Principles of insurance:

1. Principle of Uberrimae Fidei

Also known as the principle of Utmost good faith, this principle requires that both
parties to a legal contract are required by law to act in good faith. In India, the
Legislature has enacted in Section 45 of the Insurance Act
Utmost Good Faith means that “each party to the proposed contract is legally
obliged to disclose to the other all information which can influence the other’s
decision to enter the contract”.
It is a positive duty to voluntarily disclose, accurately, and fully all facts material
to the risk being proposed whether requested for or not. Every circumstance or
piece of information that could alter a prudent insurer’s assessment of the risk is
referred to as a material fact.
Parties to the insurance contract are required to disclose the material facts at the
time when the policy is being issued. Breach of good faith can be done in two
ways- Misrepresentation and Non-disclosure.
In Mithoolal Nayak v. Life Insurance Corporation of India [4], it was held that the
three conditions for the application of the second part of Section 45 are:
(a) the statement must be on a material matter or must suppress facts which it was
material to disclose;

(b) the suppression must be fraudulently made by the policy holder; and
(c) the policy holder must have known at the time of making the statement that it
was false or that it suppressed facts which it was material to disclose.

2. Principle of Insurable Interest

One of the essential ingredients of an Insurance contract is that the insured must
have an insurable interest in the subject matter of the contract.
Insurable Interest is a legal right to insure arising out of a financial relationship
recognized under the law between the insured and the subject matter of Insurance.
Insurable interest must exist both at the time of taking the policy as well as at the
time of claiming the amount of loss suffered.
For example, Alok takes a fire insurance policy for his house and after that, he
sells that house before the expiration of the policy. He does not have an insurable
interest in the property anymore.
In Vijay Kumar v. New Zealand Insurance Co. [7], owner of property has insurable
interest in property. A bailee has lien over the goods and is entitled to insure the
goods for full value as he will be liable for loss or damage to the goods to the
owner.
3. Principle of Causa Proxima
This is also known as the “proximate cause” principle. When a loss has two or
more causes, this principle is applicable. The nearest reason for the property’s loss
will be determined by the insurance company. The insurance company must pay
compensation if damage was caused to the insured property due to the proximate
cause.
In Pink v. Fleming[8], it was held that proximate cause or causa proxima means “in
law the immediate and not the remote cause is to be considered in measuring the
damages.” Where there is a succession of causes which must have existed in order
to produce a particular result, the direct and proximate cause i.e. the last cause
must be looked into and the others rejected although the result would not have
been produced without their concurrence.
4. Principle of Subrogation
According to this principle, the insurer acquires ownership of the property after the
insured, or person, has received compensation for the loss he suffered regarding
the subject matter of the insurance. Subrogation gives the insurance company, the
right to recover the amount paid as compensation from any third party due to
which the loss was caused.
Only the amount of compensation the insurer has already paid to the insured
qualifies for subrogation rights on his behalf. This applies to all policies of
insurance which are contracts of indemnity.
For example, If Ashok gets injured in an accident, due to the fault of C, a third
party, the insurance company which issued the insurance policy to Ashok will
compensate the loss that occurred to Ashok and will also sue the third party to
recover the money paid as claim. This right arose due to the principle of
subrogation.
 5. Principle of Contribution
When an insured person takes multiple insurance, policies covering the same risk,
the contribution principle is in effect. The insured cannot earn profits by claiming
the loss of one subject matter from other policies. It is applicable to all indemnity
contracts if the insured has obtained more than one policy on the same subject
matter.
Conditions necessary for the right of contribution:
 Common subject matter of insurance to all the policies (may include other
properties).
 The peril which causes the loss must be common to all the policies (may
include other perils).
 The same assured must take all insurance policies on his or her own behalf.
 At the time of the loss, all insurance policies must be active.
 The policy cannot contain any clauses that forbid the right to contribute.
For example, a certain risk has been independently covered by insurers ABC Co.
and XYZ Co. If the insured is fully indemnified by ABC Co., he may claim a
proportional contribution from XYZ Co.

6. Principle of Indemnity
The word indemnity means a contractual obligation of one party to compensate,
protect or provide security to the loss occurred to the other party. It means make
good the loss. The principle of indemnity is one of the important factor of
insurance. The principle of indemnity does not aim at profit-making as the insured
gets only indemnified. Profit-making is against the principle of indemnity.
For example – An insured pays Rs 5 Lakhs to the insurer as a premium for his
house. One day the house of the insured catches fire and incurs a loss/damage of
Rs 1 Lakh. Then the insurer will only pay Rs 1 Lakh to the insured because of the
principle of indemnity and not Rs 5 Lakhs. Similarly, if the loss incurred is more
than Rs. 5 Lakh, the insured cannot recover more than the amount for which the
house was insured because this principle sets a limit to the compensation.
  Exception – the principle of indemnity is applied to all insurances except
life insurance and personal accident insurance because the value of human
life cannot be measured in monetary terms and thus the insurer decides o pay
a fixed or guaranteed sum irrespective of the loss suffered.

Discuss the motor vehicle tribunal under the motor vehicle act.

 Motor Accidents Claims Tribunal has been created by the Motor Vehicles
Act, 1988.It has been constituted to provide speedier remedy to the
victims of accident by motor vehicles.
 The Tribunals takes away jurisdiction of Civil Courts in the matters
which concerns the Motor Accidents Claims Tribunal.
 A State Government may, by notification in the Official Gazette,
constitute one or more Motor Accidents Claims Tribunals for such area as
may be specified in the (Section 165).’
 It is for the State Government to decide the number of members of a
Claims Tribunal. If there are two or more members then one has to
appointed as Chairman(Section 165). ‘A person shall not be qualified for
appointment as a member of a Claims Tribunal unless he –
(a) is, or has been, a Judge of a High Court, or

(b) is, or has been, a District Judge, or

(c) is qualified for appointment as a High Court Judge or as a

District Judge.’ 8

 Appeals from Claims Tribunal lies with High Courts. The appeal is
limited by time and has to be filed in the High Court within 90 days from
the date of award of Claims Tribunal. ‘The High Court may entertain the
appeal after the expiry of the said period of ninety days, if it is satisfied
that the appellant was prevented by sufficient cause from preferring the
appeal in time.’ (Section 173)
What is “assignment” of an insurance policy? State the rules relating to
assignment of policies in contract of insurance.
An assignment is transferring the rights, title, and ownership of the life insurance
policy to another individual or entity. The policy can be assigned when the rights
of one person are transferred to another.
The person who transfers the policy is called an assignor, and the person to whom
the policy is transferred is called the assignee. The assignment is governed under
Section 38 of the Insurance Act 1938.
For example, in the case of a Loan Against a Life Insurance Policy, the
policyholder assigns his/her life insurance policy to the bank. So, the bank
becomes the policy owner, and in case of the demise of the assignor, the bank
claims the insurance benefits.
What are the types of Assignments?
1. Absolute Assignment:
Under absolute assignment, the assignor transfers all the rights, titles, ownership,
and interest to another person or entity. The ownership of the policy is transferred
to the other party without any terms and conditions. This type of assignment is
generally done for raising loans against life insurance policies.
2. Conditional Assignment:
Under conditional assignment, the assignor transfers the rights to the assignee
depending on the terms and conditions. So, the policy is assigned only if the
conditions are fulfilled.
Exceptions to Assignment
 Express provisions in the contract as to its non-assignability – Some
contracts may include a specific clause prohibiting assignment. If that is so,
then such a contract cannot be assigned. Assignability is the rule and the
contrary is an exception.
 Contracts which are of a personal nature – Rights under a contract are
assignable unless the contract is personal in its nature or the rights are
incapable of assignment.
  Pensions, PFs, military benefits etc.

NOMINEE ASSIGNMENT

A nomination is an appointment of a person An assignment is a transfer of the policy's

(nominee) to receive the insurance claim in case rights, ownership, and interest to another
of the demise of the insured. person or entity.

It requires attestation by at least one

2. There is no need for attestation by the witness.
witness.

There is no consideration in case of a An assignment could be with or without

3.
nomination. consideration.

It does not entitle the nominee to the right to It entitles the nominee to the right to sue
4.
sue under the property. under the property.

Nominations can be changed or modified Assignments can be concealed only

5.
several times. once or twice in a policy term.

It can be made in favour of an

6. It is made in favour of an immediate family. immediate family or external
party/entity.

What is Nomination?
You might be familiar with the nomination facility in Savings Bank Account. Nomination in life
insurance works in the same way. While buying a life insurance policy, the policyholder appoints
a nominee to receive the insurance benefits. Upon the insured's death, the nominee receives the
sum insured by the life insurance policy. Section 39 of the Insurance Act 1938 governs the
nomination process.
So, a nomination is a right given to the policyholder/ insured to appoint a person (nominee),
usually a close family member, to receive the insurance benefits in the event of the demise of the
insured.

What are the types of Nominees?

1. Beneficial Nominees:
The Insurance Regulatory and Development Authority of India has introduced the new term
'beneficiary nominee' instead of 'nominee'. The policyholder has a right to make any of his/her
close relatives, i.e., parent, guardian, child, or spouse, a nominee. Appointing the nominee
eliminates the chances of any disputes arising at the time of claim settlement. Bear in mind that
only your immediate family members can become beneficial nominees.

2. Minor Nominees:
Many policyholders prefer appointing their child/children as nominees for their life insurance
policies. However, if the child has not completed 18 years and is still a minor, he/she does not
meet the eligibility criteria to handle the claim amount. So, in case of an unfortunate demise of
the insured, the claim amount is payable to the legal custodian or the child's appointee. The legal
custodian hands over the sum to the child when he/she turns 18 years old.

3. Non-family Nominees:
In certain exceptional situations, the nominee can choose a non-family member as his/her
nominee. However, you should check the terms pertaining to the nomination with your insurer
and know that appointing a non-family nominee is generally not recommended.

4. Changing Nominees:
The policyholder has the right to change the nominees as many times as he/she wants. But bear
in mind that the latest nominee will supersede all the previous nominees.

5. Multiple Nominees:
The policyholder can choose to appoint more than one nominee to his/her life insurance policy.
In the case of multiple nominees, the policyholder divides the share of the total amount between
multiple nominees. If the policyholder has not divided the share/percentage of the policy, the
claim amount is equally divided between nominees.

6. Successive Nominees:
The successive nomination allows the policyholder to choose more than one nominee in a
successive manner. So, in case of the demise of the policyholder, the claim amount will go to the
first nominee. In case of the demise of the first nominee, the claim amount will go to the second
nominee, and so on.
Explain the history and growth of insurance business in india.
 General insurance arrived in India as a part of the East India Company's
trade policy. In 1850 with the establishment of the Triton Insurance
Company Ltd in Calcutta., the seeds of the General Insurance business in
India were sowed. It was the first company of its kind to transact in all kinds
of general insurance business in India.
 Thereafter the major development took place when Indian Mercantile
Insurance Ltd was set up in 1907.
 After 10 years of attaining independence in 1957, the General Insurance
Council, a wing of the Indian association of insurance was created. The
council framed a code of conduct to ensure that fair business practices are
being carried out in India in the general insurance sector In 1968, the
Insurance Act was amended to regulate investments and set minimum
solvency margins. After that, a tariff advisory committee was set up.
 The General Insurance Business in India was nationalized by the General
Insurance Business (Nationalization) Act in 1972(GIBNA). The
Government of India through the nationalization scheme bought 55 shares of
the 55 Indian Insurance companies along with the undertakings of 52
insurers carrying on general Insurance business. The National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd., and the United India Insurance Company Ltd.
were formed through the amalgamation of 107 insurers. The General
Insurance Corporation of India (GICI) was founded in 1971 and began
operations on January 1, 1973.
 General Insurance Corporation was formed by S.9(1) of the GIBNA and was
incorporated on the 22nd of November 1972 under the Companies Act,1956.
It was declared a private company limited by shares. GIC was established to
supervise, control, and carry out all the work in the general insurance
industry. The Government of India transferred all of its general insurance
company shares to GIC as soon as it was founded. All of the government's
 nationalized undertakings were transferred to Indian insurance companies at
the same time.
 The Insurance Regulatory and Development Authority Act, 1999 (IRDAA)
which came into being on the 19th of April in the year 2000 marked the next
major milestone in the General Insurance sector in India.
 GIBNA and the Insurance Act of 1938 were both amended by the
introduction of this Act. The exclusive license of GIC and its subsidiaries to
carry on general insurance in India was revoked by an amendment to
GIBNA. GIC was renotified as the Indian Reinsurer in November 2000, and
its supervisory function over the four subsidiaries was terminated by
administrative instruction. It ceased to be a holding company of its
subsidiaries on March 21, 2003, when the General Insurance Business
(Nationalisation) Amendment Act 2002 (40 of 2002) came into effect.

Functions of LIFE insurance corporation

1. The main function of LIC is to collect the savings of the people through a
life insurance policy and invest that money in various financial markets.
2. Investing fund in government securities to secure the wealth of
individuals who have given their money to LIC.
3. To issue an insurance policy at affordable rates to people.
4. To provide direct loans to industries at lower interest rates. The rate of
interest is as low as 12% for the entire tenure.
5. It provides refinancing activities through SFCs in different states and
other industrial loan giving institutions.
6. It has provided indirect support to industry through subscriptions to
shares and bonds of financial institutions such as IDBI, IFCI, ICICI, SFCs
etc. at the time when they required initial capital. It also directly
subscribed to the shares of Agricultural Refinance Corporation and SBI.
7. It lends loans to projects that are important to national economic welfare.
The LIC prioritizes socially-oriented programs like electrification,
sanitation, and water channelling.
8. It nominates directors on the boards of companies in which it makes its
investments.
9. It gives housing loans at reasonable rates of interest.
 10.It acts as a bridge between the process of saving and of investing.
Through several schemes it generates the savings of the small savers,
middle income community and the wealth.

What is Marine Insurance?

Marine insurance covers the risks faced by ship owners, cargo owners, terminal
handlers and various intermediaries in the shipping business. Looking at various
conditions that can affect your cargo, including weather conditions, pirates,
navigation problem, it is recommended that you avail an appropriate insurance
as per the nature of your business and the risks associated with business
operations.

It also covers third parties if they happen to get affected directly or indirectly by
the activity. There are various types of marine insurance one can choose from as
per the need and requirement.

Types of Marine Insurance

Hull and Machinery Insurance: The hull is the main supporting body of the
vessel without masts. Thus, hull insurance covers the applicant from any mishap
to the ship. It is generally taken by ship owners. Along with hull insurance, one
should also go for machinery insurance to cover the machinery of the ship. It
insures the applicant against operational, mechanical and electrical damage to
the ship machinery. Since both the sections cover the ship as a whole, it is jointly
issued as Hull and Machinery Insurance by the insurance company.

Marine Cargo Insurance: Cargo owners are exposed to the risk of mishandling
of the cargo at the terminal and during the voyage of the ship. It might get
damaged, lost or misplaced. Hence, to protect the cargo owner from the financial
losses arising out of such cases, marine cargo insurance is issued against
appropriate premium payment. It comes with a third-party liability insurance
which covers any damage done to the port, railway track, ship, other cargo or
humans due to your cargo.

Liability Insurance: The ship may be exposed to crash, collision or piracy attack.
Under such situations, the valuable cargo is exposed to a high risk. Moreover, the
life of crew members and others on the ship is also in danger. The
appropriate liability insurance indemnifies the ship owners out of any such
liabilities due to events not under his control.

Freight Insurance: This section covers the loss of freight. In case the freight is
lost or damaged or the ship is lost, the shipping company will not have to bear
the loss. They can be compensated for the loss through this insurance.

How is a Marine Insurance Claim Settled?

1. Notice to the Insurer – Informing the marine cargo insurance about the
loss or damage is the first step that needs to be taken by the policyholder.
In case, the policyholder is unable to inform the insurance company,
someone on his behalf can do so.

2. Proper Care – As per the marine cargo insurance, it is imperative for

the policyholder to take all the steps to curtail the losses or damages. The
policyholder should act as if the goods are uninsured. Just because one
has a marine cargo insurance, he/she can’t act carelessly.

3. Survey and Claim – As per the marine insurance, if at the time of

taking the goods delivery, any package shows signs of outward damages,
the policyholder or his agents must call for a detailed survey by the ship
surveyors and also lodge the monetary claim with the shipping company.

4. Missing Packages – In case any of the packages are missing, it is

mandatory for the policyholder to file the police report immediately and
also obtain a proper acknowledgement. The insurer can ask you to submit
the police report if the claim is related to theft.

5. Claim Duration – In a marine cargo insurance, the time limit for filing
the marine insurance claim is one year from the date of goods discharge,
which can further change as per the situation and the conditions specified
by the insurer. Upon receiving the claim intimation, the insurer appoints a
surveyor who visits the site at which goods are damaged or lost and after
the proper inspection, submits its report to the insurance company on the
basis of the findings. Moreover, it is always advised to file a marine
insurance claim on an immediate basis because the claim process will be
much easier, however, any delay could also make the claim process
difficult.
Documents Required for Claim Process

To make the claims under marine insurance and be able to reap the
benefits, the correct documents should be submitted. In case of any lapse,
there is a chance of the risk being rejected. Some of the documents are:

1. Duly filled in claim form

2. Original insurance certificate with the policy number
3. Copy of Billing Lading
4. Survey report or missing certificate
5. Original invoice, packing list, shipping specification
6. Copies of correspondence exchanged