Professional Documents
Culture Documents
Dr.Ashok R Patil
Associate Professor in Law
Chair on Consumer Law and Practice
NLSIU, Bangalore
Nature of Insurance
Yat bhavati tat nasyati- whatever is created
will be destroyed
Creation is inevitably followed by
destruction.
Change is a natural course & its occurrence
involves risk
Risk is closely connected with ownership
The owner want to save themselves from
risk and out of this desire, is the business
of insurance born
Cont..
d. Specifying the code of conduct for
surveyors and loss assessors;
e. Promoting efficiency in the conduct of
insurance business;
f. Promoting and regulating professional
organisations connected with the
insurance and re-insurance business;
g. Levying fees and other charges for
carrying out the purposes of this Act;
Cont..
h. Calling for information from, undertaking
inspection of, conducting inquiries and
investigations including audit of the
insurers, intermediaries, insurance
intermediaries and other organisations
connected with the insurance business;
i. Control and regulation of the rates,
advantages, terms and conditions that may
be offered by insurers in respect of general
insurance business not so controlled and
regulated by the Tariff Advisory Committee
under s.64U of the Insurance Act 1938;
Cont..
n. Supervising the functioning of the Tariff
Advisory Committee;
o. Specifying the percentage of premium
income of the insurer to finance schemes
for promoting and regulating professional
organisations referred to in clause (f);
p. Specifying the percentage of life insurance
business and general insurance business to
be undertaken by the insurer in the rural or
social sector, and
q. Exercising such other powers as may be
prescribed
Contract of Insurance
A contract of insurance is a contract
either to indemnify a person against a
loss which may arise on the happening
of some or any event for an agreed
consideration.
To put it in other words it is a contract
under which one party undertakes to
pay to another person a sum of money
or its equivalent on the happening of a
specified event.
Classification of contracts of
insurance
According to the Nature of the Event:
i. Life Insurance: the sum insured becomes
payable on the death of the insured or on
the attained of a particular age.
ii. Fire Insurance: in this class of contracts,
the sum is payable on the accident of fire
by which the insured property is destroyed
or damaged, Here the loss insured is the
damage caused by fire.
Insurable Interest
1. The interest should not be a mere
sentimental right or interest, for
example, love & affection alone
cannot constitute insurable
interest.
2. It should be a right in property or
a right arising out of a contract in
relation to the property.
Cont..
3. The interest must be pecuniary, that is,
capable of estimation in terms of money. -In other words, the peril must be such
that its happening may bring upon the
insured an actual or deemed pecuniary
loss. Mere disadvantage or inconvenience
or mental distress cannot be regarded as
an insurable interest.
4. The interest must be lawful, that is, it
should not be illegal, unlawful, immoral or
opposed to public policy.
Cont..
In the meantime Bhim Singh died on August 17,
1992.
Basanti Devi, widow of Bhim Singh informed LIC of
the death of her husband and requested for payment
of the amount due under the policy.
LIC disclaimed any liability for payment under the
policy as the instalments of premium after June, 1992
were not received by it.
LIC, therefore, repudiated claim of Basanti Devi. LIC
said that since default had been committed in
payment of premium the policy taken out by Bhim
Singh lapsed.
This led Basanti Devi to file a complaint before the
State Commission against LIC and DESU. Then
appeal to National Commission and lastly before SC.
Cont..
In this case SC held that the court is not concerned with the
insurance agent.
It is not the case of the LIC that DESU could be permitted as an
insurance agent within the meaning of Insurance Act and the
Regulations. DESU is not procuring or soliciting any business for
the LIC.
DESU is certainly not an insurance agent within the meaning of
aforesaid Insurance Act and the Regulations but DESU is certainly
an agent as defined in Section 182 of the Contract Act.
Mode of collection of premium has been indicated in the scheme
itself and employer has been assigned the role of collecting
premium and remitting the same to LIC.
As far as employee as such is concerned, employer will be agent of
the LIC. It is a matter of common knowledge that Insurance
Companies employ agents.
When there is no insurance agent as defined in Regulations in the
Regulations and the Insurance Act, general principles of the law of
agency as contained in the Contract Act are to be applied.
Cont..
Cont..
Therefore, SC directed that LIC shall pay to Basanti
Devi insurance amount of Rs. 50,000/- with interest
at the rate of 15% per annum from December 17,
1992 till payment, thus substituting Life Insurance
Corporation of India for Delhi Electric Supply
Undertaking, as ordered by the State Commission and
upheld by the National Commission.
For suffering which Basanti Devi had to undergo for
the default committed by DESU in not remitting the
premium to LIC we would direct that DESU will pay
cost of these proceedings, which we quantify at Rs.
25,000/-.