Insurance Law

Module I: Introduction
Meaning, Definition & Nature of Insurance
Insurance is a legal contract between two parties – the insurer (insurance company) and the insured
(policyholder), where the insurer agrees to provide financial protection or compensation to the insured
in the event of specified risks or losses. In exchange, the insured pays a premium to the insurer.
1. Meaning of Insurance: Insurance is a risk management tool that helps individuals or entities
protect themselves from financial losses due to uncertain events. It provides a mechanism to
transfer the financial burden of potential losses from the insured to the insurer.
2. Definition of Insurance: Insurance is often defined as a contract in which one party (the
insurer) agrees to compensate or indemnify another party (the insured) against specified
financial losses or risks in exchange for the payment of premiums. It involves the sharing of
risks among a large number of people or entities to minimize the impact of individual losses.
3. Nature of Insurance:
• Risk Transfer: Insurance involves the transfer of risk from the insured to the insurer.
The insured pays a premium to the insurer in exchange for the promise of compensation
in the event of a covered loss.
• Contractual Agreement: Insurance is a legally binding contract between the insurer
and the insured. The terms and conditions of the contract, including coverage,
exclusions, and premiums, are outlined in the insurance policy.
• Financial Protection: The primary purpose of insurance is to provide financial
protection against unexpected events or losses. This can include protection for life,
health, property, liability, and more.
• Pooling of Risks: Insurance operates on the principle of pooling risks. Many
individuals or entities contribute premiums to a common fund, and the fund is used to
compensate those who experience covered losses.
• Uncertainty: Insurance is designed to address uncertainties and unexpected events. It
does not cover predictable or intentional losses.

Historical Development of Insurance

The historical development of insurance can be traced back to ancient civilizations where various forms
of risk-sharing and mutual assistance were practiced.
1. Ancient Practices:
• Babylonian Code of Hammurabi (circa 1750 BC): The Code of Hammurabi, one of
the earliest and most complete written legal codes, contained provisions for a type of
early insurance. Merchants would pay lenders an additional sum in exchange for a loan
guarantee. If the shipment was lost or stolen, the lender would cancel the debt.
• Chinese and Mediterranean Civilizations: Historical records suggest that Chinese
and Mediterranean merchants engaged in informal arrangements to share the risks of
shipping goods. In ancient Greece and Rome, burial societies provided a form of life
insurance, where members contributed to a fund to cover funeral expenses and support
the deceased's family.
 2. Guilds and Mutual Aid Societies (Middle Ages):
• During the Middle Ages, guilds and trade associations in Europe began practicing
mutual aid. Members of these groups contributed to a common fund that would be used
to support members in times of need, such as in the event of death, illness, or property
loss.
3. Emergence of Marine Insurance (Late Middle Ages):
• Marine insurance is considered the earliest form of modern insurance. In the late
Middle Ages, Italian merchants in cities like Genoa and Venice developed marine
insurance contracts to protect against the risks of shipping, piracy, and other maritime
perils.
4. Lloyd's of London (17th Century):
• Lloyd's of London, established in the late 17th century, played a significant role in the
development of insurance. It started as a coffeehouse where merchants, shipowners,
and underwriters gathered to discuss and underwrite marine risks. Lloyd's evolved into
a prominent insurance marketplace, expanding its coverage to various types of risks.
5. Fire Insurance and the Birth of Modern Insurance Companies (18th Century):
• The Great Fire of London in 1666 prompted the establishment of the first fire insurance
company, the "Fire Office," which provided coverage against fire-related losses. This
marked the beginning of specialized insurance companies.
6. Actuarial Science and Regulation (19th Century):
• The 19th century saw the development of actuarial science, with mathematicians and
statisticians contributing to risk assessment and pricing. The growth of industrialization
led to the expansion of various insurance products, including life insurance and liability
insurance.
7. Legislation and Regulation (20th Century):
• The 20th century witnessed increased government involvement and regulation in the
insurance industry. Regulatory bodies were established to ensure solvency, consumer
protection, and fair practices within the insurance sector.
8. Globalization and Diversification (Late 20th Century - Present):
• The latter half of the 20th century and the beginning of the 21st century saw
globalization and the diversification of insurance products. Insurance companies
expanded their offerings to cover a wide range of risks, including health, cyber, and
environmental risks.

In India
The historical development of insurance in India is a fascinating journey that spans several centuries.
1. Ancient Practices:
• Yogakshema: The concept of insurance can be traced back to ancient Indian
civilization. In the Atharvaveda, there is a mention of a practice called "Yogakshema,"
 which can be interpreted as a form of mutual insurance where individuals contributed
to a common fund to provide financial protection to members of the group.
2. British Colonial Period:
• Establishment of British Insurance Companies: The formal introduction of
insurance in India began during the British colonial era. The first insurance company
in India, Oriental Life Insurance Company, was established in Calcutta in 1818.
• Regulation: The British government introduced regulatory measures to govern
insurance companies. The Life Insurance Companies Act of 1912 and the Provident
Fund Act of 1912 were among the initial regulatory steps.
3. Post-Independence Era:
• Nationalization of Insurance: In 1956, the Government of India nationalized the
insurance industry by passing the Life Insurance Corporation Act and the General
Insurance Business (Nationalization) Act. The Life Insurance Corporation of India
(LIC) was formed to take over the life insurance sector, and the General Insurance
Corporation (GIC) was established to control general insurance.
• Monopoly Era: The insurance sector operated as a monopoly for several decades, with
LIC holding a dominant position in life insurance, and GIC overseeing the general
insurance segment.
4. Liberalization and Reforms (1991 Onward):
• Opening up to Private Players: In 1999, the Indian government introduced reforms
to liberalize the insurance sector. This involved allowing private companies to enter the
industry, breaking the monopoly of LIC and GIC.
• Insurance Regulatory and Development Authority (IRDA): In 1999, the Insurance
Regulatory and Development Authority (IRDA) was established as an autonomous
body to regulate and promote the insurance industry in India.
5. Rapid Growth and Diversification:
• Entry of Private Players: The entry of private insurance companies led to increased
competition, innovation, and a broader range of insurance products and services.
• Introduction of New Products: The insurance industry in India witnessed the
introduction of various new products, including unit-linked insurance plans (ULIPs),
health insurance, and pension plans.
6. Recent Developments:
• Digital Transformation: The insurance sector in India has undergone significant
digital transformation, with the adoption of online platforms for policy purchase,
claims processing, and customer service.
• Focus on Financial Inclusion: Insurers have also focused on extending insurance
services to previously underserved segments of the population, contributing to financial
inclusion.
Functions of Insurance
The functions of insurance in India, as outlined by Indian laws, align with the fundamental principles
of insurance as a risk management tool. These functions are designed to protect the interests of
policyholders and ensure the stability and growth of the insurance industry.
1. Risk Coverage:
• Legal Requirement: Insurance in India primarily serves the purpose of providing
financial protection against various risks. Policyholders pay premiums to insurers in
exchange for coverage against specified perils or events.
• Types of Risk Coverage: Insurance in India covers a wide range of risks, including
life insurance, health insurance, property insurance, liability insurance, and more.
2. Financial Security:
• Compensation for Losses: In the event of a covered loss, insurance companies in India
are obligated to provide financial compensation to policyholders. This ensures that
individuals and businesses can recover financially from unexpected events.
3. Wealth Creation and Savings:
• Life Insurance as an Investment: Life insurance products in India often serve a dual
purpose by providing not only risk coverage but also serving as a long-term investment
and savings tool. Certain life insurance policies, such as endowment and unit-linked
insurance plans (ULIPs), offer a savings component.
4. Facilitating Trade and Commerce:
• Marine and Transit Insurance: Insurance plays a crucial role in facilitating trade and
commerce by providing coverage for goods in transit. Marine insurance, for example,
protects against losses or damages during the transportation of goods.
5. Legal Compliance and Regulation:
• IRDA Oversight: The Insurance Regulatory and Development Authority of India
(IRDAI) regulates the insurance industry in the country. Insurance companies are
required to comply with the regulatory framework established by the IRDAI to ensure
fair practices, consumer protection, and financial stability.
6. Promoting Economic Growth:
• Risk Transfer and Business Confidence: Insurance facilitates risk transfer, allowing
businesses to operate with greater confidence and undertake more significant
investments. This, in turn, contributes to economic growth and development.
7. Social Welfare and Protection:
• Social Security Programs: Certain insurance products, such as government-sponsored
schemes and social security programs, aim to provide financial protection to vulnerable
segments of the population, contributing to social welfare.
8. Customer Education and Awareness:
• Disclosure and Transparency: Insurance laws in India emphasize the importance of
customer education and awareness. Insurers are required to provide clear and
transparent information about policy terms, conditions, and benefits to ensure that
policyholders make informed decisions.
 9. Claims Settlement:
• Fair and Timely Settlement: Indian insurance laws emphasize the fair and timely
settlement of claims. Insurance companies are obligated to investigate and settle claims
promptly, ensuring that policyholders receive the benefits they are entitled to.

Kinds of Insurance: Life, Fire, Marine and Motor Vehicles Insurance

1. Life Insurance:
• Definition: Life insurance provides financial protection to the family or dependents of
the insured in case of the policyholder's death. It can also serve as an investment or
savings tool.
• Example: A person purchases a term life insurance policy to ensure financial security
for their family in the event of their untimely demise.
2. Fire Insurance:
• Definition: Fire insurance protects against financial losses caused by damage or
destruction of property due to fire. It typically covers the cost of repairing or replacing
the damaged property.
• Example: A business owner purchases fire insurance for their manufacturing facility
to protect against the financial impact of a fire-related loss.
• Case Law: In India, the case of 'Macaura v. Northern Assurance Co. Ltd.' is often cited
in discussions related to fire insurance. The case highlights the importance of insurable
interest and the need for the insured to have a direct financial stake in the insured
property.
3. Marine Insurance:
• Definition: Marine insurance provides coverage for risks associated with the
transportation of goods and cargo by sea or other waterways. It protects against losses
such as damage to the ship, theft of cargo, or accidents during transit.
• Example: A company involved in international trade purchases marine insurance to
protect its goods while being transported by sea.
• Case Law: The 'Mactavish v. London Assurance Corporation' case is an example
where the court ruled on the validity of a marine insurance policy. It emphasized the
importance of utmost good faith (uberrimae fidei) in marine insurance contracts.
4. Motor Vehicle Insurance:
• Definition: Motor vehicle insurance provides coverage for risks associated with
owning or operating a motor vehicle. It includes coverage for damages to the vehicle,
liability for bodily injury, and property damage caused to third parties.
• Example: A car owner purchases comprehensive motor insurance to cover damages to
their vehicle in case of an accident, as well as liability towards third parties.
• Case Law: In India, 'National Insurance Company Limited v. Swaran Singh & Ors.' is
a notable case related to motor vehicle insurance. The Supreme Court clarified the
obligations of insurers and the importance of prompt and fair settlement of claims.
Principles of Insurance
In insurance, there are 7 basic principles that should be upheld, ie Insurable interest, Utmost good faith,
proximate cause, indemnity, subrogation, contribution and loss of minimization.
1. Principle of Utmost Good Faith
This is a primary principle of insurance. According to this principle, you have to disclose all the
information that is related to the risk, to the insurance company truthfully.
You must not hide any facts that can have an effect on the policy from the insurer. If some fact is
disclosed later on, then your policy can be cancelled. On the other hand, the insurer must also disclose
all the features of a life insurance policy.
2. Principle of Insurable Interest
According to this principle, you must have an insurable interest in the life that is insured. That is, you
will suffer financially if the insured dies. You cannot buy a life insurance policy for a person on whom
you have no insurable interest.
3. Principle of Proximate Cause
While calculating the claim for a loss, the proximate cause, i.e., the cause which is the closest and the
main reason for a loss should be considered.
Though it is a vital factor in all types of insurance, this principle is not used in Life insurance.
4. Principle of Subrogation
This principle comes into play when a loss has occurred due to some other person/party and not the
insured. In such a case, the insurance company has a legal right to reach that party for recovery.
5. Principle of Indemnity
The principle of indemnity states that the insurance will only cover you for the loss that has happened.
The insurer will thoroughly inspect and calculate the losses. The main motive of this principle is to put
you in the same position financially as you were before the loss. This principle, however, does not apply
to life insurance and critical health policies.
6. Principle of Contribution
According to the principle of contribution, if you have taken insurance from more than one insurer, both
insurers will share the loss in the proportion of their respective coverage.
If one insurance company has paid in full, it has the right to approach other insurance companies to
receive a proportionate amount.
7. Principle of Loss Minimisation
You must take all the necessary steps to limit the loss when it happens. You must take all the necessary
precautions to prevent the loss even after purchasing the insurance. This is the principle of loss
minimization.

Premium
a premium is the amount of money paid by the policyholder to the insurance company in exchange for
coverage. It is a periodic payment, typically made monthly, quarterly, or annually, and it is a
fundamental component of the insurance contract. The premium amount is determined based on various
factors, including the type of insurance coverage, the insured's risk profile, and the amount of coverage
sought.
1. Examples of Insurance Premiums:
• Auto Insurance Premium: A car owner pays a premium to an insurance company to
obtain coverage for potential damages to their vehicle, liability for bodily injury or
property damage to third parties, and other related risks.
• Life Insurance Premium: An individual pays regular premiums to a life insurance
company to secure financial protection for their beneficiaries in the event of the
policyholder's death. Premiums for life insurance can vary based on factors such as age,
health, and the amount of coverage.
• Health Insurance Premium: A person pays a health insurance premium to ensure
coverage for medical expenses. The premium amount may depend on factors like age,
health condition, and the type of coverage chosen.
2. Legal Considerations:
• Regulation by Insurance Regulatory and Development Authority (IRDAI): In
India, the insurance industry is regulated by the Insurance Regulatory and Development
Authority (IRDAI). The authority oversees various aspects, including the pricing of
premiums, to ensure fairness and consumer protection.
• Fair and Transparent Premium Practices: Insurance laws and regulations emphasize
the need for fair and transparent premium practices. Insurers are expected to calculate
premiums based on actuarial principles, considering the risk profile of the insured.
• Non-Discrimination in Premium Setting: Insurance companies are generally
prohibited from discriminating unfairly in the determination of premiums.
Discrimination could include factors such as gender or religion, and premiums should
be based on reasonable and relevant risk factors.
• Policyholder's Duty to Pay Premiums: The insurance contract obligates the
policyholder to pay the agreed-upon premiums on time. Failure to pay premiums can
lead to consequences such as policy lapse or loss of coverage.
• Grace Period for Premium Payments: Insurance laws often provide for a grace
period during which the policyholder can make premium payments even after the due
date without losing coverage. This grace period is designed to offer some flexibility to
policyholders.

Risk in Insurance:
Risk, in the context of insurance, refers to the uncertainty of financial loss or damage. Insurance is a
mechanism to mitigate or manage risks by transferring them from an individual or entity to an insurance
company in exchange for payment of a premium. Understanding the scope and elements of risk is
crucial in the insurance industry.
Scope of Risk in Insurance:
1. Pure Risks:
 • Definition: Pure risks involve situations where there are only possibilities of loss or no
loss. These are insurable risks.
• Example: Fire, theft, accidents, natural disasters, and premature death are examples of
pure risks.
2. Speculative Risks:
• Definition: Speculative risks involve situations where there is a chance of either profit
or loss. These are generally not insurable.
• Example: Investing in the stock market or starting a new business involves speculative
risks.
Elements of Risk:
1. Loss Exposure:
• Definition: Loss exposure is the condition or situation that presents the possibility of
a loss. It is the subject matter of the insurance contract.
• Example: A business property is exposed to the risk of fire, which could result in
financial loss.
2. Peril:
• Definition: Peril is the cause of a loss or the event that triggers the loss.
• Example: In property insurance, the peril may be a fire, flood, earthquake, or theft.
3. Hazard:
• Definition: Hazard is a condition that increases the probability of the occurrence of a
peril.
• Example: A wet floor in a store can be a physical hazard that increases the likelihood
of someone slipping and getting injured.
4. Risk Management:
• Definition: Risk management involves strategies to identify, assess, and control risks
to minimize their impact.
• Example: A business implementing safety measures, like fire extinguishers and
employee training, is a form of risk management.
Legal Considerations:
1. Utmost Good Faith (Uberrimae Fidei):
• Legal Principle: Both the insurer and insured are bound by the principle of utmost
good faith, requiring honest disclosure of all material facts. Failure to disclose relevant
information can impact the validity of the insurance contract.
• Example: If an individual with a pre-existing medical condition fails to disclose it
while buying health insurance, it may affect the insurer's liability.
2. Insurable Interest:
 • Legal Principle: The insured must have an insurable interest in the subject matter of
the insurance. Without insurable interest, the insurance contract may be void.
• Example: A person cannot insure someone else's property without having a financial
interest in it.
3. Principle of Indemnity:
• Legal Principle: The principle of indemnity states that insurance is meant to
compensate for the actual loss suffered and not to provide a profit. It prevents over-
insurance.
• Example: If a car worth $20,000 is insured, the insurer will pay a maximum of $20,000
in case of a covered total loss, not more.
4. Regulation by Insurance Authorities:
• Legal Oversight: Insurance activities are regulated by authorities such as the Insurance
Regulatory and Development Authority of India (IRDAI). These regulations ensure fair
practices and consumer protection.
• Example: Regulatory guidelines may set standards for premium calculation and policy
terms to ensure fairness.

Module II: Life & General Insurance

Life Insurance Contract – Nature and Scope

Life insurance is an arrangement under which the insured agrees to pay certain amounts of money,
known as premiums, at specified times, and the insurer agrees to pay a certain amount of money, under
certain terms and in a specified manner, if a certain event occurs during the insured’s existence.
The insurance contract is similar to any other contract, but it has its own set of peculiar values. The
insurable interest must be beyond any party’s influence, and there must be some element of negligence
or confusion.
Contracts involving unknown future circumstances are classified as either alienatory, contingent, or
hypothetical.
There is currently no statutory description of life insurance that is adequate. The following are some
main life insurance definitions:
Insurance may be described as an arrangement between two parties in which one party, the insurer,
agrees to pay the other party, the insured, a fixed amount of money after a certain incident occurs in
return for a fixed sum of money called a premium. (vikassapra, n.d.)
It was mentioned in Prudential Assurance ltd vs. Inland Revenue Commissioner (1902) 2KB 286,
that the event insured against should be one that involves some degree of uncertainty. To begin with,
there must be some doubt as to whether the incident will ever occur, or that if it does, the time at which
it occurs must be unknown to both parties. Second, the accident insured against must be of a foreseen
nature to the insured, so that the insured did not cause the loss or risk of his own volition, and the loss
or risk must be represented in monetary terms.
Finally, the case that is insured against must be unintentional.
Bunyon J observed in Joseph vs. Law Integrity Insurance Company (1912) that “A contract of life
insurance can also be described as a contract in which one party agrees to pay a certain amount of
money if a certain occurrence occurs over the course of a person’s life in exchange for the immediate
payment of a smaller sum or other similar periodical payment by the other.
R.S. Sharma claims that “A life insurance contract is one in which the insurer agrees to pay an annuity
on the insured’s death after a certain number of years in exchange for a premium charged in either
instalment.
Nature of an Insurance Contract-
Insurance is a bi-party contract, and unlike other contracts in which the ability of the parties to the
contract is required, there is no such requirement for the capacity of the insured before entering into a
contract. It has been decided that insanity does not render an insured person incapable.
The only condition for the insured before entering into a contract is that he have an insurable interest in
the subject matter of the insurance. The loss one is likely to incur if the subject matter is lost has been
described as insurable interest.
Except for life insurance, all insurance contracts are indemnity contracts. Since the loss of life cannot
be assessed in terms of real loss, the insurer agrees to compensate a predetermined sum in such a
contingency. As a result, it is inherent in the definition of contingency insurance. It guarantees payment
in the case of a certain occurrence.
In developing countries like India, combining risk coverage and benefits in the form of life insurance
is a common and widespread practice. (Hasson, 1984)
The following are the essentials of a life insurance contract:

a) Acceptance and Acceptance

b) Legal Agreement
c) Competent Parties
d) Free Consent
e) Lawful consideration
f) Appropriate Object
g) Meeting of Minds (consensus ad idem)
h) Absolute Trustworthiness
i) Interest that is insurable
(a) Acceptance and Acceptance of Offer –
Life insurance policies, like all other contracts, are concluded by offer and acceptance. The insurance
provider or the applicant will make an offer in a life insurance policy, and the approval will follow.

(b) Agreement-
The parties (insurer and insured) should come to an understanding i.e. agreement.

c) Competent Parties-
It is important that the parties to a life insurance policy be qualified to enter into one. (According to
section 10 of the Indian Contract Act 1872, parties must be qualified to form a binding contract.)
Who is competent/qualified to make a legally binding contract –
According to Section 10 of the Indian Contract Act of 1872, any person who is major, of sound mind,
and not disqualified by law is competent to enter into a contract.

(i) Major – an individual who has reached the legal age of majority.
(ii) Sound Mind – A person with a clear mind.
(iii) Not barred by statute – who is not barred from entering into a contract by any law to which he
is subject.
(d) Unrestricted/Free Consent –
Free consent refers to all parties agreeing on the same thing for a specific reason. When both parties to
contract agreed and willing to abide by terms and condition of contract in the same sense and spirit,
they are said to have a free consent. (Section 13 of the Indian Contract Act 1872).
Where the consent is obtained by force, deception, unfair influence, misrepresentation or error about an
important reality, the contract becomes voidable at the option of the party whose consent was so
induced, excluding fraud.
e) Legal Consideration –
A contract is void if there is no consideration, which is an act or obligation offered by one party and
acknowledged by the other as payment for that promise. Consideration is a term used in the contract for
life insurance premiums. The insured pays a premium in exchange for the insurer’s promise to reimburse
a certain sum in the event of a specified occurrence. Without the payment of the first premium, a life
insurance policy cannot be considered valid.

(f) Legitimate Object –

The life insurance contract’s purpose should not be illegal. The object is illegal under Section 23 of the
Indian Contract Act of 1872, which states:

(i) Prohibited by statute

(ii) Unethical
(iii) In opposition to government policy or
(iv) Which nullifies any legal provision
(g) Meeting of Minds (Consensus ad idem) –
Both parties to the contract must be of the same mind and there must be agreement resulting from a
mutual interest for the contract to be legitimate. The insurer and the insured individual should have the
same point of view. All parties should be able to understand that they are purchasing the insurance
policy.
Benefits of Life Insurance:
Death Advantage: This is the most important benefit of life insurance; in the event of the insurer’s
untimely death, the insurance provider pays a lump sum amount depending on the amount insured.
Individuals can save tax on the premium sum charged under section 80C, up to a maximum of one lakh
rupees.
Some insurance firms will also lend you money if you take out a policy. The loan amount is normally
determined by the Sum Assured and the length of the loan.
Maturity Benefits: The provider is entitled to assured dividends as well as other additional benefits until
the policy reaches maturity.
Riders: Certain life insurance policies have Riders, which are additional benefits to the regular insurance
policy, in addition to life insurance coverage. Riders are beneficial in extending the insurance coverage.
(Features and Benefits of Life Insurance in India, n.d).

Different Types of Life Insurance Policies in India

1. Term Insurance Plan

The term insurance plan is one of the most sought-after types of life insurance policies in India. This is
one of the types of life insurance policy in India that you can buy for a specific period of 10, 20, 30 or
more years, hence the name.
While some other types of life insurance policy offer maturity benefits, term insurance does not. It is
one reason why term insurance, being the best insurance policy in India, is comparatively cheaper than
other types of life insurance schemes.
Term insurance is pure life cover, unlike other types of life insurance policies which have a saving
component. You can also opt for a significant life cover at a lower premium as compared to other types
of life insurance policy which are costlier but have built-in saving components.

2. Term Insurance with Return of Premium

A term insurance plan is amongst the types of life insurance policies that provides a death benefit but
no maturity benefit.
If you live a healthy lifestyle, the probability that you will outlive the best insurance policy in India you
have bought also increases. For you, among the many life insurance types, a term insurance with return
of premium is one of the best insurance policy in India, which also give you maturity benefits.
It is one of the types of term insurance plans that give back the premiums you pay on surviving the
policy period. Besides, you can easily calculate premium for term insurance using an online term
insurance calculator.
When you calculate premium for term insurance, you get a clear understanding about your unique
requirements, explore rider options, and also choose your policy term. Doing so helps you ensure that
you are investing in the most suitable types of life insurance policies for yourself and your family.
If you want to support long term goals in life, for example, you could opt for a whole life insurance,
and the factors to be considered here will be different. Keep in mind that your age and personal needs
determine the most needed types of life insurance policies
 3. Unit Linked Insurance Plan (ULIP)
You may face a dilemma in life about choosing between any of the two options – investment or
insurance.
A ULIP is one of the types of life insurance policies in India that fulfill both these aspects. Amongst
different types of life insurance, it is the one that offers life cover along with investment opportunities.
Being one of the types of life insurance, it has a lock-in period of five years, which makes it a long-
term investment instrument that comes with risk protection. ULIPs also allow you to balance your funds
as per market dynamics. citizen parents.

1. Endowment Policy
Endowment policies are one of the types of life insurance policies that provide you with the combined
benefit of life insurance and savings. Along with giving you the life cover, these types of life insurance
help you save money regularly over a period to get a lump sum at maturity.
What makes them one of the most useful types of life insurance policies is that they help fulfill long-
term goals in life. You will also get the maturity amount if you survive the policy tenure.
Endowment policies, being one of the most appropriate types of life insurance plans, also help you
create a financial cushion for your family to meet various financial objectives in life.

4. Moneyback Policy
The purpose of investing in the insurance policy in India for your loved ones can be to create wealth
over an extended period. However, most of the types of life insurance do not provide any provision to
get funds before their tenure ends. It is where a moneyback policy plays a vital role in solving the
problem of liquidity.
As the name suggests, moneyback policies are one of the popular types of life insurance policies in
India that give money back regularly.
It pays a percentage of the assured sum throughout the policy tenure, unlike other types of life insurance
plans that offer no returns till maturity.

5. Whole Life Insurance

As a life insurance policyholder, you get the benefits depending on the types of life insurance policies
you have chosen. What distinguishes a whole life insurance plan from other life insurance types is that
it provides insurance coverage to the insured for the entire life, up to 100 years of age.
Typically, the death benefit, under a whole life insurance, is payable to the beneficiary in the case of the
untimely demise of the policyholder. On the other hand, you are eligible to receive a maturity benefit
under a whole life insurance policy if you cross 100 years of age.
Another significant feature of such whole life insurance plans is that some offer the option to pay
premium for the first 10-15 years while you get the benefits for the entire life.

6. Group Life Insurance

Just like group health insurance, group life insurance is one of the types of life insurance policies that
covers a group of people under one master policy. Such life insurance types are generally provided as
part of an employment benefit.
A unique feature of these types of life insurance products is that you will get the insurance cover if you
remain a part of the group. It is different from the individual types of life insurance plans in which the
coverage continues throughout the chosen policy tenure.

7. Child Insurance Plans

When it comes to life insurance types, a child plan is an investment+insurance plan that helps you meet
your child’s financial needs. A child insurance plan will help you create wealth for your child’s future
needs like education.
You can start investing in these plans from the birth of your child. You get the flexibility of investing
your hard earned money into several funds on the basis of your financial condition and goals in mind.

8. Retirement Plans
Retirement Plans are amongst the types of life insurance policies that provides financial security and
help you with wealth creation after your retirement. With Retirement Plan, you will get a sum of money
as pension in the vesting period.
In case of your untimely demise during the policy term, your nominee will get the death benefits.
Retirement Plans comes with death benefit as well as vesting benefit providing protection to you and
your family members.
LIFE INSURANCE CORPORATION OF INDIA:
The Life Insurance Act is established in the year 1956 which started working to provide insurance to
the people. Prior to the commencement of L.I.C. Act, 1956, there were 243 insurance companies which
used to deal with the concept of insurance. Because of the establishment of this Act the business of them
was taken over by this Act. It is an institution of investment under which various people invest their
funds in different policies and the savings are spread into different types of securities to protect the
interest on a long period of time. This act also helps other institutions which are working for lending
money by providing loans. This Act establishes a biggest insurance company or corporation of India.
OBJECTIVES OF LIC OF INDIA:
These are the objectives of LIC:

• It especially works for the rural areas as well so that the people can know about the various insurance
policies.

• Convert the savings into activities of nation-building.

• To provide the full security and efficient service to them at reasonable rates.
• To safely handle the money of the holders.
• To act as trustees.
• To fulfill the different needs of the community.
• To indulge all the people who are working in the corporation to protect the interest as well as to
provide efficient service.

• To promote the employees to have dedication towards their achievement.

ACTIVITIES OF LIC:
The LIC approves the bonds, debentures and share of various financial companies and to provide long-
term loans to them. After providing the loan it creates a relationship between the other lending
institutions i.e. UTI, IDBl etc. to make an effective coordination. In India, LIC is regarded as the most
competent factor in the security market. It approves the share capital of the companies whether it is
equity or preference. It is extended to a huge number of non-financial companies as well. Even the share
market is weak the LIC is regarded as a perpetual invasion of funds.
INVESTMENT POLICY:
It is the duty of the LIC investment policy to provide a generous interest to the holders of the policy
which should be persistent with safety also. The funds should be utilized properly. The policies which
are given by the LIC should be trustworthy so that the value of the securities should not be curtailed
and also helps in providing the highest return. In other words, we can say that while investing in any
type of insurance funds the principles of safety, circulation etc. should be followed in a well-mannered
way. Because of this, it creates a great significance but not only to the policyholders also to the whole
economy.
ESTABLISHMENT AND INCORPORATION OF LIFE CORPORATION OF INDIA
(SECTION 3):
Section 3 deals with the establishment and incorporation of Life Corporation of India.

• The Central Government appoints a corporation which is called as Life Corporation of India by
giving notification in the offigial gazette.

• It shall be a corporation which acquires perpetual existence and a common seal. It has the power to
acquire, dispose and hold the property and if necessary it may be sue and sued by its name[2].
ROLE AND FUNCTIONS OF LIC (SECTION 6):
Section 6 deals with the role and functions of Life Corporation of India. The corporations shall have the
following powers:

• To carry on capital redemption business, annuity certain business or reinsurance business in so far as
such reinsurance business appertains to life insurance business;

• Subject to the rules in this section, if any, made by the Central Government in this behalf, to invest
the funds of the Corporation in such manner as the Corporation may think fit and to take all such
steps as may be necessary or expedient for the protection or realization of any investment; including
the taking over of and administering any property offered as security for the investment until a
suitable opportunity arises for its disposal; To acquire, hold and dispose of any property for the
purpose of its business

• To transfer the whole or any part of the life insurance business carried on outside India to any other
person or persons, if in the interest of the Corporation it is expedient so to do;
To advance or lend money upon the security of any movable property or otherwise;

• To borrow or raise any money in such manner and upon such security as the Corporation may think
fit;

• To carry on either by itself or through any subsidiary any other business in any case where such other
business was being carried on by a subsidiary of an insurer whose controlled business has been
transferred to an vested in the Corporation under this Act; to carry on any other business which may
seen to the Corporation to be capable of being conveniently carried on in connection with its business
and calculated directly or indirectly to render profitable the business of the Corporation;
• To do all such things as may be incidental or conducive to the proper exercise of any of the powers
of the Corporation[3].
EVENTS INSURED IN LIFE
Health and term insurance are small decisions with big impact on your family’s financial future. Ideally,
you should spend good time in deliberating and selecting the best insurance for family, and that should
be all. Once you have the plan, you should dedicate as much time possible for the wealth building
investments.
However, life insurance usually cannot keep up with the changes in your life on its own. So, from time
to time, you need to revisit and adjust the levers to meet the new demands of life with your term cover.
Here are five different types of life events which warrant your attention to your insurance covers:
1. Significant Income Growth
Your term cover is usually based on your annual household income. That is to support your family’s
lifestyle after your demise and maintain it as it was while you were alive. Thus, it makes sense to revisit
and increase your health and term cover after a significant growth in income.
While your savings growth will help you build more wealth and meet your financial goals easily, income
growth impacts the family’s lifestyle as well. Thus, it is only logical to increases the cover for both
health and life insurance plans.
Does this mean you will need to reduce the coverage if your income drops significantly? Not really.
Income drops are usually temporary and if you reduce or eliminate life insurance or health cover you
will find it difficult to increase them later.
2. Marriage
Marriage is another significant life event. Starting of family life could seem like a completely new world
and in this new world your life insurance is no longer just the minimum liability cover.
You need to ensure that your life cover will provide adequate financial support to your spouse in case
anything happens to you.
Similarly, with the health insurance plan you should add your spouse under a family floater plan. This
will help you and your spouse to avail maternity cover and health cover for the newborn child as well.
3. Buying the First House
First house is most likely to be your home, and in the event of a disaster falling upon you, you would
want it to remain in your family’s possession. Thus, you will need to include the liability you are
incurring through a home loan and any transfer cost in your term plan.
Now there are two ways you can accomplish that:
• Buy a new term cover separately

• Buy a home loan term cover with the home loan

Buying a separate life cover is, however, better for your family, as the home loan cover will only cover
the home loan balance in any given month. Whereas, the separate cover will double up as additional
life cover for the family as you repay the home loan.
4. Childbirth
Welcoming a child in the family adds to both your happiness and responsibility. Since your
responsibilities are increasing, so should your life and health cover. We have already discussed how
getting a family floater plan helps you provide health insurance cover to your newborn child. So, if you
have not availed the family floater medical cover now would be the good time to do it.

5. Other Significant Life Events

Other significant life events can include acquiring disability, changing country of residence, or changing
the profession completely. These life events may or may not cause significant financial change in your
life. But, if they do, you need to adjust your insurance policies accordingly.
You may notice that increasing the life cover is easier than decreasing it. That is because, life cover is
supposed to protect your family’s lifestyle and decline in lifestyle is equally difficult once achieved a
certain level.
Thus, ensure that your family is adequately protected at all times, a little extra protection wouldn’t hurt
for a while.
What is Nomination?
Nomination is the right of decision, made by the policyholder, to nominate a person, the policyholder
is given the authority to appoint a person who will receive the benefits in case of an unforeseen demise
of the life assured during the policy term. The person who will receive the benefit is known as a
Nominee. Nomination is permitted under Section 39 of the Insurance Act.
What is Assignment?
Assignment is known as the transfer of policy right and ownership from the policyholder to the person
chosen for the Assignment. The person who is chosen for Assignment Is known as Assignee.
Assignment is also permitted under Section 38 of the Insurance Act.
Assignment Vs Nomination In Life Insurance
Following is the difference between Assignment and Nomination under life insurance policy:
Parameter Assignment Nomination

Ownership Assignment is transferring of Under nomination a person is

rights or policy ownership nominated by the
from the policyholder to the policyholder, who will
assignee. It can be made by receive the benefits in case of
an endorsement on the life an unforeseen demise of the
insurance policy. life assured during the policy
term.
Nomination is made by
mentioning the nominees in
the policy documents.
 Witness Assignment requires No witness is required for
witnesses, without witness nomination.
the assignment shall be
considered invalid.

Purpose The policy ownership or Nominees will only receive

rights are transferred from the benefits in case the life
the policyholder to the assured passes away during
assignee. the policy term.

Authority Assignee can sue the Nominees cannot sue the

Assignor. policyholder.

Benefits Assignee shall receive the Nominees shall be paid

policy money. death benefit in case the life
assured passes away.

Types of Nominees
Following are the different types of nominee:

1. Beneficial Nominee: If the policyholder nominates an immediate family member of his

family, the nominated person shall be termed as beneficial nominee. If a policyholder
opts for a family member such as spouse, parent or children as the nominee, the
nominated person will be a beneficial nominee.

2. Minor Nominee: A nominated person who is below 18 years of age is known as a minor
nominee. If the policyholder chooses to nominate his/her child under the life insurance,
the nominated person shall be termed as minor nominee.

3. Non-Family Nominee: If the policyholder nominates distant relatives and friends, the
nominated person shall be termed as non-family nominee.
Types of Assignees
Following are the the different types of assignee:

1. Absolute Assignment: Absolute assignment is when the policyholder transfers the policy
right/ownership to the assignee without any terms and conditions.

2. Conditional Assignment: Conditional assignment is when policyholder decides to

transfer the policy right/ownership to the assignee under certain conditions, if the terms
and conditions are fulfilled then only the assignee will receive the policy
rights/ownership.
CIRCUMSTANCES AFFECTING RISK
As you purchase a life insurance policy for yourself you have to pay premiums to keep it in force. It is
important to know the reasons that may affect your premium costs compelling you to pay higher
premiums to the insurance company.
A great way to help and protect your loved ones, is with Life Insurance which can be a huge investment
as well. A lower premium paid can yield to a good amount of savings over a period of few years. Life
insurance premiums are based on a number of factors, and it can be quite tedious for a few people to
understand why and what the charges are, and why they pay a rate that may not be the same as another.
There are some factors that many insurance companies consider when pricing their policies, there factor
may not be within your control. But the life choices you make, can also lead to the factors that can affect
your Life Insurance premium.
The factors that affect your premium towards Life Insurance are:
1. Age: This is an obvious and not surprising factor that affects your Life Insurance premium,
the age of the policyholder. If you’re young the rates will be lower in comparison to
someone older. The possibility of a young individual contracting a life threatening disease
or to pass away in their youth is very unlikely. The insurance companies believe that you’ll
make many premium payments before they have to write a cheque for your family.

2. Gender: Insurance companies aren’t against gender equality, but they believe there is a
different life expectancy for different genders. As per the studies and statistical findings,
women are believed to live 5 years more than men at the minimum. Therefore affecting
the premium they pay, making them pay the premium for a larger period of time but at
lower rate which is a plus point for the women.

3. Smoking: Smoking puts the policyholders at higher risk of all ailments, so if you’re a
smoker that that’s as good as raising a red flag to the insurance companies. Most smokers
pay a premium twice as much as non - smoker does, thus affecting the premium to a huge
extent.

4. Medical history: There’s isn’t much one can do with the gene pool they come from. If a
policyholder has a medical history of serious illnesses like cancer, heart diseases, or any
other, then that makes them susceptible to get these from a hereditary perspective. Which
increases the individual’s premium by a larger margin than if their gene pool wasn’t.

5. Health records: You as the policyholder will also need to provide your own health
records. These records will ensure that you don’t have any chronic diseases or potential
health issues and keep your premium also in check instead of making a difference to it.

6. Drinking: Drinking of alcohol is injurious to health in more ways than one. If you as the
policyholder are a heavy consumer of alcohol this can affect your premium at higher
insurance rates. Insurance companies ensure to ask the applicant if they are smokers or
drinkers.

7. The Policy: The policy itself also affects the premium you pay, the longer the tenure of
the policy the larger the amount of the benefit at the time of death, since you’re paying it
for that period of time. Short term policies are more expensive that long term.

8. Profession: Your profession also plays an important role in the premium you end up
paying, any policyholder working in the mining industry, oil and gas, fisheries or any other
dangerous profession increases the premium amounts you pay for the policy you decide
to take.
 9. Lifestyles choices: Many insurers have a higher premium for people who love to takes
risks for the thrill of it. Like speeding cars, climbing treacherous mountains or other high
risk activities. Thereby increasing your premium to substantially more than other.

10. Obesity: Obesity is another factor that affects your premium as a policyholder, being
obese can lead to a number of health problems like Osteoarthritis, High Blood Pressure,
Cancer, Stroke, Coronary Heart Disease, causing overall health problems in the future and
also increases your rates.
How these factors affect your rates of premium is dependent on the insurance company and the way
they treat these factors and the combination of them. For example: having a history of cancer in your
family and still being a smoker can affect your rate in more than one way or being obese and having a
history of heart disease also affects your rates of premium. Every insurance policy is based on each
individual and premiums are calculated on the insurance company's rules of rating.
Persons entitled to payment under Life insurance -
As we all know that Life insurance is a contract that pledges payment of an amount to the person assured
or his nominee on the happening of the event insured against. Nobody can predict what will happen in
their future life however there is always need to earn income to support yourself and your dependents
in case of any eventuality. Life insurance policy provides financial security. The life insurance policy
pays you in the wake of unfortunate events such as death or on the inability to earn due to physical
disabilities. Life insurance policy covers the risk of contingencies is dependent on human life. For
example payment of an amount (which is called sum assured) on the death of of the Life Assured.
Further, annuity contracts (which provide for periodic payments to life as sure as long as the
policyholder is alive) are the provisions of accident benefits also from part of life insurance business.
The claim monies can be paid to any of the following -
A) Payee -
In the contract of life insurance, the policyholder will not always be the payee but it is the person whose
name is entered in the benefits schedule of the policy and who receives the benefits of payment of
scheme who is also known as the payee.
B)Assured himself -
In the Life insurance contract, life Assured himself in case of policy on own life for living benefit claims
( for example critical illness, disability old age etc.) if in the life insurance contract, life insured services
to the full term, then basic sum assured is payable to him only.
B) Assignee or assignment -
The expression assignment literally means transfer. the insurance act lays down the mode of assignment
and transfer of life insurance policy. an assignment or transfer may be made only on satisfaction of the
following conditions -

1) An endorsement upon the policy itself or by a separate instrument;

2) the endorsement or instrument should be signed by the transferor his agent and should be attested
by at least one witness;

3) it should specifically set forth the fact of transfer or assignment.

C) Nominee -
 Nomination is governed by Section 39 of the Insurance Act 1938. According to Section 39(1) of the
said act the holder of a policy of life insurance on his own life may, when effecting the policy or at any
time before the policy matures for payment, nominate the person or persons to whom the money secured
by the policy shall be paid in the event of his death.
Provided that, where any nominee is a minor, it shall be lawful for the policyholder to appoint any
person in the manner laid down by the insurer, to receive the money secured by the policy in the event
of his death during the minority of the nominee.
(2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of the policy
itself, be made by an endorsement on the policy communicated to the insurer and registered by him
in the records relating to the policy and any such nomination may at any time before the policy
matures for payment be cancelled or changed by an endorsement or a further endorsement or a will,
as the case may be, but unless notice in writing of any such cancellation or change has been delivered
to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him
to a nominee mentioned in the text of the policy or registered in records of the insurer.
(3) The insurer shall furnish to the policyholder a written acknowledgement of having registered a
nomination or a cancellation or change thereof, and may charge such fee as may be specified by
regulations for registering such cancellation or change.
(4) A transfer or assignment of a policy made in accordance with section 38 shall automatically cancel a
nomination.
Provided that the assignment of a policy to the insurer who bears the risk on the policy at the time of
the assignment, in consideration of a loan granted by that insurer on the security of the policy within its
surrender value, or its reassignment on repayment of the loan shall not cancel a nomination, but shall
affect the rights of the nominee only to the extent of the insurer's interest in the policy: Provided further
that the transfer or assignment of a policy, whether wholly or in part, in consideration of a loan advanced
by the transfree or assignee to the policyholder, shall not cancel the nomination but shall affect the rights
of the nominee only to the extent of the interest of the transferee or assignee, as the case may be, in the
policy: Provided also that the nomination, which has been automatically canceled consequent upon the
transfer or assignment, the same nomination shall stand automatically revived when the policy is
reassigned by the assignee or retransferred by the transferee in favor of the policyholder on repayment
of loan other than on a security of policy to the insurer.
(2) Where the policy matures for payment during the lifetime of the person whose life is insured or where
the nominee or, if there are more nominees than one, all the nominees die before the policy matures
for payment, the amount secured by the policy shall be payable to the policyholder or his heirs or
legal representatives or the holder of a succession certificate, as the case may be.
(3) Where the nominee or if there are more nominees than one, a nominee or nominees survive the person
whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors.
(4) Subject to the other provisions of this section, where the holder of a policy of insurance on his own
life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them,
the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him
or them under sub-section (6) unless it is proved that the holder of the policy, having regard to the
nature of his title to the policy, could not have conferred any such beneficial title on the nominee.
(5) Subject as aforesaid, where the nominee, or if there are more nominees than one, a nominee or
nominees, to whom sub-section (7) applies, die after the person whose life is insured but before the
amount secured by the policy is paid, the amount secured by the policy, or so much of the amount
secured by the policy as represents the share of the nominee or nominees so dying (as the case may
 be), shall be payable to the heirs or legal representatives of the nominee or nominees or the holder of
a succession certificate, as the case may be, and they shall be beneficially entitled to such amount.
(6) Nothing in sub-section (7) and (8) shall operate to destroy or impede the right of any creditor to be
paid out of the proceeds of any policy of life insurance.
(7) The provisions of sub-sections (7) and (8) shall apply to all policies of life insurance maturing for
payment after the commencement of the Insurance Laws (Amendment) Act, 2015.
(8) Where a policyholder dies after the maturity of the policy but the proceeds and benefit of his policy
has not been made to him because of his death, in such a case, his nominee shall be entitled to the
proceeds and benefit of his policy.[Amended by Insurance Act 2015]

(9) The provisions of this section shall not apply to any policy of life insurance to which section
6 of the Married Women's Property Act, 1874, applies or has at any time applied: Provided
that where a nomination made whether before or after the commencement of the Insurance
Laws (Amendment) Act, 2015, in favour of the wife of the person who has insured his life or of
his wife and children or any of them is expressed, whether or not on the face of the policy, as being
made under this section, the said section 6 shall be deemed not to apply or not to have applied to
the policy.
D) Legal heirs -
The claim is usually payable to nominee/assignee or the legal heirs as the case may be. However, if the
deceased policyholder has not nominated/assigned the policy or if he or she has not made a suitable
provision regarding the policy sums of money by way of a will, the claim is payable to the holder of a
succession certificate or some such evidence of title from a court of law.
E) Appointee -
Appointee is entitled to payment of life insurance contract.
Filing a Life Insurance Claim
Claim settlement is one of the most important services that an insurance company can provide to its
customers. Insurance companies have an obligation to settle claims promptly. You will need to fill a
claim form and contact the financial advisor from whom you bought your policy. Submit all relevant
documents such as original death certificate and policy bond to your insurer to support your claim. Most
claims are settled by issuing a cheque within 7 days from the time they receive the documents. However,
if your insurer is unable to deal with all or any part of your claim, you will be notified in writing.

Types of claims
Maturity Claim- On the date of maturity life insured is required to send maturity claim / discharge
form and original policy bond well before maturity date to enable timely settlement of claim on or
before due dates. Most companies offer/issue post dated cheques and/ or make payment through ECS
credit on the maturity date. Incase of delay in settlement kindly refer to grievance redressal.
Death Claim(including rider claim) - In case of death claim or rider claim the following procedure
should be followed.
Follow these four simple steps to file a claim:
1. Claim intimation/notification
The claimant must submit the written intimation as soon as possible to enable the insurance company
to initiate the claim processing. The claim intimation should consist of basic information such as policy
number, name of the insured, date of death, cause of death, place of death, name of the claimant. The
claimant can also get a claim intimation/notification form from the nearest local branch office of the
insurance company or their insurance advisor/agent. Alternatively, some insurance companies also
provide the facility of downloading the form from their website.
2. Documents required for claim processing The claimant will be required to provide a
claimant's statement, original policy document, death certificate, police FIR and post
mortem exam report (for accidental death), certificate and records from the treating
doctor/hospital (for death due to illness) and advance discharge form for claim processing.
Based on the sum at risk, cause of death and policy duration, insurance companies may
also request some additional documents.
3. Submission of required documents for claim processing For faster claim processing,
it is essential that the claimant submits complete documentation as early as possible. A
life insurer will not be able to take a decision until all the requirements are complete. Once
all relevant documents, records and forms have been submitted, the life insurer can take
a decision about the claim.
4. Settlement of claim As per the regulation 14 (2)(i) of the IRDAI (Policy holder's Interest)
Regulations, 2017, the insurer is required to settle a claim within 30 days of receipt of all
documents including clarification sought by the insurer. However, the insurance company
can set a practice of settling the claim even earlier. If the claim requires further
investigation, the insurer has to complete its procedures expeditiously, in any case not
later than 90 days from the date of receipt of claim intimation and claim shall be settled
within 30 days thereafter.

Module III: Marine Insurance

INTRODUCTION
The need to insure property against the economic consequences of its loss or damage has become a
fundamental feature of modern society. Insurance underpins key aspects of society by providing security
and protection to individuals, communities, and businesses. It facilitates trade and commerce; generates
employment; provides risk sharing; encourages innovation by allowing individuals and businesses to

engage in more risky business activities, thereby fostering higher levels of economic activity; and
mobilizes domestic savings through the collection of premiums by insurance companies which can help
build a country’s financial market.
In the context of globalization, maritime transport is the backbone of international trade with over 80
per cent of world merchandise trade by volume being carried by sea. Marine transport involves risks
related with the “perils of the sea”. In this respect, marine insurance is a mechanism that helps to
mitigate the risks of financial loss to the property such as ship, goods or other movables, in maritime
transport. Insurance is, thus, a necessary component of doing business on an international basis and
plays an important role in the international trade. Its purpose is to enable ship-owner, the buyer and
seller of the goods to operate their businesses, while relieving themselves, at least partly, of the
burdensome financial consequences of their property’s being lost or damaged as a result of various risks
of the high [Link], marine insurance adds the necessary element of financial security so that the risk
of an accident happening during the transport is not an inhibiting factor in the conduct of international
trade. In this sense, marine insurance is an aid to the conduct of seaborne international trade. Therefore,
developing an efficient and competitive insurance market is of key importance for developing countries
like India as they integrate into the world economy.
Evolution of Legal Framework for Marine Insurance
Insurance law in India had its origins in British law with the establishment of a British firm, the Oriental
Life Insurance Company in 1818 in Calcutta, followed by the Bombay Life Assurance Company in
1823, the Madras Equitable Life Insurance Society in 1829 and the Oriental Life Assurance Company
in 1874. The first general insurance company Triton Insurance Company Ltd. was promoted in 1850 by
British nationals in Calcutta. The first general insurance company established by an Indian was Indian
Mercantile Insurance Company Ltd. in Bombay in 1907. The first legislation in India to regulate the
life insurance business was in 1912 with the passing of the Indian Life Assurance Companies Act, 1912.
Other classes of non-life insurance business were left out of the scope of the Act of 1912, as such non-
life insurance was still in rudimentary form and regulating them was not considered necessary.
Eventually, with the growth of fire, accident and marine insurance, the need was felt to bring such kinds
of insurance within the purview of the regulations. While there were a number of attempts to introduce
such legislation over the years, law on non-life insurance was finally enacted in 1938 with the passing
of the Insurance Act, 1938.
The general insurance business was nationalized in 1973, through the introduction of the General
Insurance Business (Nationalisation) Act, 1972. Under the provisions of the GIC Act, the shares of the
existing Indian general insurance companies and undertakings of other existing insurers were
transferred to the General Insurance Corporation (“GIC”) to secure the development of the general
insurance business in India and for the regulation and control of such business. The GIC was established
by the Central Government in accordance with the provisions of the Companies Act, 1956 in November
1972 and it commenced business on January 1, 1973. Prior to 1973, there were a hundred and seven
companies, including foreign companies, offering general insurance in India. These companies were
amalgamated and grouped into four subsidiary companies of GIC viz. the National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd., and the United
India Assurance Company Ltd. GIC undertakes mainly re-insurance business apart from aviation
insurance. The bulk of the general insurance business of fire, marine, motor and miscellaneous
insurance business is under taken by the four subsidiaries From 1991 onwards, the Indian Government
introduced various reforms in the financial sector paving the way for the liberalization of the Indian
economy. Consequently, in 1993, the Government of India set up an eight-member committee chaired
by Mr. R. N. Malhotra, to review the prevailing structure of regulation and supervision of the insurance
sector. The Committee submitted its report in January 1994. Two of the key recommendations of the
Committee included the privatization of the insurance sector by permitting the entry of private players
to enter the business of life and general insurance and the establishment of an Insurance Regulatory
Authority. Subsequently, the recommendations of the Malhotra Committee were implemented by the
Indian government by allowing private investments in the insurance sector and establishing a regulatory
body through the enactment of the Insurance Regulatory and Development Act, 1999 with the aim “to
provide for the establishment of an Authority, to protect the interests of the policy holders, to regulate,
promote and ensure orderly growth of the insurance industry and to amend the Insurance Act, 1938, the
Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalization) Act, 1972″.
At present, the principal legislation regulating the insurance business in India is the Insurance Act, 1938,
as amended over the years, and regulates both life insurance and general insurance. General insurance
has been defined to include “fire insurance business”, “marine insurance business” and “miscellaneous
insurance business”. Some other existing legislations in the field are – the Life Insurance Corporation
Act, 1956, the Marine Insurance Act, 1963, the General Insurance Business (GIB) (Nationalization)
Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The provisions
of the Indian Contract Act, 1872 are applicable to the contracts of marine insurance. Similarly, the
provisions of the Companies Act, 1956 are applicable to the companies carrying on insurance business.
Marine insurance business is mostly international and subject to law and international regulations in
every stage of operations. It is governed by the Marine Insurance Act, 1963, in India and guided by the
various clauses formulated by the Institute of London Underwriters (ILU) and the International
Commercial Terms, known as ‘Incoterms’ developed by ICC (International Chamber of Commerce).
Marine Insurance Act, 1963, is designed to regulate the transaction of marine insurance businesses of
hull, cargo and freight. They have also, in addition, to fulfil the provisions of section 64VB of the
Insurance Act 1938 on payment of premium in advance of risk commencement (See. Sections 64VB(1)
and 64VB(5) of the Insurance Act 1938). The voyages undertaken are subjected to specific Institute of
London Underwriters (ILU) clauses, defining inception and termination of insurance covers, and the
perils insured against.

Marine Insurance: Definition

A contract or policy of marine insurance is an arrangement whereby one person called insurer or
underwriter, agrees, according to specific terms of contract, to indemnify another person,
called assured, for the losses incurred in connection with property, such as ship, goods or other
movables, in maritime transport .
Section 3 of the Marine Insurance Act, 1963, defines ‘marine insurance’ as follows:
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the
assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses
incidental to marine adventure.
“Marine adventure” includes any adventure where any insurable property is exposed to maritime perils
i.e. perils consequent to navigation of the sea. It also includes the earnings or acquisition of any freight,
passage money, commission, profit or other pecuniary benefit, or the security for any advances, loans,
or disbursements is endangered by the exposure of insurable property to maritime perils (ibid., sections
2(e) Marine adventure also includes any liability to a third party may be incurred by the owner of, or
other person interested in or responsible for, insurable property by reason of maritime perils.
A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to
protect the assured against losses on inland waters or on any land risk which may be incidental to any
sea voyage(ibid., Section 4[1]).

2. Insured Risks: Perils of the Sea

An insurer underwrites or subscribe to a risk in return for the payment of ‘premium’ by the assured .
The premium is considered compensation for running risks of the insured property and is normally
retained whether or not the insured property is lost or not. The size of the premium depends upon the
insurer’s estimation of degree of the risk that the insured property will incur a loss and on amount of
indemnity he will have to pay. Generally, the insurers spread their potential liabilities in a relatively
small amount over a number of risks in order to benefit from the probability that only a limited
percentage will experience losses by ‘law of averages.’
The word “risk” being in this context to refer to the risk of loss occurring in connection with insured
property, and the risk of loss can include not only actual property in return for the payment of premium
by the assured losses but also financial losses, such as those resulting from the loss of freight, passage
money, commission or profit as well as certain types of liabilities incurred to third parties (ibid., sections
2[d]{ii}.)
The specification of insurance contract usually stipulates certain limitations as to the type of occurrences
that may cause losses for which the insurer will pay indemnity. [Such occurrences are called “insured
risks” or “insured perils”. The term “perils of the sea” refers only to accidents or causalities of the sea,
and does not include the ordinary action of the winds and waves. Besides, maritime perils include, fire,
war perils, pirates, seizures and jettison, etc. A marine insurance policy may specify that only certain
maritime risks, or “perils of the sea”, are covered.

Types of Marine Insurance

Marine insurance provides coverage for risks associated with the transportation of goods and cargo over
water. There are various types of marine insurance policies designed to address different aspects of
maritime risks.
1. Hull Insurance:
• Coverage: Hull insurance provides coverage for damage to the ship's hull and
machinery. It also covers the shipowner's liability for third-party property damage or
bodily injury resulting from the ship's operation.
• Example: If a ship collides with another vessel, causing damage to its own hull and
machinery, hull insurance would cover the repair costs.
2. Cargo Insurance:
• Coverage: Cargo insurance protects the owner of the goods being transported against
loss or damage to the cargo during the voyage.
• Example: If goods are damaged due to a storm during maritime transport, cargo
insurance would compensate the owner of the goods for the loss.
3. Freight Insurance:
• Coverage: Freight insurance covers the loss of freight revenue that a carrier would
have earned if the goods had arrived at their destination in good condition.
• Example: If cargo is damaged en route, the carrier might lose the freight charges, and
freight insurance would cover this financial loss.
4. Liability Insurance:
• Coverage: Liability insurance provides coverage for legal liabilities arising from third-
party claims for bodily injury or property damage caused by the ship.
• Example: If a ship collides with a pier, causing damage to the pier and injuring
workers, liability insurance would cover the shipowner's legal liabilities.
5. Builder's Risk Insurance:
• Coverage: Builder's risk insurance, also known as construction risk insurance,
provides coverage for ships under construction or vessels undergoing repairs.
• Example: If a ship under construction is damaged due to a fire at the shipyard, builder's
risk insurance would cover the repair or replacement costs.
 6. Demurrage Insurance:
• Coverage: Demurrage insurance covers the additional costs incurred by the shipowner
when the ship is delayed at the port beyond the agreed-upon time.
• Example: If a ship is delayed at the port, resulting in additional expenses for the
shipowner, demurrage insurance would cover these extra costs.
7. Particular Average Insurance:
• Coverage: Particular average insurance covers partial losses or damages to the ship or
cargo that result from a specific fortuitous event.
• Example: If a specific part of the cargo is damaged due to water ingress during the
voyage, particular average insurance would cover the losses associated with that
particular incident.

Types of marine policies

Marine insurance policies are contracts that provide coverage for various risks associated with the
transportation of goods and vessels over water. There are different types of marine insurance policies,
each designed to address specific needs and risks.
1. Voyage Policy:
• Coverage: A voyage policy provides coverage for a specific voyage or journey. It is
suitable for insuring a single shipment or a one-way voyage.
• Duration: The coverage begins when the vessel leaves the port of origin and ends upon
arrival at the destination port.
2. Time Policy:
• Coverage: A time policy provides coverage for a specified period, usually for a few
months or a year. It is suitable for vessels involved in multiple voyages during the
policy period.
• Duration: Coverage is provided for the entire policy period, regardless of the number
of voyages undertaken by the insured vessel.
3. Mixed Policies:
• Coverage: Mixed policies combine elements of both voyage and time policies. They
provide coverage for specific voyages as well as during idle periods when the vessel is
not actively engaged in a voyage.
• Flexibility: Mixed policies offer flexibility and are suitable for vessels with irregular
schedules.
4. Valued Policy:
• Coverage: A valued policy specifies the agreed-upon value of the insured vessel or
cargo in the policy. In the event of a total loss, the agreed value is paid.
• Valuation: The valuation is determined when the policy is issued and is fixed,
providing certainty in case of a loss.
 5. Unvalued Policy:
• Coverage: An unvalued policy does not specify a predetermined value for the insured
vessel or cargo. The actual value is determined at the time of the loss.
• Valuation: The valuation is based on the actual market value or cost at the time of the
loss, which may be subject to negotiation.
6. Floating Policy:
• Coverage: A floating policy covers multiple shipments of goods over a specified
period. It allows the insured to declare the value of each shipment as it occurs.
• Flexibility: Floating policies are flexible and suitable for businesses with frequent
shipments.
7. Open Cargo Policy:
• Coverage: An open cargo policy provides continuous coverage for shipments made by
the insured over a specified period. It eliminates the need to obtain separate policies for
each shipment.
• Declaration: The insured is required to declare each shipment to the insurer, and
coverage is automatically extended to the declared shipments.
8. Open Cover:
• Coverage: An open cover is an agreement between the insurer and the insured that
provides a framework for issuing individual policies for various shipments.
• Flexibility: It allows the insured to obtain coverage for specific shipments without the
need for separate negotiations for each one.

Principles of Marine Insurance policies

Marine insurance policies are governed by certain principles that help establish the framework for the
relationship between the insured and the insurer. Understanding these principles is crucial for both
parties involved in maritime activities.
1. Utmost Good Faith (Uberrimae Fidei):
• Principle: Both the insured and the insurer are bound by the utmost good faith,
requiring full and honest disclosure of all material facts related to the insurance risk.
Failure to disclose relevant information may result in the policy being voided.
• Application: This principle is particularly important in marine insurance, where
information about the condition of the ship, cargo, and voyage is critical for
underwriting.
2. Insurable Interest:
• Principle: The insured must have a genuine insurable interest in the subject matter of
the insurance. In marine insurance, this means that the insured must have a financial
interest in the ship, cargo, or other maritime property being insured.
• Application: It ensures that only those with a legitimate financial stake in the insured
property can purchase insurance, preventing speculative or fraudulent practices.
 3. Indemnity:
• Principle: The principle of indemnity in marine insurance means that the insured
should be compensated for the actual financial loss suffered, not more. The insurer's
obligation is to restore the insured to the same financial position as existed before the
loss occurred.
• Application: Indemnity prevents the insured from profiting from an insurance claim
and helps maintain a fair and reasonable relationship between the premium paid and
the coverage provided.
4. Proximate Cause:
• Principle: The principle of proximate cause determines which event or peril was the
most dominant or effective in causing the loss. Only the proximate cause is considered
in determining coverage.
• Application: In marine insurance, where multiple perils may contribute to a loss,
identifying the proximate cause helps in determining the validity of a claim.
5. Contribution:
• Principle: When the same subject matter is insured with multiple insurers, the principle
of contribution comes into play. Each insurer contributes a proportionate share of the
loss.
• Application: Contribution ensures that the insured cannot recover more than the actual
loss by claiming from multiple insurers covering the same risk.
6. Subrogation:
• Principle: Subrogation allows the insurer, after settling a claim, to take over the rights
and remedies of the insured against third parties responsible for the loss. It prevents the
insured from being compensated twice for the same loss.
• Application: Subrogation is particularly relevant in marine insurance, where third
parties, such as other ships or entities, may be responsible for the loss.
7. Warranties and Conditions:
• Principle: Marine insurance policies often include warranties and conditions, which
are specific promises or requirements that must be fulfilled by the insured. Failure to
comply with warranties may result in the policy being voided.
• Application: Warranties and conditions are designed to ensure that certain specified
conditions are met to maintain the validity of the insurance contract.

Classification of Marine Insurance policies

Marine insurance policies can be classified into various types based on the nature of coverage, the
duration of the policy, and the specific risks addressed.
1. Voyage Policies:
• Coverage: Provides insurance coverage for a specific voyage or journey from one port
to another.
 • Duration: Effective for the duration of the specific voyage or journey.
2. Time Policies:
• Coverage: Offers insurance coverage for a specified period, typically ranging from a
few months to a year.
• Duration: Effective for the entire policy period, regardless of the number of voyages
undertaken during that time.
3. Mixed Policies:
• Coverage: Combines elements of both voyage and time policies, offering coverage for
specific voyages as well as during idle periods.
• Flexibility: Suited for vessels with irregular schedules or those engaged in occasional
voyages.
4. Valued Policies:
• Coverage: Specifies an agreed-upon value for the insured vessel or cargo in the policy.
• Valuation: The agreed value is fixed when the policy is issued, providing certainty in
case of a total loss.
5. Unvalued Policies:
• Coverage: Does not specify a predetermined value for the insured vessel or cargo.
• Valuation: The value is determined at the time of the loss based on the actual market
value or cost.
6. Floating Policies:
• Coverage: Provides continuous coverage for shipments made by the insured over a
specified period.
• Flexibility: Allows the insured to declare the value of each shipment as it occurs.
7. Open Cargo Policies:
• Coverage: Offers continuous coverage for shipments made by the insured during a
specified period.
• Declaration: The insured is required to declare each shipment to the insurer, and
coverage is automatically extended to the declared shipments.
8. Open Cover:
• Coverage: Establishes an agreement between the insurer and the insured for issuing
individual policies for various shipments.
• Flexibility: Allows the insured to obtain coverage for specific shipments without
separate negotiations for each.
9. Running Down Clause Policies:
• Coverage: Provides coverage for liabilities arising from collisions between ships.
• Liabilities: Covers the legal liabilities of the shipowner when their ship collides with
another vessel.
 10. Builder's Risk Policies:
• Coverage: Protects vessels under construction or undergoing repairs against specified
risks.
• Duration: Effective during the construction or repair period.
11. Terminal Policies:
• Coverage: Designed for vessels during their time spent at a specific port or terminal.
• Risks: Addresses risks associated with port activities and delays.
12. Port Risk Policies:
• Coverage: Covers risks associated with vessels while at a specific port.
• Risks: Includes risks such as fire, theft, and damage during loading and unloading.

Assignment of Marine Insurance Policy

Assignment in the context of marine insurance refers to the transfer of rights and interests in an
insurance policy from one party (the assignor) to another party (the assignee). The assignment of a
marine insurance policy is a legal process that allows the assignee to step into the shoes of the original
insured with respect to the benefits and obligations under the policy.
1. Legal Basis:
• Consent: Generally, the assignment of a marine insurance policy requires the consent
of the insurer unless the policy specifically allows assignment without consent.
2. Formalities:
• Written Document: Assignments are typically formalized through a written document
signed by the assignor, the assignee, and sometimes the insurer.
3. Rights Transferred:
• Benefits: The assignee acquires the rights to receive benefits under the policy,
including the right to make a claim in the event of a covered loss.
• Obligations: The assignee also assumes any obligations or conditions stipulated in the
policy.
4. Notice to Insurer:
• Requirement: It is common for the assignor to notify the insurer about the assignment
to ensure that the insurer recognizes the change in the beneficial interest.
• Effectiveness: The effectiveness of the assignment may depend on whether the insurer
acknowledges and consents to the assignment.
5. Nature of Assignment:
• Absolute Assignment: In an absolute assignment, the assignee becomes the absolute
owner of the policy and is entitled to all rights and benefits under the policy.
• Collateral Assignment: In a collateral assignment, the assignee acquires certain rights
as security for a debt or obligation. The assignor retains some interest in the policy.
 6. Effect on Premiums:
• Premium Payments: The assignee may be responsible for premium payments after
the assignment, depending on the terms of the assignment and the insurer's policies.
7. Policy Terms and Conditions:
• Review: Both the assignor and the assignee should carefully review the terms and
conditions of the insurance policy to understand any limitations on assignment.
8. Legal Documentation:
• Legal Advice: Parties involved in an assignment, especially the assignee, may seek
legal advice to ensure that the assignment is legally valid and enforceable.
9. Life Insurance and Endowment Policies:
• Special Considerations: In the case of life insurance and endowment policies, there
may be specific rules and considerations regarding assignment.
10. Irrevocable Assignment:
• Nature: In some cases, assignments may be irrevocable, meaning that the assignor
cannot cancel or revoke the assignment without the consent of the assignee.

The Voyage, Peril of the Sea

The concept of "peril of the sea" is a fundamental aspect of marine insurance. It refers to the various
risks, dangers, and hazards that a ship and its cargo face during a voyage on the sea. Marine insurance
policies typically cover perils of the sea, providing financial protection against unforeseen events that
may result in damage or loss.
1. The Voyage:
• A voyage in the context of marine insurance refers to a specific journey or trip
undertaken by a ship from one point to another, typically between ports.
• The voyage is a central element in marine insurance policies, and the coverage provided
is often tailored to the unique risks associated with that particular journey.
2. Perils of the Sea:
• Definition: Perils of the sea encompass a wide range of risks and dangers that are
inherent to maritime travel. These perils can be unpredictable and may include natural
events, accidents, and external factors that pose a threat to the safety of the ship, cargo,
and crew.
• Examples of Perils of the Sea:
• Storms and tempests
• Hurricanes and typhoons
• Shipwrecks
• Collisions with other vessels
• Fire on board
 • Piracy and attacks by hostile forces
• Grounding and stranding
• Floods and tsunamis
3. Significance in Marine Insurance:
• Marine insurance policies are designed to provide coverage for the perils of the sea.
The insured (shipowner or cargo owner) pays a premium to the insurer in exchange for
protection against the financial consequences of these risks.
• The coverage may vary based on the terms of the policy, the type of marine insurance
(e.g., hull insurance, cargo insurance), and the specific risks outlined in the policy.
4. All-Risk Policies:
• Some marine insurance policies, particularly those known as "all-risk" policies, provide
coverage for a broad range of perils unless explicitly excluded in the policy. These
policies offer comprehensive protection but may come with certain exclusions and
limitations.
5. Named Perils Policies:
• In contrast, named perils policies specify the particular risks or perils for which
coverage is provided. The policy may explicitly list the events or dangers covered, and
any peril not mentioned would not be covered.
6. Doctrine of Uberrimae Fidei:
• The principle of utmost good faith (uberrimae fidei) is crucial in marine insurance.
Both the insured and the insurer are expected to disclose all material facts related to the
voyage and the condition of the ship or cargo to ensure fair dealings.

Loss & Abandonment

In the context of marine insurance, "loss and abandonment" refers to a situation where the insured party
decides to abandon a vessel or cargo as a result of a covered loss. This concept is closely tied to the
principle of indemnity in insurance, where the insurer agrees to compensate the insured for actual losses
suffered.
1. Loss in Marine Insurance:
• Definition: Loss in marine insurance refers to the actual damage, destruction, or loss
suffered by the insured vessel or cargo due to covered perils of the sea or other covered
events.
• Types of Loss:
• Total Loss: A total loss occurs when the insured property is completely
destroyed or lost, making it impossible or economically impractical to repair
or recover.
• Partial Loss: A partial loss occurs when only a portion of the insured property
is damaged or lost, and repair or recovery is feasible.
2. Abandonment in Marine Insurance:
 • Definition: Abandonment is an action taken by the insured party, where they
voluntarily surrender their interest in the damaged or partially lost property to the
insurer. The insured effectively relinquishes ownership in exchange for a claim
settlement.
• Conditions for Abandonment:
• The loss must be of a particular nature, such as a total loss or a constructive
total loss.
• The insured must give notice of abandonment to the insurer within a reasonable
time.
• Abandonment is often linked to the insured's assessment that the cost of repair
or recovery exceeds the value of the property.
3. Constructive Total Loss (CTL):
• Definition: A constructive total loss occurs when the cost of repairing or recovering
the damaged property, plus any associated costs, would exceed its insured value.
• Conditions for CTL:
• The property is not entirely lost, but the repair costs are deemed uneconomical.
• The insured has a right to abandon the property to the insurer.
4. Procedure for Abandonment:
• Notice: The insured must give prompt notice of abandonment to the insurer, clearly
stating their intention to abandon the property.
• Acceptance by Insurer: The insurer has the option to accept or reject the
abandonment. If accepted, the insurer takes over the ownership of the property.
• Claim Settlement: The insurer compensates the insured for the agreed-upon value of
the abandoned property, often the insured value.
5. Legal Principles:
• Uberrimae Fidei: The principle of utmost good faith requires the insured to act in good
faith and disclose all material facts related to the loss and abandonment.
• Indemnity: The insurer's obligation is to indemnify the insured for the actual loss
suffered, and abandonment is a mechanism for settling claims where the cost of repair
or recovery is deemed excessive.

Measures of Indemnity
In insurance, the principle of indemnity is fundamental. It states that the purpose of insurance is to
compensate the insured for the actual financial loss suffered, and not to provide a profit. The measures
of indemnity are the methods used to determine the amount of compensation payable to the insured in
the event of a covered loss.
1. Market Value:
 • Definition: Market value refers to the current value of the property in the open market
at the time of the loss.
• Application: In property insurance, the compensation is based on the property's market
value before the loss occurred.
2. Actual Cash Value (ACV):
• Definition: Actual cash value is the replacement cost of the property minus
depreciation.
• Application: ACV takes into account the property's original cost, age, and condition,
providing a more realistic value that considers wear and tear.
3. Agreed Value:
• Definition: Agreed value is a predetermined amount agreed upon by the insurer and
the insured at the time the policy is issued.
• Application: Often used in marine insurance, the agreed value is fixed, providing
certainty in case of a total loss.
4. Stated Value:
• Definition: Stated value is a value declared by the insured at the time of policy
issuance.
• Application: The insurer agrees to pay the stated value in the event of a covered loss,
but this may be subject to verification.
5. Replacement Cost:
• Definition: Replacement cost is the cost to replace or repair the damaged property with
new property of like kind and quality.
• Application: Common in property insurance, replacement cost coverage aims to
restore the insured to the same financial position they were in before the loss.
6. Reinstatement:
• Definition: Reinstatement involves restoring the insured property to its original
condition or replacing it with a similar item.
• Application: Common in property and vehicle insurance, reinstatement aims to bring
the insured back to the pre-loss state.
7. Salvage Value:
• Definition: Salvage value is the residual value of damaged property that can be
recovered after a loss.

• Application: Insurers may deduct the salvage value from the indemnity payment, as
the insured can often sell or reuse salvaged items.
8. Extra Expense Coverage:
• Definition: Extra expense coverage compensates the insured for additional costs
incurred to minimize the impact of a covered loss.
 • Application: This measure of indemnity addresses expenses beyond the direct loss,
such as temporary relocation or increased operational costs.
9. Recovery Against Third Parties (Subrogation):
• Definition: Subrogation allows the insurer, after settling a claim, to pursue recovery
from third parties responsible for the loss.
• Application: This measure of indemnity helps prevent the insured from being
compensated twice for the same loss.
10. Contribution:
• Definition: Contribution is relevant when the same risk is insured with multiple
insurers. Each insurer contributes a proportionate share of the loss.
• Application: Contribution ensures that no single insurer bears the entire burden of the
loss when multiple policies cover the same risk.

Settlement of Marine Insurance Claim

The settlement of a marine insurance claim involves the process by which the insured party receives
compensation from the insurer for a covered loss or damage to the insured property during a maritime
journey. The specific steps and procedures for claim settlement can vary based on the terms of the
insurance policy, the nature of the loss, and applicable laws and regulations
1. Notification of the Loss:
• Prompt Notification: The insured must notify the insurer of the loss or damage as
soon as possible after the occurrence, in accordance with the terms and conditions of
the insurance policy.
• Documentation: The insured should provide all relevant documentation, including a
detailed description of the loss, the circumstances surrounding it, and any supporting
evidence.
2. Survey and Assessment:
• Appointment of Surveyor: The insurer may appoint a surveyor to assess the extent of
the loss or damage. The surveyor examines the damaged property, reviews
documentation, and estimates the cost of repair or replacement.
• Survey Report: The surveyor prepares a report outlining their findings, which is used
in the claims settlement process.
3. Claim Documentation:
• Submission of Documents: The insured is typically required to submit various
documents supporting the claim. This may include the original insurance policy, the
surveyor's report, invoices, bills of lading, and other relevant paperwork.
• Completeness and Accuracy: Ensuring that all documents are complete and accurate
is crucial for a smooth claims settlement process.
4. Claim Valuation:
 • Determination of Loss Amount: The insurer evaluates the information provided,
assesses the loss or damage, and determines the amount of indemnity payable.
• Application of Indemnity Measure: The valuation may be based on market value,
actual cash value, agreed value, or other measures specified in the insurance policy.
5. Claim Settlement Offer:
• Communication with Insured: The insurer communicates the claim settlement offer
to the insured, including the amount of compensation and any applicable deductibles.
• Negotiation: There may be a negotiation process between the insured and the insurer
to reach an agreement on the settlement amount.
6. Payment of Indemnity:
• Issuance of Payment: Once the settlement amount is agreed upon, the insurer issues
payment to the insured.
• Form of Payment: Payment may be made through a bank transfer, check, or other
agreed-upon methods.
7. Subrogation and Salvage:
• Subrogation: If applicable, the insurer may pursue subrogation rights to recover the
claim amount from third parties responsible for the loss.
• Salvage: If there is any salvage value associated with the damaged property, the insurer
may deduct it from the claim amount.
8. Closure of Claim:
• Release and Discharge: Upon receipt of the indemnity payment, the insured may be
required to sign a release and discharge form, indicating that they accept the payment
as a full and final settlement of the claim.
• Claim Closed: The claim is considered closed once all formalities are completed, and
the insured has been compensated.

Module IV: Motor Vehicle Insurance

Motor Vehicle Insurance
Motor Vehicle Insurance, commonly known as auto insurance or car insurance, is a type of insurance
that provides financial protection to vehicle owners against the costs associated with damage to their
vehicles and liabilities arising from accidents or theft. Motor vehicle insurance is a legal requirement in
many countries and is designed to mitigate the financial risks associated with owning and operating a
motor vehicle.
1. Coverage Types:
 • Liability Coverage: This covers bodily injury and property damage for which the
insured is legally responsible when involved in an accident.
• Collision Coverage: This covers damage to the insured vehicle resulting from a
collision with another vehicle or object.
• Comprehensive Coverage: This covers non-collision events such as theft, vandalism,
natural disasters, and other specified perils.
• Uninsured/Underinsured Motorist Coverage: This provides coverage if the at-fault
party in an accident is uninsured or underinsured.
2. Premiums:
• Premium Payment: Vehicle owners pay a periodic premium to the insurance company
to maintain coverage.
• Factors Affecting Premiums: Premiums are influenced by factors such as the
insured's driving history, age, gender, location, the type of vehicle, and coverage limits.
3. Deductibles:
• Deductible Amount: The deductible is the amount the insured must pay out of pocket
before the insurance coverage kicks in.
• Influence on Premiums: Higher deductibles generally result in lower premiums, but
they also mean higher out-of-pocket expenses in the event of a claim.
4. Policy Limits:
• Coverage Limits: Policies have maximum limits for each type of coverage,
determining the maximum amount the insurer will pay for a covered loss.
• State Requirements: Many states have minimum coverage requirements that vehicle
owners must meet.
5. Optional Coverage:
• Additional Protections: Insured parties can opt for additional coverages such as
roadside assistance, rental car reimbursement, and gap insurance.
• Customization: Policyholders can customize their coverage based on their specific
needs and concerns.
6. Legal Requirements:
• Mandatory Insurance: In many jurisdictions, vehicle owners are legally required to
have a minimum amount of liability insurance to cover damages they may cause to
others in an accident.
• Penalties: Failure to maintain the required insurance may lead to legal consequences,
fines, or the suspension of driving privileges.
7. No-Fault Insurance:
• No-Fault States: Some regions follow a no-fault insurance system, where each party's
insurance covers their own medical expenses and damages, regardless of fault.
 • Exceptions: In no-fault systems, lawsuits for non-economic damages are typically
limited unless the injuries meet certain criteria.
8. Usage-Based Insurance (UBI):
• Telematics Technology: Some insurers offer UBI programs that use telematics
technology to monitor driving behavior. Safe driving habits may result in discounts on
premiums.
• Voluntary Participation: Policyholders can choose to participate in UBI programs to
potentially lower their insurance costs.

Types of Motor Insurance in India.

In India, motor insurance is categorized into two main types: Third-Party Insurance and Comprehensive
Insurance. These categories serve different purposes and provide varying levels of coverage.
1. Third-Party Insurance:
• Mandatory Requirement: Third-party insurance is a legal requirement for all motor
vehicles under the Motor Vehicles Act, 1988, in India.
• Coverage: This type of insurance covers the liability of the insured towards third
parties for bodily injury, death, or property damage caused by the insured vehicle.
• Exclusions: Third-party insurance does not cover damage to the insured vehicle or
injuries to the insured party. It only addresses the financial consequences of damages
caused to others.
2. Comprehensive Insurance:
• Optional: Comprehensive insurance is not mandatory by law but is highly
recommended for comprehensive coverage.
• Coverage:
• Own Damage: Comprehensive insurance covers damage to the insured
vehicle due to accidents, theft, vandalism, natural disasters, and other specified
perils.
• Third-Party Liability: In addition to own damage, it also covers third-party
liability as mandated by law.
• Personal Accident Cover: Many comprehensive policies include personal
accident cover for the owner-driver.
• Add-Ons: Policyholders can enhance their coverage by opting for various add-ons or
riders, such as zero depreciation cover, engine protection, roadside assistance, and
more.
3. Package Policy for Two-Wheelers:
• Coverage: Two-wheeler owners can opt for a package policy that includes both third-
party liability coverage and own damage coverage.
• Personal Accident Cover: Similar to comprehensive insurance, a package policy for
two-wheelers often includes personal accident cover for the owner-rider.
 4. Long-Term Motor Insurance:
• Policy Duration: While most motor insurance policies are annual, long-term motor
insurance allows policyholders to opt for coverage for a period of two or three years.
• Advantages: Long-term policies offer convenience, protection against annual
premium increases, and compliance with legal requirements for an extended period.
5. Commercial Vehicle Insurance:
• Coverage: Commercial vehicle insurance is designed for vehicles used for commercial
purposes, such as trucks, buses, taxis, and goods carriers.
• Features: It provides coverage for third-party liability as well as own damage to the
commercial vehicle.
• Add-Ons: Commercial vehicle owners can also opt for various add-ons to tailor the
coverage to their specific needs.
6. Motor Insurance for Electric Vehicles:
• Specialized Coverage: With the increasing popularity of electric vehicles, some
insurers offer specialized motor insurance policies catering to the unique needs of
electric vehicle owners.
• Incentives: Electric vehicle owners may be eligible for certain incentives or discounts
on premiums.

Rights of third parties & Claim for Compensation in Motor Vehicle Insurance
In motor vehicle insurance, third-party insurance is a crucial aspect that provides coverage for liabilities
arising from injury, death, or property damage to third parties caused by the insured vehicle. The rights
of third parties and the process of making a claim for compensation involve legal principles and
procedures.
Rights of Third Parties:
1. Legal Right to Compensation:
• Third parties who suffer injury, death, or property damage due to the fault of the insured
vehicle have a legal right to seek compensation.
2. Direct Claim Against the Insurer:
• Third parties have the right to file a claim for compensation directly against the insurer
of the at-fault vehicle. They are not required to pursue the vehicle owner first.
3. Statutory Requirement:
• Third-party insurance is mandatory under the Motor Vehicles Act, 1988, in India. Every
motor vehicle must have at least a third-party liability insurance policy.
4. Compensation for Bodily Injury or Death:
• In the case of bodily injury or death of a third party, the insurance policy provides
coverage for medical expenses, compensation for disability or loss of life, and related
expenses.
 5. Compensation for Property Damage:
• Third-party insurance also covers property damage caused by the insured vehicle.
Compensation is provided for repair or replacement costs of the damaged property.
Claim for Compensation Process:
1. Accident Report:
• The injured third party or their representative should file an accident report with the
police as soon as possible.
2. Notification to the Insurer:
• The third party or their representative should notify the insurance company of the at-
fault vehicle about the accident and their intent to make a claim.
3. Filing a Claim:
• The injured party can file a formal claim with the insurer, providing details of the
accident, injuries sustained, and the estimated damages.
4. Medical Reports and Documentation:
• In cases of bodily injury, medical reports and documentation should be submitted to
support the claim for medical expenses, rehabilitation, and compensation for pain and
suffering.
5. Property Damage Estimates:
• In cases of property damage, the third party should provide estimates for the repair or
replacement of the damaged property.
6. Negotiation and Settlement:
• The insurer may enter into negotiations with the injured third party or their
representative to reach a settlement. The settlement amount is typically based on the
extent of injuries, damages, and applicable legal provisions.
7. Legal Recourse:
• If a fair settlement cannot be reached, the injured third party may have the option to
take legal action to seek compensation through the court system.
8. Payment of Compensation:
• Once an agreement is reached or a court orders compensation, the insurer is obligated
to make the payment to the injured third party.

No Fault Liability in Motor Vehicle Insurance.

No-fault liability is a concept in motor vehicle insurance that establishes a system where each party's
insurance covers their own injuries and damages, regardless of who is at fault in an accident. In a no-
fault system, the insured parties turn to their own insurance companies for compensation, and the need
to establish fault in an accident is minimized.
1. Basic Principles:
 • In a no-fault system, each party involved in an accident is responsible for their own
medical expenses, lost wages, and other economic losses, regardless of who caused the
accident.
• The focus is on providing prompt compensation to injured parties without the need for
prolonged investigations to determine fault.
2. Coverage:
• No-fault liability coverage is typically associated with personal injury protection (PIP)
or similar coverage in an insurance policy.
• PIP coverage is designed to pay for the medical expenses, rehabilitation costs, and lost
wages of the insured and their passengers, irrespective of who caused the accident.
3. Benefits of No-Fault Liability:
• Prompt Compensation: In a no-fault system, injured parties receive compensation
more quickly since they do not have to wait for a determination of fault.
• Reduction of Litigation: No-fault systems aim to reduce the number of lawsuits
related to minor accidents by streamlining the compensation process.
4. Exceptions and Thresholds:
• Some no-fault systems have thresholds or limitations for when a party can step outside
the no-fault framework and file a lawsuit against the at-fault party.
• Thresholds may include specific criteria such as the severity of injuries or the amount
of medical expenses incurred.
5. Mandatory vs. Optional No-Fault:
• No-fault systems can be either mandatory or optional depending on the jurisdiction.
• In mandatory no-fault systems, all drivers are required to carry no-fault coverage.
• In optional no-fault systems, drivers may choose whether or not to participate in the
no-fault system.
6. No-Fault States and Jurisdictions:
• The application of no-fault principles can vary by state or jurisdiction. Some regions in
the United States have adopted no-fault systems, while others adhere to traditional
fault-based systems.
7. Limits on Lawsuits:
• In no-fault systems, restrictions are placed on the ability of parties to file lawsuits
against the at-fault party. Lawsuits are generally limited to cases that meet specific
criteria, such as serious injuries or excessive medical expenses.
8. Trade-Offs and Criticisms:
• While no-fault systems aim to provide faster compensation and reduce litigation, they
may also lead to higher insurance premiums for policyholders due to increased claim
frequency and costs.
 • Critics argue that no-fault systems may result in moral hazard, where individuals may
be less cautious on the road knowing that their own insurance will cover their injuries.

Extent of Statutory Liability, Vicarious Liability & its extent Compensation on structured
formula basis
In the context of motor vehicle insurance and liability, statutory liability and vicarious liability refer to
legal principles that determine responsibility for injuries or damages resulting from accidents.
Compensation on a structured formula basis is a method of determining the amount of compensation
payable in such cases.
1. Statutory Liability:
Definition:
• Statutory liability refers to the legal responsibility imposed by statutes or laws on individuals
or entities.
Extent:
• In the context of motor vehicle insurance, statutory liability often refers to the liability imposed
by motor vehicle laws. For example, in many jurisdictions, there is statutory liability for bodily
injury or property damage caused by a motor vehicle.
Compensation:
• Compensation for statutory liability is typically based on the requirements specified in the
relevant statutes. This may include mandatory insurance coverage to compensate third parties
for injuries or damages caused by the insured vehicle.
Example:
• In many countries, motor vehicle owners are required by law to have liability insurance to cover
the statutory liability for bodily injury or property damage caused to third parties in the event
of an accident.
2. Vicarious Liability:
Definition:
• Vicarious liability holds one party responsible for the actions of another based on a special
relationship between the two parties.
Extent:
• In the context of motor vehicle accidents, employers can be vicariously liable for the actions of
their employees if the employee was acting within the scope of their employment at the time of
the accident.
Compensation:
• Compensation for vicarious liability is often sought from the employer's insurance policy,
which may include coverage for liability arising from the actions of employees.
Example:
 • If an employee, while driving a company vehicle for work purposes, causes an accident, the
employer may be held vicariously liable for the employee's actions. Compensation for the
injured party may be sought from the employer's insurance.
3. Compensation on Structured Formula Basis:
Definition:
• Compensation on a structured formula basis involves determining the amount of compensation
using a predefined formula or method.
Extent:
• This approach is often used to calculate compensation for bodily injury or death resulting from
motor vehicle accidents. The formula may take into account factors such as medical expenses,
loss of income, and other economic losses.
Compensation:
• The structured formula is designed to provide a systematic and standardized method for
determining compensation, ensuring consistency in the assessment of damages.
Example:
• In some jurisdictions, there are structured formulas or guidelines for calculating compensation
for personal injuries sustained in motor vehicle accidents. These formulas may consider factors
like medical expenses, rehabilitation costs, loss of earnings, and pain and suffering.

Motor Vehicle Claims Tribunal

In India, the Motor Accident Claims Tribunals (MACT) are specialized tribunals that handle
compensation claims arising from motor vehicle accidents. These tribunals have been established to
provide a speedy and efficient resolution of motor vehicle accident compensation claims.
Establishment and Jurisdiction:
1. Establishment:
• Motor Accident Claims Tribunals (MACT) are established under the Motor Vehicles
Act, 1988.
2. Jurisdiction:
• MACTs have jurisdiction over compensation claims arising from motor vehicle
accidents. These claims typically involve injuries, disabilities, or fatalities resulting
from road accidents.
Composition:
1. Presiding Officer:
• Each MACT is headed by a Presiding Officer who is usually a retired judicial officer.
2. Other Members:
• MACTs may also have other members, and their composition may vary by state.
Applicability:
 1. Claims Covered:
• MACTs hear claims related to death, bodily injuries, or damage to property arising out
of the use of motor vehicles on public roads.
2. Third-Party Claims:
• MACTs primarily deal with third-party claims, where the injured party or the legal
heirs of a deceased person file a claim against the insurance company of the at-fault
vehicle.
Procedure:
1. Filing a Claim:
• Individuals or legal heirs can file a claim with the MACT seeking compensation for
injuries, disabilities, or death resulting from a motor vehicle accident.
2. Notice to the Insurer:
• Once a claim is filed, the MACT issues notice to the insurance company of the at-fault
vehicle, providing them an opportunity to contest or settle the claim.
3. Evidence and Hearings:
• The claimant and the insurer present their evidence before the MACT, which includes
medical reports, witness statements, and other relevant documents.
• The MACT may conduct hearings to assess the merits of the claim.
4. Expert Opinion:
• In cases where necessary, the MACT may seek the opinion of medical experts or other
professionals to determine the extent of injuries and appropriate compensation.
5. Quantum of Compensation:
• The MACT determines the quantum of compensation based on factors such as medical
expenses, loss of income, pain and suffering, and other relevant considerations.
6. Award:
• Once the MACT reaches a decision, it issues an award specifying the amount of
compensation that the insurer is required to pay to the claimant.
Appeals:
1. Appeal Process:
• Parties dissatisfied with the decision of the MACT can appeal to higher courts within
a specified timeframe.
Limitations:
1. Statutory Limits:
• The Motor Vehicles Act provides statutory limits for compensation in certain cases.
2. No-Fault Liability:
 • MACTs also handle claims related to no-fault liability, where compensation is provided
without establishing the fault of the involved parties.

Consumer Claim & Insurers Liability.

Consumer claims in the context of insurance refer to claims filed by policyholders or beneficiaries
against insurance companies seeking compensation for covered losses or damages. Insurers' liability is
the legal obligation of insurance companies to honor valid claims made by their policyholders.
1. Consumer Claims:
1. Filing a Claim:
• Policyholders must file a claim with the insurance company when they experience a
covered loss or damage. This typically involves notifying the insurer of the incident,
providing relevant documentation, and completing a claims form.
2. Types of Claims:
• Claims can arise in various insurance categories, including health insurance, property
insurance, life insurance, auto insurance, and more. The nature of the claim depends on
the type of coverage and the circumstances of the loss.
3. Prompt and Fair Settlement:
• Insurers are expected to process claims promptly and fairly. This includes investigating
the claim, assessing the extent of the loss, and determining the appropriate
compensation.
4. Denial or Acceptance:
• The insurer may accept the claim and provide compensation or deny the claim if it
determines that the loss is not covered by the policy. In the case of denial, the insurer
should provide a clear explanation for the decision.
5. Appeal Process:
• If a policyholder disagrees with the insurer's decision, they may have the right to appeal
the decision, either through an internal appeals process within the insurance company
or by seeking external recourse.
2. Insurer's Liability:
1. Contractual Obligation:
• Insurers are bound by the terms and conditions outlined in the insurance policy. The
policy represents a contractual agreement between the insured and the insurer,
specifying the coverage, exclusions, and conditions under which claims will be paid.
2. Duty of Good Faith:
• Insurers have a duty of good faith and fair dealing with their policyholders. This means
they must act honestly, fairly, and transparently in handling claims and making
decisions.
3. Legal Obligation:
 • Insurers have a legal obligation to fulfill their promises as outlined in the insurance
contract. Failure to honor valid claims may lead to legal action against the insurer.
4. Regulatory Compliance:
• Insurance companies are subject to regulatory oversight, and they must comply with
applicable laws and regulations governing the insurance industry. Regulatory bodies
may intervene in cases of unfair claim practices.
5. Claims Settlement Practices:
• Insurers are expected to have fair and transparent claims settlement practices. This
includes clearly communicating with policyholders, conducting thorough
investigations, and providing reasonable explanations for claim denials.
6. Liability Limits:
• The liability of an insurer is limited to the terms and limits specified in the insurance
policy. The policy will outline the maximum amount the insurer is obligated to pay for
covered losses.
7. Legal Recourse:
• If an insurer wrongfully denies a valid claim or engages in unfair claims practices,
policyholders may have the right to take legal action to seek compensation and
damages.

Module V: Grievance Redressal

Insurance Regulatory and Development Authority(IRDA): Object, Power
and functions
Insurance Regulatory and Development Authority(IRDA): Object, Power and functions
The Insurance Regulatory and Development Authority (IRDA) is the regulatory body for the insurance
sector in India. Established by the Insurance Regulatory and Development Authority Act, 1999, the
IRDA plays a crucial role in overseeing and regulating the insurance industry.
Objectives of IRDA:
1. Protection of Policyholders:
• Ensure the interests of policyholders are protected, and they are treated fairly by
insurance companies.
2. Promotion of Fair Competition:
• Foster fair competition among insurance companies to benefit consumers and promote
efficiency in the insurance market.
3. Regulation and Development:
• Regulate and develop the insurance industry to ensure its stability, growth, and
contribution to the country's economic development.
Powers of IRDA:
 1. Granting Licenses:
• IRDA has the power to grant licenses to insurance companies, intermediaries, and other
entities involved in the insurance business.
2. Regulation of Premiums:
• Regulate the premiums charged by insurance companies to prevent unfair practices and
protect the interests of policyholders.
3. Approving Products:
• Approve insurance products and policies to ensure they comply with regulations and
provide adequate coverage to policyholders.
4. Setting Solvency Margins:
• Prescribe solvency margins that insurance companies must maintain to ensure their
financial stability and ability to meet obligations.
5. Supervision and Inspection:
• Conduct supervision and inspection of insurance companies to ensure compliance with
regulations and the financial soundness of the industry.
6. Resolving Disputes:
• Resolve disputes and grievances between policyholders and insurance companies
through a fair and transparent process.
7. Imposing Penalties:
• Impose penalties and take enforcement actions against insurance companies that violate
regulations or engage in unfair practices.
8. Promotion of Innovation:
• Encourage innovation in insurance products and services while ensuring that they meet
the needs of policyholders.
Functions of IRDA:
1. Licensing and Registration:
• Grant licenses and registrations to insurance companies, intermediaries, and other
entities involved in the insurance business.
2. Product Approval:
• Approve insurance products and policies before they are offered to the public to ensure
compliance with regulatory standards.
3. Policyholder Protection:
• Safeguard the interests of policyholders by monitoring and regulating insurance
companies' activities and ensuring fair treatment.
4. Market Conduct Regulation:
• Regulate the market conduct of insurance companies and intermediaries to prevent
fraudulent practices and maintain market integrity.
 5. Promoting Innovation:
• Promote innovation in the insurance sector by facilitating the introduction of new and
innovative insurance products.
6. Financial Stability:
• Ensure the financial stability of insurance companies by setting solvency margins and
conducting regular financial assessments.
7. Consumer Education:
• Promote consumer education to enhance awareness and understanding of insurance
products, terms, and conditions.
8. Dispute Resolution:
• Provide mechanisms for the resolution of disputes between policyholders and insurance
companies through a fair and efficient process.
9. Supervision and Inspection:
• Conduct supervision and inspection of insurance companies to monitor their financial
health and compliance with regulatory requirements.
10. Market Development:
• Facilitate the development and growth of the insurance market in India through
regulatory initiatives and reforms.

Insurance Ombudsman
The Insurance Ombudsman is an institution set up to address and resolve grievances and complaints
raised by policyholders against insurance companies. The Ombudsman serves as an independent and
impartial mediator, providing an alternative dispute resolution mechanism for policyholders who are
dissatisfied with the services or decisions of their insurance providers. The concept of an Insurance
Ombudsman is aimed at ensuring fair treatment and quick resolution of disputes in the insurance sector.
Features of the Insurance Ombudsman System:
1. Independence:
• The Insurance Ombudsman operates independently of insurance companies, ensuring
impartiality and fairness in dispute resolution.
2. Free of Charge:
• Policyholders can approach the Ombudsman without incurring any charges. The
service is typically provided free of cost.
3. Alternative Dispute Resolution:
• The Ombudsman offers an alternative to legal proceedings for resolving disputes. It is
a quicker and less formal process than going to court.
4. Jurisdiction:
 • The Ombudsman has jurisdiction over specific types of insurance-related complaints,
including those related to delay in claim settlement, non-issuance of policy documents,
and disputes over premium amounts.
5. Limitation Period:
• Complaints must be filed within a certain time frame, known as the limitation period,
which is usually within one year from the date the insurer rejects the complaint or
provides an unsatisfactory resolution.
6. Scope of Complaints:
• The Insurance Ombudsman can handle a range of complaints, including those related
to life insurance, general insurance (including motor and health insurance), and other
types of insurance policies.
7. Authority to Award Compensation:
• The Ombudsman has the authority to award compensation to the complainant, provided
the complaint is found to be justified.
8. Office of the Ombudsman:
• Multiple Ombudsman offices may exist across different regions or zones to provide
accessibility to policyholders.
Process for Filing a Complaint:
1. Internal Grievance Redressal:
• Before approaching the Ombudsman, policyholders are generally required to first seek
resolution through the internal grievance redressal mechanism of the insurance
company.
2. Complaint to Ombudsman:
• If the policyholder is dissatisfied with the insurer's resolution or if there is no response
within a specified period, they can file a complaint with the Insurance Ombudsman.
3. Complaint Form:
• The complainant needs to submit a complaint form along with relevant documents to
support their case.
4. Investigation and Resolution:
• The Ombudsman investigates the complaint and attempts to facilitate a resolution
through negotiations or mediation.
5. Award of Compensation:
• If the complaint is found to be justified, the Ombudsman may pass an award, including
compensation or any other relief deemed appropriate.
6. Appeal Process:
• Both the complainant and the insurance company have the right to appeal the
Ombudsman's decision within a specified period.
Relevant Regulations and Guidelines issued by IRDA
1. IRDAI (Protection of Policyholders' Interests) Regulations, 2017:
• These regulations aim to safeguard the interests of policyholders by establishing norms
for insurers in areas such as policy servicing, grievance redressal, and disclosure of
information.
2. IRDAI (Health Insurance) Regulations, 2016:
• This set of regulations governs health insurance products and services. It provides
guidelines on product design, underwriting, claims settlement, and other aspects related
to health insurance.
3. IRDAI (Insurance Surveyors and Loss Assessors) Regulations, 2015:
• These regulations outline the requirements and responsibilities of insurance surveyors
and loss assessors. It covers aspects like eligibility criteria, licensing, and the code of
conduct for surveyors.
4. IRDAI (Non-Linked Insurance Products) Regulations, 2013:
• These regulations specify the norms for designing and pricing non-linked insurance
products, including life insurance policies that are not linked to market fluctuations.
5. IRDAI (Insurance Advertisements and Disclosure) Regulations, 2000:
• These regulations govern the content and manner of advertisements and disclosures
made by insurance companies. The objective is to ensure transparency and prevent
misleading information.
6. IRDAI (Investment) Regulations, 2016:
• These regulations prescribe guidelines for the investment of funds by insurance
companies. It includes rules related to asset allocation, valuation, and prudential norms.
7. IRDAI (General Insurance - Forms of Annual Statements) Regulations, 2000:
• These regulations specify the forms to be used by general insurance companies for
submitting their annual statements and other financial information to the regulatory
authority.
8. IRDAI (Insurance Web Aggregators) Regulations, 2017:
• These regulations pertain to the functioning of insurance web aggregators, online
platforms that provide information on insurance products and assist in the purchase of
policies.
9. IRDAI (Registration of Corporate Agents) Regulations, 2015:
• These regulations lay down the requirements for the registration and functioning of
corporate agents involved in selling insurance products.
10. IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017:
• These regulations provide guidelines on the outsourcing of activities by insurance
companies. It includes requirements related to due diligence, confidentiality, and
monitoring of outsourced activities.
11. IRDAI (Minimum Limits of Applicability and Limits of Liability in Indian Rupees)
Regulations, 2015:
• These regulations specify the minimum limits of applicability and limits of liability in
Indian rupees for reinsurance and retrocession contracts.