-based, the fault of the insured has to be proved along
with the fact that the injury was caused due to his actions.
In accordance with the Motor Vehicle Act (hereafter referred to as the “MV Act”), third-party
insurance or liability coverage is considered to be a statutory requirement. As the name
suggests, the beneficiary of the policy is not the two parties involved in a contract. To put it in
simpler terms, the vehicle owner and the insurance companies are not the beneficiaries of this
contract. The insured is not provided with any benefit. Rather, it helps in covering the legal
liability owed by the insurer to the third party on account of the disability/death caused to the
party by the insured’s vehicle.

This insurance cover is mandatory and non-life insurance companies are obligated to provide
it. In our country, third-party insurance can be obtained right at the time of purchasing the
vehicle from automobile drivers in accompaniment with the registration of vehicles. It is an
add on to the regular coverage that protects the insured from theft or damage to the vehicle.

The Motor Vehicle Act of 1988 regulates motor insurance and any third-party liabilities and
rights that arise from it. However, Part XI of the Act deals specifically with third party rights.
Section 32D of the Insurance Act of 1938 also creates an obligation on part of the insurer to
provide for insurances dealing with third party risks.

In accordance with the MV Act, there are certain requirements to be followed for third party
insurance plans, which are as follows:

Section 146 of the Act also provides that the driver of the vehicle must always carry at least a
bodily injury liability and coverage for the liability of property damage. In the case
of Govindan V. New India Assurance Co Ltd., the court held that no clause in an insurance
policy can override the third-party insurance policy.

Section 147(1): An insurer authorized to do so must provide for any damage to a third party’s
vehicle caused by the insured. These policies are required to cover any accident in accordance
with the value of the liability incurred. A certificate is to be granted in the prescribed format
containing particulars as prescribed and must be handed over to the insured.

Section 157: In accordance with this Section, the certificate of insurance can be transferred to
the new owner of the vehicle if and when the vehicle is transferred to a new owner. In order
to make the required changes with the authority in question, the transferee is required to
apply within 14 days to make the changes necessary.

In the case of Karnataka SRTC V. New India Assurance Company Ltd., the vehicle in
question was only given on hire in accordance to an agreement and was not transferred
completely. It was held by the Court that the insurer would be held liable even in case of an
agreement of lease or hire. In case of agreements for hire, cannot be excluded merely on the
basis that there is a case of extended contractual liability. Thus, even if the transfer of the
vehicle takes place even without providing notice to the insurer, the liability of the insurer
will not cease.

35. Motor Insurance is a type of insurance policy which covers your vehicles from potential
risks financially. Policyholder's car or two-wheeler is provided financial security against
damages arising out of accidents and other threats. A motor insurance policy is a contract
between the insured (vehicle owner) and the insurance company that provides protection
against financial losses arising from accidents, theft, or other damages to the insured vehicle.
In the old days, many of the pedestrians who were knocked down by motor vehicles and who
were killed or injured, did not get any compensation because the motorists did not have the
resources to pay the compensation and were also not insured. In order to safeguard the
interests of pedestrians, therefore, the Motor Vehicles Act, 1939, introduced compulsory
insurance.

Section 140 of the Motor Vehicles Act 1988, provides for liability of the owner of the Motor
Vehicle to pay compensation in certain cases, on the principle of “no fault”. The amount of
compensation, so payable, is, Rs.50,000/- for death, and Rs.25,000/- for permanent
disablement of any person resulting from an accident arising out of the use of the motor
vehicle. The Motor Vehicles Act provides that the policy of insurance shall be of no effect
unless and until a certificate of insurance in the form prescribed under the Rules of the Act is
issued. The only evidence of the existence of a valid insurance as required by the Motor
Vehicles Act acceptable to the police authorities and R.T.O, is a certificate of insurance issued
by the insurers. The points covered under a certificate of insurance differ according to the
type of vehicle insured.

There are two kinds of Motor Insurance Policies

1. Third Party Car Insurance Policy:- As per the Motor Vehicles Act of 2019, it is
mandatory to avail a Third-Party Cover. Without it, you will be driving your car
unlawfully on the road and would result in a penalty and/or fine. This cover offers
coverage against legal liability caused to a third party due to your car or vehicle. In
simple terms, Third Party insurance covers injury or death caused to a third person by
your vehicle along with damage caused to a property. Here’s one interesting feature of the
 cover. As per the Motor Vehicles Act, the claimant is not obliged to prove negligence of
the driver that was responsible for the accident. As the name suggests, Third Party
Insurance only covers third party liabilities. It does not cover damage to your vehicle or
theft. Considering the nature of the cover, the premium is also low.
This provision typically includes the following coverages:

a. Third Party Property Damage: If your vehicle causes damage to another person's
property, such as another vehicle or building, the insurance company will cover the cost
of repairs or compensation for the damaged property, up to the insured limit.
b. Third Party Bodily Injury or Death: If your vehicle causes injury or death to a third
party, the insurance company will cover the medical expenses and compensation for the
injury or loss of life, up to the insured limit.
c. Legal Liabilities: The Third-Party provision also covers legal liabilities that may arise
due to the accident, such as court costs, lawyer's fees, and any compensation awarded by
the court, up to the insured limit.

Supreme Court in the case of S. RAJASEEKARAN V. UNION OF INDIA AND OTHERS

held that the third-party insurance cover for new cars should mandatorily be for a period of
three years and for two-wheelers, it should mandatorily be for a period of five years. This
may be taken and treated as a separate product

2. Own Damage Car Insurance Policy:- An Own Damage car insurance policy helps you
stay covered against the damages caused to your car due to accidents like fire, theft,
etc. In case of an accident, an own damage cover compensates you for expense to repair
or replace parts of your car damaged in the accident. The Own Damage provision covers
the costs related to damages or losses incurred to the insured vehicle itself. This provision
typically includes the following coverages:
A) Accidental Damage: If your vehicle is damaged due to an accident, collision, or other
unforeseen circumstances, the insurance company will pay for the repair costs or
provide compensation if the vehicle is declared a total loss.
B) Fire and Theft: If your vehicle is damaged or lost due to fire or theft, the insurance
company will cover the cost of repairs or provide compensation for the insured value
of the vehicle.
 C) Natural Calamities: Damages caused by natural calamities like floods, earthquakes,
or other natural disasters may also be covered under the Own Damage provision,
depending on the policy terms.
D) Malicious Act, Riot and Strike, Terrorist attack

There are certain addon coverages which are:-

 Nil Depreciation Cover – no depreciation charged on parts replaced under repair loss
claims

 Invoice Protect – in case of total loss/ theft of vehicle – covers the difference between
the current invoice price of the same make and model and the IDV plus regn charges,
taxes and insurance expenses – normally given for vehicles less than five years old. It
is clear that the policy will pay cost of new vehicle of same make model,
specification.

 Engine Protect: seizure/hydrostatic lock arising out of water ingression due to flood /
inundation / leakage of lubricating oil - usually seen as consequential loss of cranking
the engine

 No Claim Bonus Protect: A No Claim Bonus or NCB is a reward given to

policyholders for having a claim-free year. The insurers offer NCB if they do not raise
any insurance claims during a particular policy year or consecutive policy years.
Policyholders with a claim-free record can get from 20% to 50% discount on
premiums.

It's important to note that the specific coverages and limits may vary depending on the
insurance policy and the insurer. Thus, it's always recommended to carefully review the
policy document and understand the terms, conditions, and exclusions before purchasing an
insurance policy.

34. Inco Terms - Incoterms are a set of internationally recognized trade terms that define the
responsibilities and risks involved in the delivery of goods between buyers and sellers.
International Commercial Terms or Inco terms are published by the International Chamber of
Commerce (ICC). These terms are used in international trade. It is an integral part of the sales
contract. Incoterms pave the way for international trade and eliminate any sort of confusion. In
marine policy, the buyers and sellers are the parties to a sales agreement, which is based on the
incoterms. Hence, incoterms in marine insurance is a rule book that is expected to be obliged by the
buyer and sellers.

The purpose of Incoterms is to precisely delineate three aspects of international commerce:

1. The allocation of logistic costs between the seller and buyer.

2. The transfer of risks during the transport of goods.
3. The necessary customs documents and procedures for foreign trade operations.
These rules are crucial for international sellers and buyers, but also for intermediaries in
global trade, including carriers, lawyers, and significantly, cargo insurers.

International sale of goods implies several risks, expenses, and tasks that are split between the
buyer and seller:

 Paying the cost of freight

 Incurring other expenses, such as loading and discharging
 Clearing customs
 Loss or damage to goods
 Arranging cargo insurance
Incoterms play a crucial role in outlining who’s responsible for every step of the transport
chain. Few examples for incoterms are CIF(Cost, Insurance and Freight), CIP(Carriage and
Insurance paid to).

b) FOB (Free on Board) – FOB is a kind of Incoterm. With the FOB term, the seller is
responsible for delivering the goods onto the vessel at the named port of shipment. The buyer
is responsible for arranging and paying for the marine insurance coverage from the point
where the goods are loaded onto the vessel. The seller is responsible for delivering the goods
to the port of departure, clearing it for export, and loading the goods on the vessel. Once the
goods are on the vessel, the risk transfers from the seller to the buyer, who from that point is
responsible for all costs thereafter.

Free on Board shipping is further broken down into either FOB Destination or FOB Shipping
Point, which essentially determines who foots the majority of the transportation bill - the
buyer or the seller.

FOB Destination transfers the responsibility of shipped goods when they arrive at the buyer’s
specified delivery location – usually the buyer’s loading dock, post office box, or office
building. Once the products arrive at the buyer’s location, the legal title of ownership
transfers from the seller to the buyer. Therefore, the seller is legally responsible for the
products during transport, up until the point the goods reach the buyer. FOB Destination is
different to FOB Shipping Point where the buyer is responsible for the shipping and
transportation instead of the seller. A buyer can save money by using FOB Destination since
the seller assumes costs and liability for the transportation. However, the disadvantage for the
buyer is the lack of control over the shipment, including shipment company, route, and
delivery time.

The advantage for the buyer when purchasing under FOB Incoterms is they have the most
control over the logistics and shipping costs, which allow them to choose their shipping
methods.

FOB allows the buyer to select their freight forwarder for the entire shipment. Instead of
relying on the supplier for part or all of the freighting process. The buyer only needs to rely
on a single company throughout the transportation process, thus, minimizing the back and
forth and potential for miscommunication between two shipping companies. FOB Incoterms
are also the most cost-effective option, as it allows the buyer to shop for the best possible
shipping rate. While the transfer of risk occurs when the goods are safely loaded onto the
shipping vessel, the buyer’s forwarder is responsible for the entire transportation process.
Once the cargo leaves the seller’s warehouse, the buyer is in possession of the load, and can
better control the successful outcome of their shipment.

c) CIF (Cost, Insurance and Freight) - Cost, insurance, and freight (CIF) is an international
shipping agreement, which represents the charges paid by a seller to cover the costs,
insurance, and freight of a buyer's order while the cargo is in transit. Cost, insurance, and
freight only applies to goods transported via a waterway, sea, or ocean.

The goods are exported to the buyer's port named in the sales contract. Once the goods are
loaded onto the vessel, the risk of loss or damage is transferred from the seller to the buyer.
However, insuring the cargo and paying for freight remains the seller's responsibility. The
risk transfer between the seller and buyer happens when loading the goods onto the ship or
vessel. The seller is held responsible for any risks associated with the goods until they are
loaded onto the ship at the origin port. On the other hand, the cost transfer from the seller to
the buyer happens when the goods are delivered at the destination port.

Therefore, the buyer has the ownership of the goods once it is loaded onto the vessel. In the
case of damage or destruction to the goods, after it is loaded or transported, the buyer is
responsible for raising a claim for the insurance benefit with the insurance company where
the seller has purchased the risk cover.

Sellers choosing the CIF will have increased control over the shipment process. They can
decide on the CIF value, shipment route, and other processes to benefit from cost-efficient
export. The seller can purchase the CIF at a lesser rate and add the cost to the sales invoice
for the buyer. The cargo shipped onto the vessel is covered against any damages or
destructions until it arrives at the destination. Buyers can benefit from a simple and
streamlined shipment process, avoiding the hassles of logistics and export-related formalities
in CIF shipping.

d) General Average Sacrifice - Master of the vessel sacrifices the insured property for the
safety of the common adventure ie, ship and cargo It is a voluntary sacrifice of a particular
cargo or ship gear with an intention to save the vessel and the cargo on board for the safety of
the common interest. General Average is a clause in Maritime insurance, which is defined
under section 66 of the Marine Insurance Act 1963. A General Average in Maritime Insurance
is a sacrifice made by the assured in order to prevent the insured articles from getting
damaged. The sacrifice of goods must be made voluntarily and reasonably to preclude the
more significant cause. General Average loss rarely takes place. However, when it occurs, an
insured may lose millions of dollars of cargo and the vessel while protecting human life.

In this case of Adams, Mr. Justice Grier stated three elements required to form General
Average in Maritime Insurance. If any of these elements is absent, the insured party cannot
claim damage under the marine Insurance policy. Listed below are three elements stated by
Justice Grien -

 First, there must be a common danger to all participants in the cargo. The threat must
be imminent and inevitable for the crew of the ship
 The risk could only be avoided by voluntarily sacrificing tewer portions of the ship in
order to save the large portion.
 The attempt to avoid the imminent peril and save the ship must be successful

Thus, General Average in Maritime Insurance is an act or sacrifice committed by the crew or
insured to prevent the total loss of the ship. However, the surveyor can determine if the claim
meets the essential elements of the General Average in Maritime Insurance. Upon proper
examination, the insured may get Indemnified for the losses incumed.
33. Constructive Total Loss - A constructive total loss in marine cargo insurance means that
the cost of repair of a damaged item is more than the current value of the item. The insurer
settles the insured the entire amount. Since the repairing cost exceeds the replacement or
market value so the insurer settles the entire claim. Insurance companies often consider the
loss equal to 50% or 60% of the stated value of the item. This helps them ascertain the
constructive total loss. This results in the cargo being declared a total loss, and the insurance
company compensates the policyholder with the full insured amount. This loss can be caused
by natural disasters, accidents, or theft if claimants don't insure their property for the full
value, they may not receive full compensation in case of a loss.

The insurer has the authority to declare a constructive total loss when the retrieval cost of a
ship or its cargo is impractical. Even if the ship or cargo hasn't suffered complete damage,
restoring or repairing it to its original state is not a practical option. Abandoning the vessel is
recommended when it sustains severe damage and repair expenses are excessive. Similarly,
abandoning the cargo is preferable when the cost of bringing it to the shore is higher than its
value and it is secure on an abandoned ship. In such cases, a marine company can assert a
constructive total loss. The insurer has the authority to declare a constructive total loss when
the retrieval cost of a ship of its cargo is impractical. Even if the ship or cargo hasn't suffered
complete damage, restoring or repairing it to its original state is not a practical option.
Abandoning the vessel is recommended when it sustains severe damage and repair expenses
are excessive. Similarly, abandoning the cargo is preferable when the cost of bringing if to the
shore is higher than its value and it is secure on an abandoned ship. In such cases, a marine
company can assert a constructive total loss.

b) Increased Value Clause - The traditional marine insurance policy covers only the market
value of the ship commonly referred to as 'Shipowner's Interest.’ However, there are other
additional costs apart from the market value of the vessel requiring coverage. Some costs like
sundries for the ship replacement, buying an equivalent new ship, such as office expenses, or
brokerage also require coverage. The insurance industry recognized these additional costs. It
realizes that an insured has an additional insurable interest in Marine Insurance that goes
beyond the vessel's market value. Also, the excess of the sum insured under the hull and
machinery insurance is the insurable interest.

The increased value clause in marine inland transit insurance acts as an additional cover for
the insured. This cover ensures an additional 20% to 25% of the insured value of the vessel in
case of total loss. The insured has an additional insurable interest in marine inland transit
insurance, which is in excess of

a) The vessel's market value

b) Hull insurance

The Increased Value clause in inland transit insurance makes it possible to replace the vessel
and minimize the economic consequences of the total loss. In marine inland transit insurance,
the likelihood of a total loss is relatively low as compared to other penis and risks. Hence,
some insurers started offering a lower premium level in the increased value insurance.
Shipowners started using the increased value cover to also cover the ship's market value.
They realized they could save on the premium costs.

Overall, the increased value clause serves as a valuable risk management tool for businesses
engaged in international trade, providing an additional layer of protection against financial
losses resulting from fluctuations in the value of insured goods during transit. Its inclusion in
marine insurance policies promotes confidence and stability in global trade transactions.

32. Insurance surveyors are professionals responsible for assessing risks associated with
insured assets. Their role primarily involves conducting thorough inspections and evaluations
of properties, vehicles, or any other subject matter to be insured. These surveyors
meticulously analyze the potential risks involved, evaluate the condition of the property, and
provide comprehensive reports to insurance companies. By accurately assessing the risks,
insurance surveyors help insurers determine appropriate coverage and premiums for
policyholders.

Insurance surveyors and loss assessors are equipped with a deep understanding of insurance
policies, procedures, and legal frameworks. They possess the expertise to conduct thorough
investigations to determine the cause, extent, and value of a loss. Whether it’s assessing
property damage, estimating the cost of repairs, or evaluating the financial impact of a
business interruption, these professionals employ their technical knowledge and experience to
ensure an accurate assessment.

A surveyor and loss assessor is an insurance intermediary licensed by IRDAI to investigate,

manage, quantify, validate and deal with losses (whether insured or not) arising from any
contingency, on behalf of insurer or insured and report thereon and carry out the work with
competence, objectivity and professional integrity by strictly adhering to the code of conduct
stipulated under the Law/Regulations.

Section 64UM of the Insurance Act, 1938, IRDAI (Surveyors & Loss Assessors) Regulations,
2015, IRDAI (Surveyors & Loss Assessors) (Amendment) Regulations, 2017 and IRDAI
(Surveyors & Loss Assessors) (Amendment) Regulations, 2020 are the relevant Sections and
Regulations dealing with all aspects of Surveyors & Loss Assessors.

Functions of an Insurance Surveyor include:-

a. declaring whether he has any interest in the subject-matter in question or whether it

pertains to any of his relatives, business partners or through material shareholding;
Explanation: For the purpose of this clause ‘relatives’ shall mean any of the relatives as
defined in Subsection (77) of Section 2 of the Companies Act, 2013; b. Bringing to the notice
of the Authority, any change in the information or particulars furnished at the time of issuance
of license, within a period not exceeding fifteen days from the date of occurrence of such
change, that has a bearing on the license granted by the Authority c. maintaining
confidentiality and neutrality without jeopardising the liability of the insurer and claim of the
insured; d. conducting inspection and re-inspection of the property in question suffering a
loss; e. examining, inquiring, investigating, verifying and checking upon the causes and the
circumstances of the loss in question including extent of loss, nature of ownership and
insurable interest; f. conducting spot and final surveys, as and when necessary and comment
upon franchise, excess/under insurance and any other related matter; g. estimating, measuring
and determining the quantum and description of the subject under loss; h. advising the insurer
and the insured about loss minimisation, loss control, security and safety measures, wherever
appropriate, to avoid further losses; i. commenting on the admissibility of the loss as also
observance of warranty conditions under the policy contract; j. surveying and assessing the
loss on behalf of insurer or insured; k. assessing liability under the contract of insurance; l.
pointing out discrepancy, if any, in the policy wordings; m. satisfying queries of the
insured/insurer and of persons connected thereto in respect of the claim/loss; n.
recommending applicability of depreciation, percentage and quantum of depreciation; o.
giving reasons for repudiation of claim, in case the claim is not covered by policy terms and
conditions; p. taking expert opinion, wherever required; q. commenting on salvage and its
disposal wherever necessary.

Conducting Thorough Investigations:

Insurance surveyors and loss assessors are equipped with a deep understanding of insurance
policies, procedures, and legal frameworks. They possess the expertise to conduct thorough
investigations to determine the cause, extent, and value of a loss. Whether it’s assessing
property damage, estimating the cost of repairs, or evaluating the financial impact of a
business interruption, these professionals employ their technical knowledge and experience to
ensure an accurate assessment.

Facilitating Smooth Claims Settlement:

Navigating the claims process can be overwhelming, especially during times of distress.
Insurance surveyors and loss assessors act as guides, helping policyholders understand their
rights and obligations. They facilitate open communication between policyholders, insurance
companies, and other relevant parties to ensure a smooth and efficient claims settlement.
Their expertise in interpreting insurance policies, negotiating settlements, and documenting
evidence plays a crucial role in securing fair compensation for the insured.

Balancing the Interests of Insurers and Policyholders:

Insurance surveyors and loss assessors are independent entities whose duty is to remain
impartial throughout the claims settlement process. They act as intermediaries, balancing the
interests of insurers and policyholders. By providing unbiased assessments and expert
opinions, they contribute to resolving disputes and reaching mutually acceptable agreements.
This fair and neutral approach fosters trust and transparency, creating a foundation for long-
term relationships between insurers and policyholders.

Every Insurance Surveyor has to get a license and that will be valid for 3 years. Every insurer
shall have a Board approved surveyor management policy with regard to empanelment of
surveyors, utilization of surveyors and allotment of survey jobs to licensed surveyors.

In the intricate world of insurance, the roles of insurance surveyors and loss assessors are
invaluable. These professionals bring their specialized knowledge, technical expertise, and
impartiality to the table, ensuring a fair and efficient claims settlement process. By accurately
assessing risks, investigating losses, and representing the interests of policyholders, insurance
surveyors and loss assessors safeguard assets and contribute to the overall stability and
reliability of the insurance industry. Their dedication to providing quality services benefits
both insurers and policyholders, making them indispensable in protecting what matters most.
31. Corporate Governance is understood as a system of financial and other controls in a
corporate entity and broadly defines the relationship between the Board of Directors, senior
management and shareholders. Corporate governance is important because it creates a system
of rules and practices that determines how a company operates and how it aligns with the
interest of all its stakeholders. Good corporate governance fosters ethical business practices,
which lead to financial viability. In turn, that can attract investors.

In case of the financial sector, where the entities accept public liabilities for fulfillment of
certain contracts, the relationship is fiduciary with enhanced responsibility to protect the
interests of all stakeholders. The Corporate Governance framework should clearly define the
roles and responsibilities and accountability within an organization with built-in checks and
balances. The importance of Corporate Governance has received emphasis in recent times
since poor governance and weak internal controls have been associated with major corporate
failures. As regards the insurance sector, the regulatory responsibility to protect the interests
of the policyholders demands that the insurers have in place, good governance practices for
maintenance of solvency, sound-long term investment policy and assumption of underwriting
risks on a prudential basis. The emergence of insurance companies as a part of financial
conglomerates has added a further dimension to sound Corporate Governance in the
insurance sector with emphasis on overall risk management across the structure and to
prevent any contagion.

Corporate governance in insurance sector is guided by the corporate governance guideline

issued by IRDAI. IRDAI issued comprehensive Corporate Governance Guidelines in 2016.
The revised guidelines broadly cover Corporate Governance practices, appointment of MD/
CEO and other Key Management Persons (KMPs) and the appointment of statutory auditors
of insurers. The guidelines also contemplate to oversee the compliance position in regard to
the adherence of corporate governance guidelines. This guideline outlines the required
structure of board of director to be adopted by insurance company, the manner by which they
will exercise control through the appointment of actuary, auditor, remuneration committee,
policy holders protection committee. They will have to adopt whistleblowing policy
adequately safeguarding the whistleblower whereas board or IRDA can have information
regarding irregularities existing inside. The insurer shall submit report to the compliance of
guideline to IRDAI.
The Board of Directors of insurance companies/corporations shall have minimum three
independent directors. Though, this criterion is relaxed for insurance companies at their initial
years. They can have two independent directors in the board in cases they have not crossed
five years from the grant of Certificate of Registration to them. Appropriate procedures and
rules shall be maintained by the insurance company in the matter of conduct of board meeting
and their committees. In this regard the Secretarial Standards of ICSI as issued from time to
time and relevant provisions of the Companies Act, 2013 shall be complied with.

Board, with the objective to preserve adequate board time, may delegate significant corporate
responsibilities to different committees of directors after laying down overall objective, role
and responsibilities. Board may form such committees to effectively monitor the company as
a whole. IRDAI advises all insurers to mandatorily establish Committees for Policyholder
Protection, Risk Management, Investment, Audit, Nomination and Remuneration, Corporate
Social Responsibility.

Insurers shall have to examine that how much compliance they are performing with respect to
with these guidelines. The insurer have to take immediate action to achieve compliance in
cases where already compliance is not made. It is expected that all the necessary compliance
structure shall be put in place to ensure total compliance with the guidelines issued. In cases
where such compliance is either too difficult to achieve or is not possible for any particular
reason, the insurance companies shall have to write to the IRDAI for additional guidance in
this regard.

Corporate governance and corporate social responsibility (CSR) are interconnected concepts
that shape an organization's ethical and responsible conduct. Corporate governance
establishes the rules, practices, and processes that ensure accountability, transparency, and
ethical decision-making within an organization, considering the interests of various
stakeholders, including shareholders, employees, customers, and communities. CSR, on the
other hand, is the practical implementation of these principles by addressing the
organization's social and environmental impacts through responsible practices. Effective
corporate governance mechanisms, such as board oversight, risk management, and
transparent reporting, provide the framework for organizations to integrate CSR initiatives
into their operations and strategy. Conversely, CSR initiatives contribute to mitigating
reputational, legal, and operational risks, building positive stakeholder relationships, and
creating long-term value for the organization. Together, corporate governance and CSR
promote ethical conduct, sustainability, and long-term success by aligning the organization's
actions with the expectations of stakeholders and society at large.

In essence, corporate governance provides the framework and mechanisms for an

organization to operate ethically and responsibly, while CSR is the practical implementation
of these principles by considering the organization's impact on society and the environment.
Effective corporate governance and a strong commitment to CSR are mutually reinforcing
and contribute to long-term business success and sustainability.

30. Risk governance is an essential component of effective business management because it

provides a structured framework for identifying, assessing, and mitigating potential risks
faced by an organization. Without a robust risk governance system in place, organizations
leave themselves vulnerable to a wide range of threats that could potentially derail their
operations, undermine their financial performance, and damage their reputation.

A comprehensive risk governance structure begins with the establishment of processes and
mechanisms for systematically identifying and evaluating risks across all aspects of the
business. This includes operational risks related to daily activities, financial risks associated
with market conditions and investments, strategic risks that could impact long-term
objectives, compliance risks stemming from regulatory requirements, and reputational risks
that could erode stakeholder trust. By taking a proactive approach to risk identification and
assessment, organizations can gain a comprehensive understanding of their risk landscape
and prioritize their risk management efforts accordingly.

With a clear understanding of the risks they face, organizations can then develop and
implement effective risk management strategies and controls to mitigate or minimize the
potential impact of these risks. This may involve allocating appropriate resources, defining
risk appetites and tolerances, implementing risk mitigation plans, and establishing monitoring
and reporting systems to track the effectiveness of risk management efforts. Effective risk
governance ensures that risk management is not an isolated function but rather an integral
part of the organization's overall decision-making and strategic planning processes.

Moreover, risk governance plays a crucial role in supporting informed decision-making and
strategic planning by providing valuable insights and information about potential risks and
their potential impact. By considering these risks, organizations can make more informed
choices about business strategies, investments, resource allocation, and other critical
decisions. This not only helps organizations navigate uncertain and volatile business
environments but also enables them to seize opportunities and maintain a competitive
advantage over their peers.

In many industries and sectors, risk governance is not just a best practice but also a regulatory
requirement. Organizations must comply with various regulations and standards related to
risk management, such as those set forth by regulatory bodies, industry associations, or
corporate governance codes. Effective risk governance helps organizations meet these
compliance obligations, avoid penalties, and maintain their license to operate.

Furthermore, risk governance is vital for protecting the interests of various stakeholders,
including shareholders, employees, customers, and the broader community. By effectively
managing risks, organizations can safeguard their reputation, ensure business continuity, and
maintain stakeholder trust and confidence. This not only contributes to the organization's
long-term sustainability and resilience but also enhances its ability to attract and retain
customers, investors, and top talent.

From the perspective of insurance law, robust risk governance practices are absolutely vital
for insurance companies and other businesses operating in the insurance sector. The insurance
industry is highly regulated, with strict requirements around risk management, capital
adequacy, and consumer protection. Effective risk governance enables insurance companies
to comply with these regulatory requirements and maintain their licenses to operate.

Insurance companies face a wide array of risks, including underwriting risks, investment
risks, operational risks, and emerging risks like cyber threats and climate change impacts. A
comprehensive risk governance framework allows insurers to identify, assess and manage
these varied risks through mechanisms such as risk modeling, stress testing, and
implementing appropriate controls. Strong risk governance also supports well-informed
pricing, reserving, and capital allocation decisions for insurers. By managing risks prudently,
insurers can maintain sound financial positions and ensure they have sufficient capital to pay
claims when due, safeguarding policyholder interests. Given the systemic importance of the
insurance industry, supervisors like the International Association of Insurance Supervisors
place great emphasis on insurers adopting robust risk governance systems and practices. This
makes risk governance an indispensable part of insurance law and regulatory compliance.

Ultimately, risk governance is a critical enabler of long-term success and sustainability for
any business enterprise. By implementing a comprehensive risk governance framework,
organizations can proactively identify, assess, and manage risks in alignment with their
strategic objectives and values. This not only helps them navigate challenges and
uncertainties but also positions them to capitalize on opportunities and maintain a competitive
edge in an ever-changing business landscape.

29. Reinsurance, or insurance for insurers, transfers risk to another company to reduce the
likelihood of large payouts for a claim. Reinsurance allows insurers to remain solvent by
recovering all or part of a payout. Companies that seek reinsurance are called ceding
companies. Reinsurance allows insurers to remain solvent by recovering some or all
amounts paid out to claimants. Reinsurance reduces the net liability on individual risks
and catastrophe protection from large or multiple losses.
The practice also provides ceding companies, those that seek reinsurance, the chance to
increase their underwriting capabilities in number and size of risks. Ceding companies are
insurance companies that pass their risk on to another insurer. By covering the insurer
against accumulated liabilities, reinsurance gives the insurer more security for its equity
and solvency by increasing its ability to withstand the financial burden when unusual,
major events occur. Through reinsurance, insurers may underwrite policies covering a
larger quantity or volume of risk without excessively raising administrative costs to cover
their solvency margins. In addition, reinsurance makes substantial liquid assets available
to insurers in the event of exceptional losses.
One of the primary roles of reinsurance is risk management and risk transfer. Insurance
companies are exposed to a wide range of risks, including natural disasters, large-scale
accidents, and unexpected claims volumes. Without reinsurance, an insurer's ability to
absorb losses from such events could be severely limited, potentially leading to
insolvency. By ceding a portion of their risk to reinsurers, insurers can effectively spread
their risk exposure, mitigating the impact of potential losses and ensuring they can meet
their obligations to policyholders.
Reinsurance also plays a vital role in increasing an insurer's underwriting capacity.
Insurance companies have finite capital resources, which limits the amount of risk they
can underwrite directly. By transferring a portion of their risk to reinsurers, insurers can
free up capital and increase their underwriting capacity, enabling them to write more
business and generate additional premium income. This increased capacity not only
benefits the insurers but also provides greater insurance coverage options for customers
and contributes to the overall stability of the insurance market.
Furthermore, reinsurance serves as a crucial financial safety net for insurance companies,
protecting their financial stability and solvency. Significant losses or an accumulation of
claims can strain an insurer's financial resources, potentially jeopardizing their ability to
meet their obligations. By sharing the risk with reinsurers, insurers can maintain their
financial stability and solvency, ensuring they can continue to operate and pay claims to
policyholders without disruption.
Apart from risk management and financial stability, reinsurance also provides insurers
with access to valuable expertise and knowledge. Reinsurers often have specialized teams
with extensive experience in various risk areas, such as catastrophe modeling,
underwriting complex risks, and developing risk management strategies. By partnering
with reinsurers, insurers can leverage this expertise to improve their own operations,
refine their underwriting practices, and enhance their overall risk management
capabilities.
It is important to note that the reinsurance industry is not a one-way street. Reinsurers
themselves may seek to manage their own risk exposure through a process called
retrocession. Retrocession is a form of reinsurance for reinsurers, where a reinsurer
transfers a portion of the risk they have assumed from an insurer to another reinsurer. This
practice allows reinsurers to diversify their risk portfolios, manage their capital
requirements, and access specialized expertise from other reinsurers.

Retrocession is a form of reinsurance where a reinsurer transfers a portion of the risk they
have assumed from an insurer to another reinsurer. It is essentially a form of reinsurance
for reinsurers, providing them with a mechanism to manage their own risk exposure and
diversify their portfolios.
Through retrocession, reinsurers can cede a portion of the risks they have accepted from
insurers to other reinsurers, known as retrocession. This process serves several purposes
for reinsurers:
1. Risk diversification: By ceding a portion of their assumed risks to other reinsurers, the
original reinsurer can diversify their risk portfolio and reduce their concentration in
specific geographic regions or lines of business.
2. Capital management: Retrocession helps reinsurers manage their capital requirements
and maintain adequate solvency levels by transferring a portion of their risk exposure
to other reinsurers.
 3. Capacity expansion: Through retrocession, reinsurers can increase their overall
underwriting capacity, enabling them to accept more business from insurers.
4. Access to specialized expertise: Retrocession can provide reinsurers with access to
specialized expertise or knowledge in certain risk areas from other reinsurers.
Retrocession acts as a risk management tool for reinsurers, allowing them to spread their
risk exposure across multiple parties and reduce the potential impact of large claims or
catastrophic events on their financial stability.

28. Policyholder protection regulations are a set of laws, rules, and guidelines designed to
safeguard the interests of policyholders and ensure that insurance companies operate in a fair,
transparent, and responsible manner. These regulations aim to promote consumer confidence
in the insurance industry and protect policyholders from unfair practices or financial losses.
Insurance companies are required to maintain adequate capital and reserves to ensure they
can meet their financial obligations to policyholders. Regulations set minimum solvency
standards and capital requirements to maintain financial stability and protect policyholders in
case of adverse events.

Regulations prohibit unfair or deceptive practices by insurance companies, such as

misleading advertising, discriminatory pricing, or unfair claims settlement practices. They
ensure that policyholders receive clear and accurate information about their policies and that
claims are handled promptly and fairly. Insurance companies are required to provide
policyholders with detailed information about their policies, including terms, conditions,
exclusions, and pricing. Regulations ensure that policyholders have access to the necessary
information to make informed decisions. Regulations establish standards for the timely and
fair handling of claims by insurance companies. They may set deadlines for acknowledging
and processing claims, as well as guidelines for investigating and evaluating claims to protect
policyholders' rights. Regulations often establish mechanisms for policyholders to file
complaints or grievances against insurance companies and seek redressal. This may include
dedicated complaint handling departments, ombudsman services, or regulatory bodies that
can investigate and take action against companies violating policyholder rights.

Regulatory authorities conduct regular market conduct examinations and audits to ensure that
insurance companies comply with policyholder protection regulations and maintain
appropriate practices. Consumer education: Some regulations mandate that insurance
companies and regulators provide educational resources and guidance to help policyholders
understand their rights, responsibilities, and the terms and conditions of their policies.
Regulatory authorities conduct regular market conduct examinations and audits to ensure that
insurance companies comply with policyholder protection regulations and maintain
appropriate practices. Some regulations mandate that insurance companies and regulators
provide educational resources and guidance to help policyholders understand their rights,
responsibilities, and the terms and conditions of their policies.

In India, there are several regulations in place to protect the interests of policyholders and
ensure fair practices by insurance companies. These regulations are primarily governed by the
Insurance Regulatory and Development Authority of India (IRDAI). Here are some of the key
policyholder protection regulations in India:

1. Insurance Act, 1938 and IRDAI Act, 1999: These acts provide the legal framework
for regulating the insurance industry in India and empowering IRDAI to enforce
regulations.

2. IRDAI (Protection of Policyholders' Interests) Regulations, 2017: This regulation sets

out various provisions for protecting policyholders' interests, including requirements
for fair disclosures, handling of claims, grievance redressal mechanisms, and
prohibitions on unfair business practices.

3. IRDAI (Issuance of e-insurance policies) Regulations, 2016: This regulation governs

the issuance of electronic insurance policies, ensuring transparency and easy access to
policy documents for policyholders.

4. IRDAI (Non-Linked Insurance Products) Regulations, 2019: This regulation specifies

the product design requirements for non-linked insurance products, ensuring fair
pricing, clear disclosures, and reasonable policy terms.

5. IRDAI (Linked Insurance Products) Regulations, 2013: This regulation governs the
design and pricing of unit-linked insurance plans, aiming to protect policyholders'
investments and ensure transparency.

6. IRDAI (Health Insurance) Regulations, 2016: These regulations specific to health

insurance products aim to standardize definitions, ensure fair claims settlement, and
prevent unfair practices.
 7. IRDAI (Obligations of Insurers to Rural and Unorganized Sectors) Regulations, 2015:
This regulation mandates insurance companies to provide a certain percentage of their
business to rural and economically weaker sections, promoting financial inclusion.

8. IRDAI (Appointment of Insurance Agents) Regulations, 2016: This regulation

governs the appointment and conduct of insurance agents, ensuring they provide
accurate information and advice to policyholders.

9. IRDAI (Grievance Redressal) Regulations, 2002: This regulation mandates insurance

companies to establish efficient grievance redressal mechanisms for policyholders and
specifies timelines for resolving complaints.

10. IRDAI (Protection of Policyholders' Interests) Regulations, 2002: This regulation

prohibits unfair trade practices by insurance companies, such as misleading
advertisements, discriminatory pricing, and unfair claims settlement.

In addition to these regulations, IRDAI also issues circulars, guidelines, and advisories from
time to time to address emerging issues and strengthen policyholder protection measures. The
regulator also conducts periodic inspections and audits of insurance companies to ensure
compliance with these regulations.

The policyholder protection regulations in India enable and safeguard various customer rights
in an insurance contract. Here are some key ways in which these regulations help protect
customers' rights:

1. Right to Information: The regulations mandate insurance companies to provide clear

and transparent disclosures about the policy terms, conditions, exclusions, and
pricing. This ensures that customers have access to all relevant information before
purchasing a policy, enabling them to make informed decisions.

2. Right to Fair Contract Terms: Regulations like the IRDAI (Non-Linked Insurance
Products) Regulations, 2019, and the IRDAI (Linked Insurance Products)
Regulations, 2013, set guidelines for fair product design, pricing, and policy terms.
These regulations prevent insurance companies from including unfair or one-sided
clauses in the contract.

3. Right to Non-Discrimination: The regulations prohibit insurance companies from

discriminating against customers based on factors such as gender, religion, caste, or
 geographical location. This ensures that all customers have equal access to insurance
products and services.

4. Right to Timely Claims Settlement: The IRDAI (Protection of Policyholders'

Interests) Regulations, 2017, sets standards for prompt and fair claims settlement by
insurance companies. It specifies timelines for acknowledging, investigating, and
settling claims, ensuring that customers receive their rightful claims without undue
delay.

5. Right to Grievance Redressal: The IRDAI (Grievance Redressal) Regulations, 2002,

mandates insurance companies to establish efficient grievance redressal mechanisms
for policyholders. Customers have the right to file complaints and seek redressal if
they face any issues with the insurance company or their policy.

6. Right to Understand Policy: Regulations like the IRDAI (Issuance of e-insurance

policies) Regulations, 2016, aim to ensure that customers receive policy documents in
an easily accessible and understandable format, enabling them to comprehend the
terms and conditions of their insurance contract.

7. Right to Fair Advice: The IRDAI (Appointment of Insurance Agents) Regulations,

2016, governs the conduct of insurance agents and requires them to provide accurate
and unbiased advice to customers, protecting customers' rights to receive fair and
ethical guidance.

8. Right to Financial Stability: Solvency regulations and capital requirements ensure that
insurance companies maintain adequate financial resources to meet their obligations
to policyholders, protecting customers' rights to receive claims and benefits as per the
insurance contract.

By enforcing these regulations, IRDAI aims to create a balanced and fair insurance
ecosystem, empowering customers with their rightful entitlements and protecting them from
unfair practices. These regulations help establish trust and confidence in the insurance
industry, enabling customers to make informed decisions and exercise their rights effectively.